Quotulatiousness

August 3, 2017

Words & Numbers: Is UBI Better Than Welfare?

Filed under: Economics, Government — Tags: , , , , — Nicholas @ 03:00

Published on 2 Aug 2017

A viewer recently asked us what Words & Numbers thought of Universal Basic Income.

Antony Davies likes the idea of it, provided it’s done well, but doesn’t think it could ever possibly be done well. But what about a theoretical UBI? If we could actually figure out how to implement that well, would that work? And why wouldn’t that work in the real world? This week on Words and Numbers, Antony and James R. Harrigan tackle the issue that’s getting a lot of attention in Silicon Valley.

August 2, 2017

Some troubling early signs from Finland’s UBI experiment

Filed under: Economics, Europe, Government — Tags: , , , — Nicholas @ 03:00

Dan Mitchell says we can’t draw definite conclusions from these early (anecdotal) points, but that it may point toward UBI (universal basic income) not being the panacea it’s been touted to be:

Map of Finland (Suomen kartta) by Oona Räisänen. Boundaries, rivers, roads, and railroads are based on a 1996 CIA map, with revisions. (via Wikimedia)

The New York Times published an in-depth preview of Finland’s experiment late last year. Here’s a description of the problem that Finnish policymakers want to solve.

    … this city has…thousands of skilled engineers in need of work. Many were laid off by Nokia… While entrepreneurs are eager to put these people to work, the rules of Finland’s generous social safety net effectively discourage this. Jobless people generally cannot earn additional income while collecting unemployment benefits or they risk losing that assistance. For laid-off workers from Nokia, simply collecting a guaranteed unemployment check often presents a better financial proposition than taking a leap with a start-up.

For anyone who has studied the impact of redistribution programs on incentives to work, this hardly comes as a surprise.

Indeed, the story has both data and anecdotes to illustrate how the Finnish welfare state is subsidizing idleness.

    In the five years after suffering a job loss, a Finnish family of four that is eligible for housing assistance receives average benefits equal to 73 percent of previous wages, according to data from the Organization for Economic Cooperation and Development. That is nearly triple the level in the United States. … the social safety net … appears to be impeding the reinvigoration of the economy by discouraging unemployed people from working part time. … Mr. Saloranta has his eyes on a former Nokia employee who is masterly at developing prototypes. He only needs him part time. He could pay 2,000 euros a month (about $2,090). Yet this potential hire is bringing home more than that via his unemployment benefits. “It’s more profitable for him to just wait at home for some ideal job,” Mr. Saloranta complains.

So the Finnish government wants to see if a basic income can solve this problem.

    … the Finnish government is exploring how to change that calculus, initiating an experiment in a form of social welfare: universal basic income. Early next year, the government plans to randomly select roughly 2,000 unemployed people — from white-collar coders to blue-collar construction workers. It will give them benefits automatically, absent bureaucratic hassle and minus penalties for amassing extra income. The government is eager to see what happens next. Will more people pursue jobs or start businesses? How many will stop working and squander their money on vodka? Will those liberated from the time-sucking entanglements of the unemployment system use their freedom to gain education, setting themselves up for promising new careers? … The answers — to be determined over a two-year trial — could shape social welfare policy far beyond Nordic terrain.

The results from this experiment will help answer some big questions.

    … basic income confronts fundamental disagreements about human reality. If people are released from fears that — absent work — they risk finding themselves sleeping outdoors, will they devolve into freeloaders? “Some people think basic income will solve every problem under the sun, and some people think it’s from the hand of Satan and will destroy our work ethic,” says Olli Kangas, who oversees research at Kela, a Finnish government agency that administers many social welfare programs. “I’m hoping we can create some knowledge on this issue.” … Finland’s concerns are pragmatic. The government has no interest in freeing wage earners to write poetry. It is eager to generate more jobs.

As I noted above, this New York Times report was from late last year. It was a preview of Finland’s experiment.

[…]

Maybe I’m reading between the lines, but it sounds like they are worried that the results ultimately will show that a basic income discourages labor supply.

Which reinforces my concerns about the entire concept.

Yes, the current system is bad for both poor people and taxpayers. But why would anyone think that we’ll get better results if we give generous handouts to everyone?

So if we replace all those handouts with one big universal handout, is there any reason to expect that somehow people will be more likely to find jobs and contribute to the economy?

Again, we need to wait another year or two before we have comprehensive data from Finland. But I’m skeptical that we’ll get a favorable outcome.

June 15, 2017

Words & Numbers: What You Should Know About Poverty in America

Filed under: Economics, Government, USA — Tags: , , , , , — Nicholas @ 04:00

Published on 14 Jun 2017

Poverty is a big deal – it affects about 41 million people in the United States every year – yet the federal government spends a huge amount of money to end poverty. So much of the government’s welfare spending gets eaten up by bureaucracy, conflicting programs, and politicians presuming they know how people should spend their own money. Obviously, this isn’t working.

This week on Words and Numbers, Antony Davies and James R. Harrigan delve into how people can really become less poor and what that means for society and the government.

March 27, 2017

UBI as “trust-fundism” writ large

Filed under: Government, USA — Tags: , , , — Nicholas @ 04:00

In City Journal, Oren Cass discusses the suggested Universal Basic Income:

The UBI’s implications are clear from a family perspective. Imagine promising your child a basic income beginning at age 18. This is not just providing support — most parents already do that. Within the constraints of their own resources, they may give their young-adult children assistance with educational costs and even the down-payment on a first home; other government programs already seek to offer such support to those with lower incomes. But the UBI goes well beyond that, to an unconditional, irrevocable right to receive the cash for meeting basic needs: basically, the ultimate handout, not a hand up. A child would not receive payments himself, but he would grow up expecting them in a culture that endorsed them.

So if a parent wants the UBI experience for his children, he should not only promise the payments but also envision having “the UBI talk” with each one at least once a year, beginning no later than age 10. It could go something like this:

    Son, it is important to me that you not feel obligated to support yourself. That’s my job. Nor should you feel a duty to be a productive member of society. It is a central principle of this family, rather, that you feel entitled to everything you need.

    I hope you will get a job, because I think you will find it fulfilling, and it will allow you to buy nicer things. I also hope my support will encourage you to take some extra risks and pursue a challenging career, or become an entrepreneur, or dedicate yourself to helping those less fortunate. But none of that is a condition of my support. You can also backpack through Europe indefinitely or just sit in the basement smoking pot. In fact, as soon as we are done with this talk, let’s go watch one of the many movies Hollywood has produced recently in which they show the enormous benefits of those choices and viciously mock anyone who frowns on them.

    If you find a girlfriend, I’ll be happy to double your payment. If you have kids, the payment will increase further. But lest you feel tied down, rest assured that you can break up, abandon the kids, and I’ll continue making payments anyway. And we’ll start those payments as soon as you turn 18, at a critical inflection point in your future.

Of course, some parents do provide their children with a system of automatic support. We call the result a “trust-fund baby.” The term is not usually synonymous with “kind, well-adjusted, productive member of society.” The day when parents embrace trust-fundism as a child-rearing ideal is the day when the UBI will gain mainstream traction as a public policy.

If the UBI’s advocates really believe in the policy, they should start with their own children. Granted, the “what about your own kids?” argument is usually a cheap rhetorical ploy. Advocates of foreign intervention don’t eagerly send their children into battle, nor do advocates of higher taxes voluntarily pay higher taxes themselves; they don’t claim that fighting wars or paying taxes benefits the individual, but rather that society as a whole would benefit. A policymaker might rationally enroll his children in private school while pursuing a public school model of education reform, or sign up his family for better health insurance than he believes the government should guarantee to all, without necessarily being hypocritical. What’s best for one’s own child need not align with the public policy one believes most appropriate for the government to adopt.

February 1, 2017

“This unapologetic Luddism is what passes for futurism in leftist circles these days, I fear”

Filed under: Economics, Europe, France, Politics — Tags: , , , , — Nicholas @ 04:00

Colby Cosh looks at the tribulations of the French Socialist party (the rough equivalent of Canada’s “Natural Governing Party”) as they scramble to remain meaningful in the upcoming elections:

[Benoît] Hamon’s candidacy will provide a first serious electoral test of the ultra-trendy universal basic income idea. His proposal is for a universal income of €750 a month, or about $1,050 in Canadian currency. This is none too generous an amount to live on, even granting that France is a hell of a nice place to be poor. But without other sources of financing, such a UBI might require nearly an immediate doubling of French state revenue, even if you count the existing welfare programs France could get rid of.

Valls expended a lot of effort challenging Hamon’s math, to little apparent avail. Hamon has “plans” to raise new revenue, mostly of a hand-wavy sort that will be familiar from the worst sort of Canadian provincial election. But his tax on robots and artificial intelligences is certainly a fun new wrinkle.

On hearing of the idea, the advanced, full-blooded nerd will immediately think of Frank Herbert’s Dune novels. Herbert, finding it amusing to construct a science-fiction universe without computers, created a backstory in which humans had risen up in an enormous, ultra-violent “Butlerian Jihad” and established a pan-galactic religious taboo: “Thou shalt not make a machine in the likeness of a human mind.”

For, after all, any machine that mimics human operations, mechanical or cognitive, takes away a potential job from a human being, or from dozens of them. That is the premise of the “robot tax”, and, by all logic, it should apply to computers. Or, for that matter, to any labour-saving device — any device that multiplies human productivity at all. Pens. Crocs. Red Bull.

This unapologetic Luddism is what passes for futurism in leftist circles these days, I fear. The sense that automation finally went too darn far, in the year 2015 or thereabouts, finds willing hearers everywhere in communities that used to be able to count on beer-bottling plants or fish canneries or automotive assembly lines. The universal basic income is of interest to future-minded politicians because that low-skill mental and physical work seems to be disappearing. Some see an approaching world in which scarcity of goods is transcended, by dint of robots and 3D printing and machine learning, and most humans have no opportunities for productive work.

December 5, 2013

The unhappy math that undermines the Guaranteed Income notion

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 11:30

Megan McArdle is convinced that despite the appeal, any form of guaranteed income is doomed to fail. She provides four strong reasons for this, but I think the strongest reason is sheer mathematical impossibility:

Not a few libertarians have embraced the idea as an alternative to the welfare state. Get rid of all the unemployment insurance and just cut everyone a check once a month. There’s a lot to like about this: It has minimal overhead, because you don’t need to verify eligibility beyond citizenship, and it may reduce some of the terrible incentives that poor people face under the current system.

There are a couple of problems with this, however. The first is that zeroing out our current income security system wouldn’t provide much of a basic income. Total federal spending on income security (welfare, unemployment, etc.) is under $600 billion a year. There are 235 million adults in the U.S. Millions of those are undocumented immigrants, but that still leaves you with a lot of people. Getting rid of all of our spending on welfare and so forth would be enough to give each of those people less than $3,000 a year. For a lot of poor people, that’s considerably less than what they’re getting from the government right now.

The problem is that if you try to bring it up to something a bit more generous, the cost quickly escalates. Cutting everyone a check for $1,000 a month, which most people in that room would consider too little to live on, would cost almost $3 trillion. But if you means-test it to control the cost, or try to tax most of the benefits back for people who aren’t low-income, you rapidly lose the efficiency gains and start creating some pretty powerful disincentives to work.

$12,000 a year isn’t enough to live on in a major city — which is where a lot of the people you’re hoping to help are living — and providing higher guaranteed income to those living in more expensive areas will create an incentive that will draw more people into the qualifying areas. Excluding immigrants from the benefits will exacerbate the already serious problems some areas have with their illegal immigrants (and create yet another barrier for legal immigrants over and above what is already in their way, as documented here).

Switzerland is reported to be considering a guaranteed income plan. As Megan says, it’ll be an interesting experiment if they do:

In general, I am wary of exciting results from small pilot programs. Most of those programs fail when they’re rolled out statewide, either because the result was spurious or because the exciting work of a small, dedicated group just can’t be replicated in a gargantuan state bureaucracy.

I will be very happy if Switzerland decides to mail a check for a couple of thousand dollars to every citizen every month; it will be fascinating to see what results this has. But I am skeptical that those results will, on net, be good ones.

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