Bryan Caplan  

UBI: Reply to Dolan

Hans Rosling RIP... TANSTAAFL...
Ed Dolan thoughtfully replies to my Universal Basic Income challenge on the Niskanen blog.  Here's my point-by-point reply.  Dolan's in blockquotes, I'm not.

Here are three kinds of libertarians who might take a UBI very seriously indeed.

Libertarian pragmatists

...By some calculations, the government already spends enough on poverty programs to raise all low-income families to the official poverty level, even though the poverty rate barely budges from year to year. Wouldn't it be better to spend that money in a way that helps poor people more effectively?

Sure, holding spending constant.

A UBI would help by ending the way benefit reductions and "welfare cliffs" in current programs undermine work incentives.. A UBI has no benefit reductions. You get it whether you work or not, so you keep every added dollar you earn (income and payroll taxes excepted, and these are low for the poor).

But, wait, you might say. Why would I work at all if you gave me a UBI? That might be a problem if you got your UBI on top of existing programs, but if it replaced those programs, work incentives would be strengthened, not weakened.

This is a serious overstatement. 

First, as Dolan acknowledges elsewhere, the disincentives are theoretically ambiguous.  Yes, the UBI encourages work via the substitution effect - if you get paid more per hour after taxes, work is more attractive.  But it also discourages work via the income effect - if you get more free money, work is less attractive.

Second, as I emphasize in the piece to which Dolan is responding, existing welfare states make it hard for prime-age, healthy, childless citizens to get free money.  For the vast population in this category, a UBI is a clear addition to existing programs, because they're currently ineligible for most existing programs.

Or, you might say, a UBI might be fine for the poor, but wouldn't it be unaffordable to give it to the middle class and the rich as well? Yes, if you added it on top of all the middle-class welfare and tax loopholes for the rich that we have now. No, if the UBI replaced existing tax preferences and other programs that we now lavish on middle- and upper-income households. Done properly, a UBI would streamline the entire system of federal taxes and transfers without any aggregate impact on the federal budget.
I urge the friends of UBI to click on the "Done properly" link.  In it, Dolan crunches a lot of numbers to estimate the maximum feasible UBI if (a) taxes stay the same, and (b) we abolish a vast array of government programs.  His answer: $4452 per person per year.  I say this confirms the obvious: A UBI high enough to be politically appealing would be utterly unaffordable because it wastes so much money on the non-poor.

Classical liberals

Not all of those with libertarian sympathies are anarcho-capitalist purists. Many classical liberals, even those whom purist libertarians lionize in other contexts, are more open to the idea of a social safety net as a legitimate function of a limited government.

Indeed.  But even moderate classical liberals have traditionally tempered this concession with elevated concern for scarcity, disincentives, desert, and long-run fiscal stability.  Concern for scarcity makes them ask, "Shouldn't we target anti-poverty resources on the very poor, instead of helping everyone?"  Concern for disincentives makes them ask, "What about the UBI's effect on prime-age, healthy, childless citizens?"  Concern for desert makes them ask, "Shouldn't we target anti-poverty resources on people who genuinely can't help themselves, like children and the severely handicapped?"  Concern for long-run fiscal stability makes them ask, "Shouldn't we get our fiscal house in order before we contemplate massive new spending programs?"  I'm not saying that libertarians should oppose the UBI because it's inconsistent with anarcho-capitalism.  I'm say that libertarians should oppose the UBI because it's even more oblivious to our many well-founded reservations about the welfare state than the status quo.

Lifestyle libertarians

The libertarian sympathies of still others arise from the conviction that all people should be able to live their lives according to their own values, so long as they don't interfere with the right of others to do likewise. These lifestyle libertarians are drawn to a UBI because of its contrast with the nanny state mentality that characterizes current policies. Why should social programs treat married couples differently from people living in unconventional communal arrangements? Why should welfare recipients have to undergo intrusive drug testing? Why should food stamps let you buy hamburger and feed it to your dog, but not buy dog food?

Simple: Because people on welfare are interfering with taxpayers' right to live their lives according to their own values.  It's entirely appropriate, then, for taxpayers to impose conditions on (a) who gets the money, and (b) what they have to do to get it.  This principle is widely accepted even for voluntary charity: If you want to sleep on my couch and eat my food, you have to follow my rules.  This applies even more clearly for involuntary charity: If you're living off my money without my consent, you have a grave responsibility to spend my money prudently and strive to become self-supporting.

Writing for, Matthew Feeney urges libertarians to stop arguing in principle against the redistribution of wealth. Instead, he says, "scrap the welfare state and give people free money." Feeney sees a UBI as an alternative that "promotes personal responsibility, reduces the humiliations associated with the current system, and reduces administrative waste in government."

This neglects a middle path for libertarians: Arguing for limits on the redistribution of wealth.  What kind of limits?  "You shouldn't get money unless you are absolutely poor through no fault of your own" isn't just great place to start.  It also has great intuitive appeal for non-libertarians.

Comments and Sharing

COMMENTS (6 to date)
Hazel Meade writes:

I am skeptical. One could also take the position of "If we give you money, it should be as restrictive and humiliating as possible as an incentive to get off of it."

Welfare doesn't exist so people can be free to do whatever they want on someone else's dime. It exists so they won't starve to death. The person who produced the dime should always be in control.

Also, I understand the desire to form a liberaltarian alliance in order to oppose trump and the alt-right/nativist movement, but the redistribution of wealth is just too fundamental an issue to sacrifice. Self-ownership entails that the people producing the wealth get to decide what to do with it - there's just no way around that.

Pajser writes:
    "Because people on welfare are interfering with taxpayers' right to live their lives according to their own values. It's entirely appropriate, then, for taxpayers to impose conditions on who gets the money, and what they have to do to get it."

It is all valid if you accept private property of taxpayers for granted. For instance, you built factory, you produce and now you are taxpayer. So, now you want to make rules, if you give charity, you'll decide the way.

But, it is other way around. To be able to produce, you grabbed some natural resources, some land you didn't created. You put the fences around and restricted freedom of others to use these resources. Why other people should allow you to do that? It is natural that they want some benefit out of the project. Otherwise they can just say "oh, wait a minute, if I have no benefit of your factory at all, please, don't put any fences around; don't restrict my freedom; this land, and this building, and these machines, all these are natural resources and I want the freedom to use them any way I want, just as you used it."

So, it is only moral that citizens make the rules. And taxpayers should decide how to adapt to rules. The citizens should be reasonable and moral. But it is another issue.

Thomas writes:

I often take issue with your posts. Not this one. Well done.

Ed Dolan writes:

First of all, thank you, Bryan, for the civil, cogent, and detailed response. I think we might even find common ground--I might eventually be able to get you to concede that libertarian sympathizers should "take a UBI seriously" (that is not the same as drinking the UBI Kool-aid, after all) and in return I will concede that a UBI is not a magic bullet, but nonetheless is worth serious consideration.

A couple of specifics:

1. You say that I acknowledge elsewhere that the incentives are theoretically ambiguous,income effect vs.substitution effect and all that. Fine, but you give the wrong link. The place where I discuss that issue in detail is in the two-part series that starts here. Part 1 of that post deals with theory, and shows that although there is some ambiguity, it requires very special and implausible assumptions for the income effect to outweigh the substition effect. Part 2 looks at the empirical literature, and concludes that the overwhelming weight of evidence suggests that a UBI improves work incentives relative to any means tested program.

2. You are very right to zero in on the "done properly" proviso as critical. I completely agree that tacking a UBI onto the existing system would not work. I also strenuously object to the line you get from some conservatives that a UBI should replace welfare for the poor, but leave all tax and transfer goodies intact for the rent-seeking middle and upper classes. What is sauce for the goose is sauce for the gander. Does that make a UBI a hard sell politically? Maybe. I'm a lowly economist. As the song says, "If the rocket goes up/who cares where it comes down?/That's not my department/says Werner von Braun."

3. Taxpayers have right to attach conditions to public charity. I don't dispute that. Whether pragmatic considerations might lead them to avoid excessive or silly conditions is another matter.

4. "You shouldn't get aid unless you are poor through absolutely no fault of your own." Yes, that argument has some moral force. However, pragmatically, it is hard to pull off since it requires a huge welfare bureaucracy to decide who qualifies, and the very effort to decide has a Heisenberger-like way of changing the nature of the phenomenon you are trying to evaluate. Exhibit A is our disability system, which tries to follow the principle you suggest, but ends up with massive unintended consequences (UBI vs. disability is subject of a forthcoming post.)

Thanks again, anyway. I'd love to have a live debate on this.

Tracy W writes:

If you truly believe that factories only benefit their owners, I invite you to figure out how to comment on this blog without using anything made in a factory.

Or at least without anything made in a factory not owned by you.

Cole D. writes:

One distinct advantage of a UBI vs. other means tested welfare solutions is that it eliminates rent-seeking behavior. Whenever you have a cliff, no matter how reasonable it may be, you will have individuals who try to worm their way into the cracks. If there was a perfect method of verifying whether the person's circumstances are no fault of their own, that would indeed be the ideal solution--though I'm doubtful such a method exists without spending significant resources on it.

That being said, I'm intrigued by the powerpoint you linked to: "You shouldn't get money unless you are absolutely poor through no fault of your own". I'd like to hear more on that. Do you have a video of your presentation?

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