More On Basic Income (and Robots)

Marc Andreessen recently wrote a post titled “This is Probably a Good Time to Say That I Don’t Believe Robots Will Eat All the Jobs …" — like all of Marc’s posts it is full of good ideas and worth reading. I agree with many of the points including the benefits of technology driven deflation and being long on human creativity to find interesting things for us to do. There is, however, a critical distribution question that Marc mostly avoids but is at the crux of the transition.

Marc writes:

Imagine 6 billion or 10 billion people doing nothing but arts and sciences, culture and exploring and learning. What a world that would be. The problem seems unlikely to be that we’ll get there too fast. The problem seems likely to be that we’ll get there too slow.

We could add other great activities to this list such as caring for each other, our communities and the environment. I too find that a desirable state of the world and I am optimistic that we can get there in the longrun. 

The transition is difficult though because pretty much all of these activities are either not paid at all (eg making music, cleaning up the environment) or paid poorly (eg teaching, nursing, open source, basic research). Now we can use crowdfunding mechanisms such as Kickstarter, Patreon, Beacon, Experiment, etc to pay some people for some of these and over time that can and will grow significantly. Still the money has to come from someone. And that’s a meaningful limitation at a time of great and growing inequality with nearly half of Americans without any savings (or net in debt).

A higher minimum wage, as vigorously argued for in an interesting recent piece on Politico, can inject some short term liquidity into the economy and I am sympathetic to that but it is also a very blunt instrument and still doesn’t help with the many unpriced activities. The same goes for government mandated shorter working hours or longer vacations (although I am pretty sure that Google’s founders did not have a government mandate in mind).

Marc suggests that we “[c]reate and sustain a vigorous social safety net so that people are not stranded and unable to provide for their families.” Our present approach to that though has gotten us stuck with a large government sector and complicated entitlement programs. 

This brings me once again to the idea of a guaranteed basic income. This is a potentially attractive alternative for a number of reasons:

First, it sets human creativity free to work on whatever comes to mind. For many people that could be making music or learning something new or doing research.

Second, it does not suppress the market mechanism. Innovative new products and services can continue to emerge. Much of that can be artisanal products or high touch services (not just new technology). 

Third, it will allow crowdfunding to expand massively in scale and simultaneously permit much smaller federal, state and local government (they still have a role — I am not a libertarian and believe that market failures are real and some regulation and enforcement are needed, eg sewage, police).

Fourth, it will force us to more rapidly automate dangerous and unpleasant jobs. Many of these are currently held by people who would much rather engage in one of the activities from above.

Fifth, in a world of technological deflation, a basic income could be deflationary instead of inflationary. How? Because it could increase the amount of time that is volunteered.

I will write more about how such as system could be financed. In the meantime suffice it to say that one of the (relatively few) roles of government should be the collection of taxes from companies and individuals (like myself) who have already benefited from technological change.

PS One way to think about a basic income is as follows: it removes a currently binding constraint on time optimization for many individuals allowing them to escape a local minimum — that in turn lets the economy as a whole adjust much faster (and with far less pain). 

Posted: 7th July 2014Comments
Tags:  basic income work labor robots

A Basic Income Experiment I Would Like to See (Detroit)

I have referred to a basic income many times here on Continuations so now it is time to flush out a bit more how this could ever possibly work. Many people do simple back of the envelope math like saying there are 319 million people in the US, so if you paid each of them $10K per year that would be $3.2 trillion which exceeds the annual federal tax base (which is about $2.7 trillion) and then quickly conclude that the whole thing is a lost cause.

My basic contention though is that the amounts for a basic income could be significantly less and still achieve the goals of letting local activity flourish. So with that in mind here is an experiment I would like to see: have the city of Detroit recruit up to a thousand people to one of their destitute areas with a basic income set at something like $400 per month. So the monthly cost of the experiment including some initial overhead might be $500K or $6 million for a full year. I believe the funds for that could be raised from people like myself who are interested in seeing such an experiment.

Now imagine three or four people sharing a house. They could easily afford the utility bill (unlike current situation in Detroit where almost half of households cannot even pay their water bill). As part of the experiment the city should also work to provide high speed internet at only slightly above cost in a utility model. By picking a relatively compact area this could be done wirelessly as a start to reduce the initial set up cost and time. Eventually if the experiment works the network can be expanded. There are plenty of houses in Detroit that are being either razed entirely or auctioned off in the low thousands of dollars, so housing should be the least of issues. Especially because people with a basic income would be excellent credit risks on a P2P lending platform such as Lending Club.

Here are two other components of the experiment that I think would be critical. First, there should be relatively little regulation on activity for instance to make it possible to do local farming, operate small schools, drive others around, etc. exactly the kind of activities that used to historically allow for people in communities to help each other. Second, I believe that participants for this experiment should be recruited and screened. I am not sure exactly what the right criteria would be but ideally they generate some diversity in interests and backgrounds (eg include people who already know how to renovate houses). One could think of this as a colony, not in a new geographic area but in a new social arrangement. Therefore initial recruitment is essential to increase the likelihood of success.

Would love to hear from anyone who thinks this kind of experiment would be interesting. Please also provide any and all feedback on the conditions for such an experiment that you think make sense (or don’t).

Posted: 24th June 2014Comments
Tags:  basic income experiment Detroit

More on Basic Income Guarantee: Minimum Wage is Not a Longterm Solution

On Monday I posted about looking for a Research Assistant primarily to look into questions around using Basic Income Guarantees as a way to deal with what I believe is the end of work as we know it. Then yesterday Fred wrote a terrific post on the Limits of Capitalism and linked to my earlier post driving more traffic to it. The net result is that I now have many wonderful folks interested in helping out and will be sorting through that over the weekend.

In the meantime though I wanted to address an important point that came up in several of the comment threads where people asked about minimum wage. While the motivation behind a minimum wage is to help people make enough money to be able to live it winds up causing distortions that effectively reduce rather than increase the work that can clear in the market. That’s of course a known problem but at a time when automation is becoming a real alternative the distortion effect of a minimum wage is going way up.

Basic Income Guarantee (assuming for a moment that it can be made to work, this is what my research project is about) is a much more elegant solution. Why? Because it shifts the bargaining position for *all* labor as it gives everyone a credible walk away point. Yet it still allows for the labor market to clear effectively. For instance, if someone wants to do an unpaid internship (e.g., at a startup) because they value what they will learn this can now happen, whereas a minimum wage requirement will effectively eliminate a whole bunch of these internship opportunities.

The same is true for many other jobs, such as say bicycle messenger. A good friend of mine spent a year between college and graduate school as a bicycle messenger in Manhattan. He loved to cycle, loved the adrenaline rush of doing so on busy city streets. A minimum wage may eliminate a bunch of these jobs entirely whereas a Basic Income Guarantee makes it an individual choice.

This becomes especially interesting in the context of a potential migration of work into marketplaces such as Postmates. Without a Basic Income Guarantee these might quickly become a race to the bottom. But applying a minimum wage approach here would easily result in essentially arbitrary price floors. One of the arguments against a Basic Income Guarantee ist that it would reduce the labor supply so much that these marketplaces collapse entirely — I will have more to say about this in future posts.

Posted: 13th December 2013Comments
Tags:  economics basic income wages