Alberto Mingardi  

Hayekian arguments for basic income

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Matt Zwolinski has an interesting article which attempts to answer the question "Why Did Hayek Support a Basic Income?". His answer is that Hayek did so because such a minimum endowment of economic means grants people the essential freedom to say "no"--thus making up for "real" freedom of contract. Matt stresses that Hayek was more concerned than most libertarians with the idea that "unbalanced" market relationships may also be a source of coercion.
I think Matt brings together a neat summary of some well-pondered arguments for a guaranteed minimum income. I would have thought, however, that the Hayekian arguments for a basic income were different.
I think that a Hayekian argument for the basic income is that it would minimize state interventions and, thus, discretionary powers on the part of lawmakers as opposed to contemporary welfare systems.
Hayek believed that there was a legitimate role for collective action against "the extremes of indigence or starvation". Certainly, as Matt remarked in a previous article that David Henderson sharply criticized here, "Hayek was not opposed to the welfare state as such (not even in the Road to Serfdom). At the very least, he regarded certain aspects of the welfare state as permissible options that states might pursue".
However, Hayek was also concerned "with the process by which an apparatus originally meant to relieve poverty is generally being turned into a tool of egalitarian redistribution. It is as a means of socializing income, of creating a sort of household state which allocates benefits in money or in kind to those who are thought to be most deserving, that the welfare state has for many become the substitute for old-fashioned socialism" . He saw clearly the limit of a welfare system that ended up in tinkering with economic life. For example, he maintained that "a compulsory scheme of so-called unemployment insurance will always be used to 'correct' the relative remunerations of different groups, to subsidize the unstable trades at the expense of the stable, and to support wage demands that are irreconcilable with a high level of employment" (The Constitution of Liberty).
Hayek feared that "bleeding heart" policies may endanger the market process. He thought the claims for redistribution were by and large built upon a misunderstanding of markets and a sense of nostalgia for societies based on face-to-face interactions, where (very limited) resources were orderly "distributed" rather than generated in the market process. He eloquently remarked that "those who attack great private wealth do not understand is that it is neither by physical effort nor by the mere act of saving and investing, but by directing resources to the most productive uses that wealth is chiefly created" (Law Legislation and Liberty II. The Mirage of Social Justice). In a market society, people get rewarded for their contributions in a restless process of learning, not because of their "just deserts".
The problem with social justice is thus that it embodies "a demand that the members of society should organize themselves in a manner which makes it possible to assign particular shares of the product of society to the different individuals or groups" (Law Legislation and Liberty II. The Mirage of Social Justice). This would imply a series of continuous interventions in the market process - and, ultimately, the demise of those general, uniformly applicable norms that make for the rule of law.
Thus, a basic minimum income is a smart solution to (a) keep our allegiance to the idea we shall accept some sort of poverty mitigation device but (b) refuse to accept the bureaucratization and the social and economic planning that inevitably comes with "organised benevolence", as Hayek repeatedly pointed out. By providing people with a basic income you do not play with prices (including the price of labour), and society spares herself the (self-interested) intermediation of a welfare apparatus. A basic income is less paternalistic, and may have seemed to Hayek a good way to avoid what happened in the years when he was writing, particularly in England: that is, increasing redistribution, nationalizations, and regulation of the economy going hand-in-hand.
Of course, the interesting question is: could this version of the idea of a basic income survive the test of the political process? And what about its unintended consequences? Hayek would have been fine with replacing the welfare state altogether with a basic income. In Europe at least, most advocates of the basic income are for adding it to the existing welfare provisions. If this happened, I suspect Hayek would not be very confortable in the position of the useful idiot (neither would Matt, for that matter).


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CATEGORIES: Economic Philosophy



COMMENTS (29 to date)
Guest2 writes:

This is very much like the predictions in the book, “Does Capitalism Have A Future?” (Oxford 2013). For example, Randall Collins’ chapter, “The End of Middle Class Work: No More Escapes,” states that some form of socialism is inevitable -- he predicts a revolution (violent or non-violent) in 2030-2045 due to 50% structural unemployment from technological displacement, and 70% not long after that -- but the capitalist/socialist mix will be highly dependent on various factors that he enumerates. It could come in the form of income-supports.

If popular attitudes toward capitalism change as radically as predicted, the argument would be that "unintended consequences" will be dealt with as they come up.

Jon Murphy writes:

Fantastic article, sir. Thank you.

I think the question you ask at the end, regarding surviving the political process, is key. In a republican system of governance, it would be extremely unlikely that any such plan were to escape unscathed. I tend to agree with your second-to-last statement that basic income with be in addition to, rather than instead of, other welfare programs.

I understand Hayek's argument for a basic income, but I still oppose it, partly for the political reason you cited.

Jameson writes:

I kind of have a problem with libertarian arguments that count distortions from the political process as a flaw inherent to an idea. The thing is, pretty much every libertarian idea has that flaw. Seriously, is there a single libertarian idea that has actually been implemented such that it works in the idealized way libertarians have described?

It seems like the right thing is to argue for a basic minimum income a la Hayek, then hope that one day a political coalition can pull off something close to it while dismantling large parts of the welfare state. If Hayek's reading of history is any lesson, this will probably happen more by accident/luck than anything else.

Pajser writes:

Almost all leftists emphasize that egalitarian distribution increases individual freedom on the bottom of the society. It is particularly hard to justify non-egalitarian distribution of natural resources. The basic income can be seen as some compensation for natural resources non-owners are left without.

magilson writes:

Jameson,

Seriously, is there a single libertarian idea that has actually been implemented such that it works in the idealized way libertarians have described?

Has any formal social organization ideology every been implemented to plan so closely as to leave no complaints among those who proposed it? I can't really think of one.

The point for myself, as a libertarian, is not that perfection in implementation is possible. Only that a framework should be created such that failures can be largely internalized so that ideological growth is possible. True and actual "progress" as opposed to Progress.

I'm not personally opposed to Hayek's reasons for proposing a minimum income type policy. When discussed in the realm of ideas they seem to be reasonable. It's just that like a lot of libertarians I believe the chances it will be highly distortionary weigh heavily on my willingness to actually advocate the policy.

Jon Murphy writes:

Magilson,

I think you hit the nail right on the head with that one.

Philo writes:

“Hayek believed that there was a legitimate role for collective action against ‘the extremes of indigence or starvation’.” This must mean that there is a *positive duty*, incumbent on certain people (upon whom, precisely?) to relieve the distress (*how severe*?) of other people (with certain provisos, such as that these people have not *willfully caused their own distress*?) . No one doubts that people with means *may* help others, but *forcing* Peter to help Paul, when Peter is unwilling, is justified only if helping Paul is Peter’s *duty*--perhaps even (since this is a political question) only if helping Paul is *obviously* Peter’s duty.

An especially crucial issue concerns nationality: is Peter’s duty affected by whether Paul is a fellow citizen of his, or a permanent resident of the same country (state, county, etc.)?

“Of course, the interesting question is: could this version of the idea of a basic income survive the test of the political process?" Not so interesting, since the *obvious* answer is ‘no’! Between the majority (who support either the welfare state or outright socialism) and the libertarian minority, the support for Hayek’s guarantee of just “basic” (?) income is very thin indeed.

English Professor writes:

Can anyone tell me what a Hayekian guaranteed minimum income would look like? Would every person receive a monthly check from the government? Would only those below a certain income threshold get a check? Would it be distributed to families (or households) rather than individuals? How are children counted in such a scheme? I keep reading that Hayek supported some such policy, but I don't know what it is supposed to look like.

Tim C writes:

Government has nothing to give that it has not taken ,by force, form those who produced it.

At this point in human history there can be no doubt of the failure of ANY socialist intervention to improve the lives of the individuals within the nation organized around interventionist ideas.

A guaranteed minimum income is not a libertarian idea as it contradicts the basic premise of non-aggression that libertarianism is founded on. Anyone claiming to support a government forced minimum income is NOT a libertarian and should be called out as the fraud they are.

Seth writes:

English Professor asks great questions.

This may not be Hayekian, but I'd be more supportive of any welfare program if recipients were give a simple choice -- you can have the welfare or you can vote. You don't get to do both.

In other domains we easily recognize that getting to vote for others to give you their money is a conflict of interest.

Lee Waaks writes:

I believe the state creates poverty by its consumption of capital and myriad interventions. Attempting to forestall socialism (or at least mild socialism) with the gambit of guaranteed income is somewhat risky because the state lowers real wages (relative to what they would have been) and causes numerous problems with its interventions. As these are always blamed on the "free market", capitalism, etc., growth from technology must outpace capital consumption/interventions to forestall socialism. So far, so good, I suppose.

Hazel Meade writes:

I can't help but think that any sort of BIG is going to end up causing all sorts of perverse consequences.

For one thing, it would certainly incentivize immigration and make open borders an impossibility. A free market in labor is one thing. But immigration for the purpose of receiving a BIG wouldn't be labor at all. And there's really no way to ensure that immigrants aren't coming to take advantage of the BIG, without making citizenship extremely difficult to obtain, which would create a permanently disenfranchized labor class.

And then there is simply the injustice of redistributing income, and the difficulty in determining how large the BIG should be in an objectively fair way (i.e. not what is politically expedient), and who should be financing it.

I have some sympathy towards the view that owners of natural resources should be paying it, but how much wealth is really ultimately derived from natural resources? Should I pay 50% of my income in taxes as a software developer because I write code on computers that were built from components designed by engineers that happen to use tiny traces of copper on plastic subtrates? How much of the value of what I do is derived from the mining of ore?

TallDave writes:

Considering the times in which Hayek lived and wrote, his proposed minimum income would almost certainly be considerably less than the median welfare recipient gets today in absolute terms.

Given the cost of food relative to total economic production and voluntary charitable actions, "starvation" seems an extremely remote possibility in 2014 America even absent any coercive distribution.

Incentives make a minimum income problematic; on the other hand current MTRs for the poor are arguably worse, and public assistance is overly complex and poorly executed (e.g. PPACA).

MingoV writes:

I don't like the minimum income idea. I agree that a society should not ignore those who are starving and unprotected from the elements. But handing such people cash is inefficient and often counterproductive. (Those who are addicts would spend the money on drugs instead of housing and clothes.)

Some of the homeless poor should be in a mental health facility or a drug addiction treatment facility. My recommendation for the others is to provide housing in a barracks-like structure that has communal bathrooms and a cafeteria. The residents would be living as well as our soldiers, which seems fair. These facilities could be funded by donations (necessary in a libertarian society) or by tax-payers.

Rod writes:

From my economics standpoint, a guaranteed minimum income makes much better sense than an array of welfare programs; in many ways that would take to long to outline (the elimination of market distortions alone would be worth it), and I would support such a measure. From my libertarian standpoint, wealth redistribution by force is wealth redistribution by force regardless of what you call it, and I would oppose such a measure.

The question on my mind is, which side will prevail?

LD Bottorff writes:

Seriously, is there a single libertarian idea that has actually been implemented such that it works in the idealized way libertarians have described?

I consider Milton Friedman a libertarian. His idea of ending the draft worked out pretty well. I don't recall libertarians suggesting that it would end all wars. I'm not sure what other ideals the end of the draft was supposed to reach, but ending the draft worked out pretty well for lots of young men.

Ted writes:

I am very skeptical of non-scalable proposals. A minimum income is by definition non-scalable.

Testing the limits makes it obvious. If the entire population wants to live on the minimum income, it obviously won't work.

It doesn't need to be so extreme. Probably at 25% the system starts cracking - look at Wales for example. They couldn't survive without the generous handouts from London. Remember that you need very big government as well, to provide things that the vanishingly small private sector will be incapable to.

Then the obvious problem is of political power. More and more idlers on guaranteed incomes vote for bigger and bigger handouts, which creates incentives for more to become idle, thus higher expropriations are needed on the productive private sector, lowering their incentives to be productive or in the private sector. Better to join the idle sector and so forth.

I think that Hayek didn't dream of his proposal being applied in today's circumstances, in which it becomes the norm for governments to consume over half their countries' domestic product.

Paul Marks writes:

This is not a surprise.

Matt Z. has long supported the core collectivist doctrine - Social Justice. So of course he supports the government giving everyone an income in return for no work.

It would destroy the economy and destroy the culture (Civil Society) - but so what, as long as "Social Justice" is served.

Hazel Meade writes:

I agree that a society should not ignore those who are starving and unprotected from the elements. But handing such people cash is inefficient and often counterproductive. (Those who are addicts would spend the money on drugs instead of housing and clothes.)

This is where it breaks down. Because when the junkies end up starving in the streets, then social democrats will STILL want to bail them out with more welfare.

The problem is, no matter how much welfare you provide, there will always be some people who blow it, and end up lying naked in the gutter. And the left will always use that as evidence that we need more welfare.

If we could actually implement a BIG while eliminating food stamps and CHIP and any number of other welfare programs that would be an improvement. But that's not what would happen. The BIG would just be more welfare In ADDITION to what's already there.

Roger McKinney writes:

Pajser:

Almost all leftists emphasize that egalitarian distribution increases individual freedom on the bottom of the society.

It does the opposite. Those who receive income from the state become slaves to it and to the dishonest manipulation of unscrupulous politicians.

Christianity and Judaism have always maintained that people have an obligation to provide a minimal level of income for the poor. But until Marx, Christianity and Judaism insisted that helping the poor must be voluntary. If not voluntary it has no moral value for the people giving.

Using the state to do what people should voluntarily do gives the state enormous power over people that politicians cannot handle. Recipients become slaves to the political class.

Voluntary giving to the poor provides some competition among those who give so that no one giving can demand things from the poor they aren't willing to give.

vikingvista writes:

There is never such a thing as guaranteed income.

A "guaranteed" income from government is only a promise to steal whatever one can for the direct benefit of one's political interests. But there is a limit to what people will produce for confiscation, so there is no guarantee at all. Any attempt at organizing such institutionalized violence in the pursuit of guaranteed income, is guaranteed production loss. This limits the prospects of future levels of "guaranteed" income, and results in the government managing its citizen producers like so much cattle for the purpose of maximizing the annual slaughter.

An income from a peaceful society, on the other hand, comes without promises. And yet allowing individuals to keep and freely trade their surplus production leads to a network of individuals each one of which has the perpetual incentive to produce more and expand the network further. This leads--and has led--to a level of wealth creation and redistribution the likes of which the world had never before imagined. "But we know that, right?" (to quote an Irish rocker).

Voluntary redistribution without guarantees has put immensely more income in the hands of more people--particularly more low income people--than any guarantee could ever hope to achieve.

Pajser writes:
Roger McKinsey: Using the state to do what people should voluntarily do gives the state enormous power over people that politicians cannot handle. Recipients become slaves to the political class.
First, state is voluntary organization. One can leave it on more-less the same way he can leave his workplace, church, chess club or the apartment he rents.

Second, if political class really rules the state, how is that income of elite politicians is so small, compared to elite capitalists or even elite managers? Why they do not change their income first? They cannot?

magilson writes:

Pajser,

First, state is voluntary organization. One can leave it on more-less the same way he can leave his workplace, church, chess club or the apartment he rents.

Obviously this is incorrect. Even if I were to pack up my things and move I still have legal obligations to this country simply because I emerged from the womb on land the state has declared it's own. When I leave my workplace, church, chess club, or apartment I do not have to take identification to prove my person so that I may be allowed re-entry. I do not have any obligation, say, to inform my chess club that I no longer wish to pay dues via a court process and lengthy paperwork.

Clearly this understanding of "voluntary" is utterly wrong.

Second, if political class really rules the state, how is that income of elite politicians is so small, compared to elite capitalists or even elite managers? Why they do not change their income first? They cannot?

That has nothing whatsoever to do with what Roger McKinsey said:

Recipients become slaves to the political class.

Remember we're talking about "guaranteed" income. He was suggesting that those who would be the beneficiaries of this guaranteed income would in turn become beholden to the state. The perfect example being that some states recently have passed drug testing laws as a means of controlling the recipients of aid. I think Roger's point is pretty clear cut and has many relevant and current examples showing it's truth.

I'm not sure what point you were trying to make about relative incomes among political leaders and private leaders. But I can be sure it had nothing to do with what Roger said or what's being discussed here.

Pajser writes:
Magilson: When I leave my workplace, church, chess club, or apartment I do not have to take identification to prove my person so that I may be allowed re-entry.
Perhaps it isn't exact and important difference. Many employers require that employee identify himself on exit; institutions require the same from visitors.
I do not have any obligation, say, to inform my chess club that I no longer wish to pay dues via a court process and lengthy paperwork.
But one can leave his state and ignore it, like he can ignore chess club. Then, the old state may request extradition, just like old chess club may sue ...
That has nothing whatsoever to do with what Roger McKinsey said: Recipients become slaves to the political class. I'm not sure what point you were trying to make ...
Roger McKinsey didn't wrote 'slaves to the state,' but 'slaves to the political class' so note on relative wealth and power of that class can be relevant.
triclops41 writes:

Pajser,
Politicians may only be very wealthy as opposed to obscenely wealthy as in other industries. But you neglect the fact that they use their positions to accomplish through political power what the rest of us must pay money for.
If you add up the monetary value that politicians extract through political power, you would see that the wealth of politicians is quite obscene. Which makes the hypocrisy of the wealth envy some of them display all the more galling. I would need to be a multi millionaire many times over to have the life of privilege that a Nancy pelosi or John boener can provide for themselves and their kin. Family trips in private jets across the country for you and your 20 closest family members? You and I would have to pay good money for that.

magilson writes:

Pasjer,

Perhaps it isn't exact and important difference.

You're reaching is obvious enough that I think your claim falls obviously flat. Employers may require identification, but only after the employer and employee come to voluntary agreement about those terms. Again, in birth, the agreement is tacit and non-negotiable. You are making a comparison of legally binding agreements to which I voluntarily enter (chess club, employer, renter/"landlord") and simply being born within some imaginary lines (the State).

Roger McKinsey didn't wrote 'slaves to the state,' but 'slaves to the political class' so note on relative wealth and power of that class can be relevant.

Please provide your definition of "the political class".

From Wikipedia:

Political class, or political elite is a concept in comparative political science originally developed by Italian political theorist theory of Gaetano Mosca (1858–1941). It refers to the relatively small group of activists that is highly aware and active in politics, and from whom the national leadership is largely drawn. As Max Weber noted, they not only live "for politics"—like the old notables used to—but make their careers "off politics" as policy specialists and experts on specific fields of public administration.[1] Mosca approached the study of the political class by examining the mechanisms of reproduction and renewal of the ruling class; the characteristics of politicians; and the different forms of organization developed in their wielding of power. Elected legislatures may become dominated by subject-matter specialists, aided by permanent staffs, who become a political class.

If one accepts this definition, and I will for the purpose of making my point, the political class, outside of politicians themselves, are constituted of people who derive their power via politicans and the political process i.e., the State. Without the state the political class amount of ideological blowhards. With the State, they amount to de facto rulers.

You may make a distinction, but I don't see one. It may have been the State that enacted a law requiring drug testing for aid receipt. But it was the political class that pushed the idea that was made law. Without the one, the State, there can not be the other, the political class.

And so, to follow, you first mentioned the income issue:

Second, if political class really rules the state, how is that income of elite politicians is so small, compared to elite capitalists or even elite managers? Why they do not change their income first? They cannot?

But then said:

Roger McKinsey didn't wrote 'slaves to the state,' but 'slaves to the political class' so note on relative wealth and power of that class can be relevant.

As I read this, it seems you make one argument and the directly contradict it in order to refute are counter-argument. So I'm not clear on your position as it would appear to change when challenged.

You argue politicians don't give themselves massive incomes in keeping with their private counterparts ergo they aren't as dangerous as their private counterparts must be. As triclops41 points out looking strictly at their stated incomes is a poor proxy for all the ways they're compensated. It's a pretty obvious straw-man argument.

If politicians cannot change their income then the money of their private counterparts, which I think I'm reading you insinuating are also the "political class", should have no effect. Since that's obviously wrong, the next logical step is that the political class, via politicans, can enact their political desires through these politicians and ultimately the State. Again, I don't see the differentiation between the State and the political class that you continue to try to make.

If you could explain further that might help me to understand your point.

Alberto Mingardi writes:

Thanks for the comments. I do agree with most have been said. Jameson is certainly right in pointing out that, well, reality and philosophical treaties do not necessarily match. But how the political process may metabolize a certain proposal is, I believe, a legitimate concern.
EnglishProfessor asks a very interesting question. The devil is in the details, and Hayek was very economical with details on this particular proposal. Don Arthur at Clubtroppo has an interesting post here: http://clubtroppo.com.au/2014/01/02/did-hayek-support-a-basic-income-guarantee/. He argues that Hayek’s BIG was BIG in the name only.

Pajser writes:
Magilson: "Employers may require identification, but only after the employer and employee come to voluntary agreement about those terms. "
Your claim was that employee doesn't need to identify himself. Now you claim he must, but only after he agreed about these terms. It is not true. Even if employers decision was unilateral, employee would have to identify himself on the way out, otherwise security will stop him. On the other side, some states (in EU for instance) do not identify people who leave. You don't have exact and important difference here.

For me, political class consists of professional politicians who make decisions in institutions of formal authority, most importantly the state. There are numerous edge cases; for instance, amateurs who are about equally active are members of the political class. Leaders of parties not on power are part of political class, because they aspire to formal authority. The capitalists, leaders of secret organization, lobbyists, respectable intellectuals are not the members of political class because although they are very powerful, they do not hold or aspire on position of the formal authority. That is how I understand the notion of political class. Your definition "people who derive their power via politicians" seems too wide for me.

If political class has not enough power to make the change of whole elite of that class wants strongly - to increase their income, it means that political class has relatively little power.

magilson writes:

Pasjer,

Your claim was that employee doesn't need to identify himself. Now you claim he must, but only after he agreed about these terms.

I pointed this out because you returned that:

Many employers require that employee identify himself on exit; institutions require the same from visitors.

I haven't changed my stance. I only pointed out that even if the employer were to require identification, that requirement was acknowledged and accepted consciously be the employee. To repeat again, upon emerging from the womb I can at least speak for myself in saying I had no such opportunity. Your analogy just doesn't hold up. If you're looking for "exact and important difference" you fail as well.

And thank you for your further definition. It helps to clarify exactly where your understanding diverges from reality.

By defining the goal of the political glass as increasing their income you can quickly assure yourself the political class has no power as compared to "capitalist elite".

Except that you still have to convince people other than yourself that what the political class is after is increasing their income. It becomes obvious you are setting up a straw man.

And so all I can do is repeat what I explained clearly previously.


That has nothing whatsoever to do with what Roger McKinsey said:

Recipients become slaves to the political class.

Remember we're talking about "guaranteed" income. He was suggesting that those who would be the beneficiaries of this guaranteed income would in turn become beholden to the state. The perfect example being that some states recently have passed drug testing laws as a means of controlling the recipients of aid. I think Roger's point is pretty clear cut and has many relevant and current examples showing it's truth.

I'm not sure what point you were trying to make about relative incomes among political leaders and private leaders. But I can be sure it had nothing to do with what Roger said or what's being discussed here.

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