It feels like, rather than a basic income, we need two orthogonal currencies: one for necessities (food, rent, utilities) and one for niceities. Everyone would just have two numbers in their bank account, for each of the country's two official currencies. Basic income would be paid in one, while all income from trade in the economy would be in the other.
Economists liken money to votes for demand in a decentralized allocation scheme. They liken taxes and fines to punishing people by taking away their voting-weight in said scheme, relegating them to suboptimal options that they wouldn't have voted for. (Basically, the equivalent of pairing them up with a non-first-choice partner in the Stable Marriage Problem.)
This works fine at a theoretical level where every agent is participating in economy X without depending on economy X (e.g. an economy consisting wholly of foreign investors), but falls apart when people are expected to also eat and live in some of the things they vote for, because those things have inelastic demand—taxing/fining people doesn't make them consume any less of those things, because they need to consume those things; and frequently inelastic supply—there just aren't options for places to live below a certain cost, because all the suppliers' prices are being "floated up" by said inelastic demand.
If, instead, we said something like:
• A new currency—"necessity dollars"—is allocated to people by the government each month to pay for a basket of goods with inelastic demand. The original currency persists, renamed "nicety-dollars."
• Necessity-dollars can only be used for goods and services with inelastic demand (as found by the BLS during CPI calculation), though they are not restricted to goods with any particular "moral cleanliness" value (so cigarettes are just as applicable as bread†.) This is enforced by only permitting certain sellers to accept necessity-dollars, and only on certain transactions.
• At point-of-first-sale, necessity-dollars are actually sent off to the government and the seller receives nicety-dollars instead. There's probably some exchange-rate involved, that the government can manipulate to some interesting end. Thus, companies never hold necessity-dollars, or pay out in necessity-dollars; they're just a thing individuals have and transparently give back to the government at payment-processing time.
• You can't tax or fine anyone in necessity-dollars. People just receive them, hold them in an account, and spend them voluntarily, and that's it: no other operations are valid. Importantly, banks aren't allowed to impose necessity-dollar fees on necessity-dollar accounts for holding them, and so forth. (They could impose nicety-dollar fees on fancy necessity-dollar accounts, but see the next point:)
• If you get taxed or fined or liened or collected on for anything in nicety-dollars, and you don't have enough nicety-dollars, this doesn't "spill over": you can't pay a nicety-dollar cost in necessity-dollars. You're not allowed. This means that if you run out of nicety-dollars, you're effectively bankrupt (in all the current meanings of that word—all the same machinery kicks in), while still being able to afford necessities. Your niceity-creditors get chased off/annulled by your bankruptcy, without disrupting your ability to afford necessities.
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† Addiction causes need just like hunger does. You can't really economically disincentivize addicts from seeking a fix; that's basically definitional. Addicts under pressure commit crimes to get the money to pay for their fix, rather than going without. Just freakin' build the infrastructure to treat addiction, if you don't want people spending taxpayer money that way.
It is overly judgemental of what people living on a basic income are allowed to do, thus making living on only the basic income less viable. Your mother is dying and you need to fly to a different city to visit her? Nope sorry, long distance transit is a nicety. You want to take some time to switch careers? Sorry, books are a nicety. Have back trouble? Sorry a fancy chair is a nicety. You may say that those things could be necessities but a huge fraction of goods typically a 'nicety' can be a 'necessity' in the right circumstances. Better not to tie people's hands.
I think this adds a lot of complexity, cost and bureaucracy for a net loss in how effective the basic income is.
I don't actually want to restrict people from deciding what to buy; I want to restrict the government and corporations from wielding the tool of economic incentivization—a tool that works in most of the market—near the margins, where it just becomes a punishment to no end.
Left to their own devices, UBI will be treated as "free votes" in the economy: it will be entirely soaked up by corporations raising prices, because people will still have all the same "non-free votes" they had before, along with the free ones, and everything will adjust to the expectation that people spend both.
Along with this, the government will continue to levy harsh fines, liens will continue to be applied, etc. In UBI, these will take away the money that was supposed to be people's social support. (In fact, in the "pure" UBI most advocate for, these will take away more their social support than is possible today, since we'll have also disassembled welfare, disability assistance, medicare, pensions, etc.)
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Now, you're right in that people's needs vary. I don't agree that (pure) UBI is the best possible solution to this problem; it's just an easy one to conceptualize.
Do note that, of your hypothetical scenarios, I'd posit that the "fancy chair" is probably a medical device (and the entire healthcare system would be paid only in necessity-dollars; all demand there is inelastic.) And the book is probably a nicety. (Why not use a library? Unless it's a textbook—those are really, really inelastic, which is why they've gotten to be as expensive as they are.)
The flight situation is the truly confounding one. I would agree that this is something that people should be able to do. Yet most flights are for leisure or business, and it's nearly impossible to distinguish from any sort of government-verifiable context why someone is flying somewhere. There's no component of the economy-wide pricing of flights to pick out as being inelastic demand. It's a good example.
I'm not sure what to do about it, though. Even if you allocated people regular (nicety-dollar) UBI along with the necessity-dollars I've been talking about, that UBI would still suffer all the same problems plain UBI does. Flights (and anything else you could spend the UBI on) would just get more expensive by exactly how much everyone was getting.
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Now, maybe I'm coming at the problem all wrong. The problem is that suppliers of goods with inelastic demand right now get to charge $(elastic demand + inelastic demand), whereas everyone would be better off if they could only charge $(elastic demand), and then get the $(inelastic demand) paid from some other source.
You probably don't need a separate currency to do that. You don't need UBI, either. You just need, basically, the cheapest house in a market to cost $0, and for all other houses in that market to be shifted down in price by that same adjustment. That could be accomplished with simple government rebates, probably. Find products+services with inelastic demand, write people rebates for the amount of that inelastic demand, done.
The idea that the poor can't handle money or would somehow be better off without it is silly paternalistic thinking of the sort that basic income is supposed to do away with. The income streams we're talking about are pretty modest and all the evidence so far is that most people can handle it.
Its effects on inflation are overblown too. Other than real estate, we're not seeing much in the way of inflation. And on the margin, an income that's not tied to a job makes it easier to move to cheaper places. (Why do you think so many retirees live in Florida?)
Is there any evidence for this, or is this purely conjecture?
- decide who actually "needs" the benefit
- figure out how to recognise these people ("means-tested" benefits!)
- catch the people defrauding the system
Instead, you could just say, e.g. for the case of child benefit, that every child receives $400/month and get rid of:
- the complexity in deciding who gets $400/month
- the enforcement of fraud
The "underserving" middle- and upper-income will receive this money too, but it doesn't matter - it's effectively coming out of the higher taxes they are paying already.
UBI is just a generalization of this idea to all benefits.
Introducing two kinds of dollars smacks, to me, of the same mindset that introduced means-testing/etc in the first place: "we don't want fraud", "we want this to only go to deserving purposes". Lots of complexity, hard to manage, and for no convincing benefit.
Even if some people waste the money on drugs the net benefit is still higher. The person determined to waste whatever income, in whatever form, will do so. The person who just needs cash to make ends meet doesn't need ever changing rules and calcified structures to try and work around.
Just give everyone the money, including the entire buildings of people who follow around making up rules and then making sure the rules are followed.
Welfare by basic income can be run by a set of scheduled tasks in a server. It's sheer simplicity outweighs all other drawbacks. Add a flat tax rate to the income side of the ledger and shackles are really starting to fall off.
Such a system will still require systems to prevent multiple claims, ensure people aren't claiming for others and making sure people aren't claiming on behalf of dead people.
Sure you remove means testing, but that is only one part of it. The measures which will need to be in place will still require a lot of bureaucracy.
#2 Uniquely, correctly identifying every single person participating in the economy is currently being done by data aggregators like LexisNexis (nee Seisent), ChoicePoint, others. Basically a private (non govt) RealID. This could and should be a government function.
To go with your tobacco example, I personally don't believe that tobacco should be considered a necessity. (Though I have no problem with Nicorette / nicotine gum being in that category, which could be used by someone unable to buy cigarettes to satisfy their craving.) Someone else may have a different definition of a necessity vs nicety altogether.
It's much simpler IMO to just give people ordinary currency, and let them decide how to spend it best.
And my point was that even UBI falls over when someone gets their UBI taken away by a fine. Starving is starving.
So if you get a parking ticket (presumably <1% UBI), you can just pay it, but if you get a large fine (20% UBI), you'd pay it off in two monthly payments of 10% each.
You'd probably need something in place to intervene if someone's constantly paying 10% every month due to multiple fines to prevent people racking up daft amounts of fines and just 'living on 90%'
Everyone has a slightly different demand elasticity for certain goods. To use myself as an example, I would buy the same amount of coffee if the price doubled tomorrow, but someone else may choose to cut back on their coffee consumption.
You could also see food stamps as a parallel currency. You get work done, you fix the payment as N food stamps. The guy who takes this, uses the same method to pay others... and so on, until the final guy in the chain exchanges those N food stamps for actual rations. This has other side effects, since there is a parallel currency, it can't be regulated, its supply cannot be controlled. You can't levy taxes on it and so on...
These sort of parallel currencies already exist in India.
They're called "Ticket Alimentación", and they're provided by Edenred. They're electronic these days to prevent the easiest ways to convert them into real money.
https://en.wikipedia.org/wiki/Edenred
Among the problems:
- most places don't accept it, so you HAVE to go to the places where they accept them. That sucks a lot (nowadays I can't go to the small local places as they don't have the infrastructure to process them, since government heavily monitors their use)
- you can only buy essentials with them, but that does not include stuff like paying rent.
- all taxes and stuff are taken from the "real" money, and you can have a negative "real" income while having too much in food vouchers (which can't be used to pay rent or utilities or transportation).
- you're basically forced to spend them (I make more than what I'd like to spend on food & essentials), you can't save unless you do some kind of hoarding or buy-to-sell scheme. I'm pretty sure some kind of black market would emerge where your proposed "necessity dollars" would be exchanged for "nicety dollars"
I don't have enough leverage to individually negotiate not getting paid in food vouchers, but it's definitely a factor I'm going to consider.
Thank you very much for posting this. I owe you.
there are so many reasons why this wouldn't work. The whole point of UBI is that you are not creating a judgemental system by which certain products are or are not reified by the system. Would tampons be covered by UBFS? Let's say then we allow for UBFS to cover female menstrual products. Would cups then be covered? Why or why not? How would you validate a product as being "for a given use"? How much political maneuvering would be required to get a permit for a product?
* inelastic demand (as found by the BLS during CPI calculation)
Pray tell how does one measure demand elasticity[0]? And if you're entrusting the BLS to do this, will they apply fudge factors? Why or why not? Who gets to influence the BLS to get the 'stats right' on their
* You can't tax or fine anyone in necessity-dollars
one word: Arbitrage.
[0] usually a merchant does this by dicking around with the price.
The phrase "during CPI calculation" should be the key to understanding here. CPI tells you how much prices have gone up or down generally, by just sending a bunch of secret-shoppers around to measure a bunch of prices.
Knowing the treasury's current bond interest rates, the current exchange rate, and Core CPI, you can derive economy-wide aggregate demand—which is the point of the whole exercise. You can then look at any given good's economy-wide demand (i.e. the same formula, where Core CPI is calculated in terms of just that one good) relative to total demand as a time series, take their co-variance, and that's the good's demand-elasticity. (All the numbers are public at every step; there's no real way to fudge them.)
> Would tampons be covered by UBFS? Let's say then we allow for UBFS to cover female menstrual products. Would cups then be covered? Why or why not?
Again: you plug in the demand-elasticity formula and get an answer. No politics, just cold automated logic. Female menstrual products as a category are very likely to be calculated to be inelastic.
Now, how that breaks down to individual items within the category is something I didn't define. As a raw guess, the government could define base inelastic-value for the category, which would apply as a sort of rebate to all the items in that category. Any individual item's price should, after this "rebate", reflect exactly and only its additional elastic demand—making the "premium" products cost some number of nicety-dollars, while the "economy" products in that class cost "nothing" in nicety-dollar terms. (The real key there is the creation of a law preventing companies from increasing their prices in response to this—because, without market manipulation, of course prices would rise to reflect all the same competitive demand as before, plus the extra "free" votes each person got. The law would just need to force companies receiving necessity-dollars to price according to demand in an alternate world where demand was exactly [the amount of inelastic-demand] lower.)
> one word: Arbitrage.
No reason to allow individuals to trade in necessities at all, which would nearly completely prevent arbitraging opportunities. (e.g. it's obvious enough that you shouldn't be able to rent your necessity-dollar-paid apartment out on AirBnB.) Consider anything paid for in necessity-dollars to be tainted and have no legal nicety-dollar value after that.
CPI tells you how much prices have changed, it doesn't explain the source of the changes (and, particularly relevantly, it doesn't measure isolate effects of changes in the supply of dollars chasing the good -- that would be attributed to the degree of elasticity -- vs. other influences on the price of an item.)
You can't really economically
disincentivize addicts from
seeking a fix; that's basically
definitional.
One interesting effect of this is that if you calculated it per-market, then different goods would have different inelastic-demand floors in different markets. In e.g. Vancouver, where tiny one-bedroom detached homes can cost >$1mm, there'd be a pretty large necessity-dollar allocation for rent/mortgage. In Cleveland, where houses go for $65k, it'd be much lower.
You might not want this effect—you might want to incentivize people to move to cheaper markets instead. But the network-effect of cities is another of those things economic incentives just don't seem to work very well to treat.
It feels like, rather than a basic income, we need two orthogonal currencies:
one for necessities (food, rent, utilities) and one for niceities. Everyone
would just have two numbers in their bank account, for each of the country's two
official currencies. Basic income would be paid in one, while all income from
trade in the economy would be in the other.
… that in a planned society "political democracy can remain if it confines itself to all but economic matter". Such assurances are usually accompanied by the suggestion that by giving up freedom in what are, or ought to be, the less important aspects of our lives, we shall obtain greater freedom in the pursuit of higher values. On this ground people who abhor the idea of a political dictatorship often clamour for a dictator in the economic field.
The arguments used appeal to our best instincts and often attract the finest minds. If planning really did free us from the less important cares and so made it easier to render our existence one of plain living and high thinking, who would wish to belittle such an ideal? If our economic activities really concerned only the inferior or even more sordid sides of life, of course we ought to endeavour by all means to find a way to relieve our- selves from the excessive care for material ends, and, leaving them to be cared for by some piece of utilitarian machinery, set our minds free for the higher things of life.
Unfortunately the assurance people derive from this belief that the power which is exercised over economic life is a power over matters of secondary importance only, and which makes them take lightly the threat to the freedom of our economic pursuits, is altogether unwarranted. It is largely a consequence of the erroneous belief that there are purely economic ends separate from the other ends of life. Yet, apart from the pathological case of the miser, there is no such thing. The ultimate ends of the activities ofreasonable beings are never economic. Strictly speaking there is no "economic motive" but only economic factors conditioning our striving for other ends.
What in ordinary language is misleadingly called the "economic motive" means merely the desire for general opportunity, the desire for power to achieve unspecified ends. If we strive for money it is because it offers us the widest choice in enjoying the fruits of our efforts. Because in modern society it is through the limitation of our money incomes that we are made to feel the restrictions which our relative poverty still imposes upon us, many have come to hate money as the symbol of these restrictions. But this is to mistake for the cause the medium through which a force makes itself felt. It would be much truer to say that money is one of the greatest instruments of freedom ever invented by man. It is money which in existing society opens an astounding range of choice to the poor man, a range greater than that which not many generations ago was open to the wealthy.
Money is a good way to avoid abject poverty, but it doesn't give poor people freedom, because poverty for most is a matter of education and socialisation. Basic income can pay your bills and put a roof over your head, but it won't create opportunity.
Nor will free markets. Left to its own unregulated devices, no form of social organisation is quite so good at destroying economic freedom for most of the population as a laissez-faire zero-regulation regime.
Most of the civilised world has affordable health care precisely because it offers financial freedoms that market-based "solutions" reliably try to destroy. The cost of health insurance in the US is literally crippling. It's a prime driver of personal bankruptcy, it makes would-be entrepreneurs think more than twice about setting up - and none of this is an issue in countries where public health care is available.
Likewise with student loans. Who has more freedom - a student with $100k of debt, or a student with no debt?
Who benefits from a generation of students with huge debt burdens? It's certainly not the students.
The real road to prosperity and economic freedom is a regulated market in a broadly prosperous economy with minimal cost of entry for entrepreneurs. That means easy and cheap access to investment funding, plenty of high quality blue sky government-funded seed R&D, a strong culture of academic research and independence, serious investment in public infrastructure, a broad variety of independent media, free unrationed access to world class educational resources, and seed level support for entrepreneurs and business creators from all social backgrounds.
It doesn't mean the "freedom" that makes the proverbial 1% extremely rich while everyone else's economic and personal freedoms are diminished.
Necessities were more or less shared communistically, while "money" was mainly used to elevate status within a social group.
There was little to no trade surrounding necessities.
Your suggestion might or might not be impractical, but I think the general thrust is correct.
If you provide UBI and people can have fines, interest, judgements, etc. levied against it, many predatory practices will render people destitute even with it.
Needless to say, it distorts all kinds of incentives and the black market thrives anyway.
There isn't really a difference here. Need vs. want isn't a binary classification, even though we treat it as one. It is a spectrum. Even worse, it is a spectrum where ever people with choice don't always make the choices of need. Take someone thirsty who is drinking soda. Enough so that they are lowering their life expectancy. They have a need for water, not soda. Soda is worse, comparable to slightly dirty water in how it impacts their life expectancy, but they choose it for other reasons.
It would be far easier to give people money and let them choose how to allocate it. If someone's immediate needs is a safer location to shelter in then they can decide what do they need less (maybe reduce their food budget to compensate). The only issue needing government involvement is with ensuring parents meet the needs of their children (but once again, needs isn't a distinct classification).
No we don't. "Vote with yer dollers" is a political talking point.
I knew someone in a rough spot that went there and spent a day building a rabbit cage or something. When he got back to the center he was told that his SO earned too much for him to work there, they had failed to mention that when he got there first. So now he has checks worth nothing hanging on his walls.
So I think that is a good argument against them being, uh, necessary, and then there is the whole thing where if it is a real currency, it will be fungible, so people will still be able to use them stupidly on things that aren't necessities.
1. Buy allowed item with necessity dollars.
2. Merchant credited with nicety dollars.
3. Return item to merchant.
4. Receive refund as X% of the nicety dollars.
1. Buy $X banana with necessity dollars.
2. Merchant credited with nicety dollars.
3. Give $Y rebate card to merchant.
4. Receive rebate in nicety dollars.