Indeed. The closest I have seen in explaining this is that everyone gets a tax bill that starts at -$1000 a month, and as they earn more above some threshold that bill gradually goes positive. So at something like $35,000 a year it is break even, or whatever number your equations aim for, and above that you are paying net taxes in.
The trouble is that it doesn't change the math a great deal in terms of cost, although the gradual diminishing of the net payout helps a bit compared to a sharp cliff like "At $19,999 yearly you get $1000 a month, but at $20,000 yearly you get zero."
Of course many people might note that this all sounds remarkably similar to Friedman's negative income tax, so I am not sure why it isn't just that... I might well be missing something.
Yes. My basic attitude is that Say's Law makes *Universal* Basic Income impossible -- hence all possible implementations do not deserve the 'Universal' qualifier, thus making such name false advertising.
Which makes it even more worrisome that Sweden and other UBI exemplars have been trying to get away from the UBI for decades due to its high costs. It isn't universal so much as a "shall issue" sort of deal where you don't have to prove you need it to get it, but it is still very expensive. It suggests to me there are a lot more limitations on the math than advocates like to acknowledge (or have considered fully.)
I think there is something to be said for the nice incentive effects of UBI, but it seems that the level that would make it livable is just too expensive, so you either need a sharp decrease in payout/effective negative tax rate, or to really gut a lot of what the federal government does. If I believed the latter was on the table I would be willing to give it a shot but I highly doubt it will. Flat tax proposals have better numbers and seem to be highly unpopular with legislators, for... reasons I can guess at.
Universal means "You don't need to apply for anything, anyone can receive under a certain threshold". It is universal. But as I said above, "Subsistence allocation" would be more accurate.
The tax curve is practically unchanged. And yes, it is like NIT. And the "universal" part is about being "automatic". You don't need to apply for anything, anyone can receive under a certain threshold. Anyhow, that's why personally I don't like the term "universal". I prefer "Subsistence Allocation", because that's what it is.
Thanks for the link, that is interesting. I do note that the author includes a flat tax proposal in the UBI argument, one that significantly raises taxes on the average (possibly median) tax payer. The UBI is cheaper than the current system under that tax plan (by their estimates) but that seems like a pretty big lift, raising taxes on something close to the majority of tax payers to switch to a UBI. I am not sure I would call that "practically unchanged" in terms of taxes, as it is roughly 5-7% at the middle ranges. I also note that while the author mentions that the UBI is lower than the pension payments, 8000 vs 8546, he says this doesn't adjust the numbers much, but state pensions are the single biggest state benefit, representing almost half of the total. That 546$ a year difference represents just over 6 billion pounds. It seems a little... suspicious to just wave that away. I think it would be more above board to assume an UBI of 8500$ a year to match that pension benefit, because there is no way that pensioners are going to be taking a hit like that; there is good reason they are roughly 50% of the total benefits budget! Using the author's estimates for increasing the UBI by 500$ knocks the net (tax-benefits) down 26 billion, from 88 to about 62, which is more expensive than the status quo, although not awful. The author claims those benefits numbers don't include the costs of administering the programs, which I am skeptical of because usually government budgeting numbers include the costs of the program, but maybe things are different in the UK.
However, that is only UBI for everyone over 16 (nothing for kids, no child raising benefits, nothing like that).
So, if we are being honest, the proposal is to raise taxes and pay more for similar benefits (assuming those getting pensions are not also getting housing benefits or other categories... which I don't think is a good assumption), but possibly save money on the administration of the programs. I don't know if ~10 billion GBP is a reasonable number to save, but it might be. Flat taxes are good savings vehicles, not just for government but for citizens who no longer need to spend a lot on tax accountants.
Still, the plan hopes that raising taxes will lead to a linear increase in revenue, instead of a decreasing rate as is usually the case when taxes are raised, as well as no incentive effects on taxable economic behavior. I am a little skeptical.
If I understood the plan correctly, the flat tax is reduced by the universal allocation (which is not taxed) so that for the majority, the tax burden is unchanged or increases a little. So that the overall curve is pretty much similar.
Or am I misunderstanding?
And about the decreasing rate of revenue, do we have empiricals about the strength of the effect at this kind of rate? Or only theory?
What about the effects of poor people exiting the so-called "fiscal cliff" and being able to work instead of strictly relying on benefits? Or the abolition of the minimum wage? Could these effects counteract those? I think a more free labor market could present many substantial advantages that we need to include when assessing potential results and effects of a subsistence allocation.
I think you are correct that the curve includes the UBI which is why the tax curve starts to the right a fair bit, but I don't think that you are correct that it is "pretty much similar". The majority of tax payers seem to be getting a tax hike, particularly those making what looks like 30-120K a year. Not just a little hike, either, but 4-5% as the author mentions. That's a very significant hike. If your effective tax rate was 25% and now you pay 30%, that's a 20% increase in your total tax liability. It looks a bit like ~30% of the total adult population is seeing that pretty sharp increase.
As to decreasing rates of revenue, that's a good question. It is held to be true by economists, sort of a "so obvious we don't worry about talking about it much" kind of thing. I am sure one could Google it, but it is basic supply and demand at root. Taxes on economic activity make those activities more expensive, so the amount of activity goes down. The effect is analogous to a company raising prices: you might get more per sale, but since sales go down a bit you don't get as much as a straight "multiply current sales at price X by (X+increase)" would suggest.
When it comes to poor people working and having more ability to pay taxes, I think it would depend more on where that fiscal cliff is. The author points out that the break even point for his 8000$ a year proposal is 31K, below which one is paying less in taxes for the new proposal than for the old. It doesn't look like he is including fiscal cliff sort of numbers in the effective taxation rates, so unless those people entering the workforce are making more than 31k a year, it would actually be quite bad for his numbers. As it stands, the median income seems to be around 25k or lower, so there would have to be a lot more earnings for that to work out. Likewise with abolition of the minimum wage: a good idea in general, but I don't think it helps here so much as one has to make something like 17k before they start paying taxes at all. (Going off the graph quick, which is tough to estimate with its log scale of income.)
Also note: all those numbers are from the author's assumption of 8000 a year, not 8500 which is the base pensioner's current receipts, nor 8500+whatever other benefits pensioners currently get. I am extremely skeptical that any UBI that is less than the total that old folks currently get is at all politically feasible, particularly seeing as how they get the lion's share of benefits currently. And if there is a higher payout level that shifts the break even between paying net taxes to the right further, and means either way less revenue or a higher flat tax rate to get numbers back down. Remember that we are looking at spending a very large percentage of the total government revenue just on this UBI as well. I don't know much about the UK national budget, but... maybe they want to aim for saving money?
I do agree that a more free labor market is a great idea and should be done no matter what other policies are enacted, but I don't think it helps the tax revenue side of this particular plan the way the author needs it to.
Not sure about the difference that the 500 pounds would make on state pensions and its effect on political feasability. But, that's exactly the kind of questions we should be asking and debating publicly to be better informed about the policy. I'm all for it!
As for the tax curve and its effects on revenue, again, not sure either. Surely it could be adjusted (I don't really mind the tax being flat or not) to change who pays what. We should be talking about these things instead of dismissing the policy out of hand for being "ridiculously unaffordable" or any other easy (and largely false) smear. So, thank you for that.
Finally, I know about the Laffer Curve, yes. It sounds good in theory but if I'm not mistaken, the threshold has never been really found and I've seen little studies about it. I'd say it's still debatable and should be considered in a public discussion, yes.
The crux of it all being that a subsistence allocation could have far-reaching negative and (mostly, I'd say) positive outcomes that we should be talking about in place of knee-jerk reactions about "unaffordability" and "laziness".
So again, thank you for that!
PS: if you're interested it'll be a pleasure to expose some of these positive projected outcomes.
I should expand a little on the point about decreasing rates of revenue: There is a difference between raising more/less total revenue and raising more/less rate of revenue. Whether or not a tax hike will produce more or less revenue depends a great deal on where you are on the Laffer Curve, or whether or not the increase will push you to the point where taxable activity contracts enough that you are on net losing revenue despite higher rates. That part is debatable because we don't really know where that point is ahead of time. If you imagine two kids with lemonade stands charging different prices, one selling lemonade for a penny might sell a lot of lemonade but won't get much money, while one selling lemonade for $100 a cup probably won't sell any at all and will make zero. ("But if I sell just one cup, I can retire!") Somewhere between 0.01$ and 100$ is the optimal price that will maximize revenue or profit, but it is a bit hard to tell where that would be ahead of time.
However, there is no debate that the RATE of revenue increase from increasing prices declines as you raise prices. Going from 1 cent to 2 cents might just double your revenue, but going from 50 cents to 1$ probably won't. Going from 1$ to 2$ almost certainly will not double the revenue. At some point those diminishing rates of return will even go negative, and you will lose revenue by increasing prices, but no matter what you won't have a flat relationship where doubling price doubles revenue at every price point.
That distinction sometimes gets people confused when discussing things like the Laffer Curve.
Here’s a challenge: If UBI is so simple, then it would be even simpler to apply it just to healthcare, since that likely eliminates almost all concern about labor market outcomes. So it should be easy to replace Medicare, Medicaid, the VA hospital system, tax-based subsidies for buying employer-based insurance, Obamacare subsidies, etc with a voucher to buy health insurance. Right?
That's a very good point. Part of me wonders though how much of those funds would go unused each year, and how long it would take for a secondary market for either laundering funds from those who don't use them to those who would, or for "medical food supplies" to start cropping up so people like me who almost never go to the doctor could use that voucher on something.
1) Government healthcare is a backdoor way to cross subsidize in the name of "insurance". We could do universal catastrophic like Singapore, but then you couldn't offer first dollar subsidization for favored groups.
2) Having a large dysfunctional underclass makes it difficult to offer anything but subsidized first dollar coverage unless you are willing to deny medical care. Singapore, not allowing a large dysfunctional underclass, doesn't have to deal with that.
"So how much would a UBI end up costing? Well, it depends on how big the UBI is, and who is eligible to receive it."
Taking the U out of UBI? How.... interesting.
A more appropriate name might be Selective Basic Income. And as Caplan answered in his recent AMA on UBI, the UBI as proposed solves nothing, but I would add that it contributes to a greater problem that all inefficient tools create, which is the need for more tools.
My problem with the UBI proposal is the example of the Israeli religious scholar program's evolution over time. I think that its initial purpose and scope was appropriate - to regenerate a host of religious scholars after the losses of the Holacaust. But over decades it has evolved into a program that supports a large parasitical population. People will adapt to programs, values will adapt, and advantage will be taken. We saw similar changes in behavior in early welfare programs over the span of a generation or two. What is the equilibrium? Programs aimed at the elderly are more self limiting - they do not reproduce and they die off relatively rapidly.
Those economists with their advanced complicated models are so silly... :)
Even if UBI is "proven" to work, I will tell you what will happen - incentives will change. UBI will be taken for granted, feeling of entitlement will soon develop. Prices will adjust accordingly, negating all "proven" positive effects. It will be impossible to set the "correct" level of UBI - would it be the same for people living in Manhattan and Montana? If different, then strategies for maximization of your UBI will emerge. What would be the "basic" costs, covered by UBI - would it cover the cheapest way to get 2000 calories, what about rent (Manhattan vs Montana), clothing, latest iPhone? Would non-citizens be eligible for UBI? If yes, expect new migration flows, if no, expect drift towards hardening of citizenship laws (towards something similar what they have in Gulf countries - they have UBI now, but only for citizens).
In short, if you examine a kibbutz, you will "prove" that collective farming works. But if you try to scale it, you will get a kolkhoz. The result wil UBI will be the same.
My question, Bryan, for these people is this: “What the goddamn hell are you even talking about??? The reason something like this is even considered needed is government taxes and regulation have stripped near 50% of our wealth from us. Now they want to raise taxes far more so they can return a portion of it (a large portion of all government assessments are siphoned off to the assessors and their cronies)as humane largesse.
I’ve got a far better suggestion: let me/us keep ALL our wealth and you all go pound sand.
Your statement clearly evades the fact that government is giving away money that they don’t have, don’t earn (since they produce NOTHING), and belongs to someone else!!!!!! What the hell are you even implying. Young lady, you appear to have a thinking problem.
Your statement is clearly aggressive and ideologically close-minded. The State can and does absolutely produce things and services even if you wish they did not.
Do they also redistribute money earned by individuals? Yes, and that is a voluntary contract between it and the people being a part of it. If you don't want to adhere to this contract, vote with your feet! Actions speak louder than words as some might say here. But I digress, since this isn't part at all of the point I was making above. Taxes exist and you don't have to raise them much to make sure people don't starve or can't put a roof on their head. But, hey, if you don't care about your fellow people starving, that's your right.
As for your assertion about my thinking, I suggest you take a good hard look in the mirror and ask yourself why you need to throw rocks while living in a glass house.
Statist economics: rent control and minimum house lot sizes decrease new housing; "affordable" housing subsidies praised by statists as solution to "market failure" in housing. Compartmentalization (Pragmatism) wins again.
Govt controls decreases production. Markets are blamed. Then, as "solution," more controls subsidize production. The first controls are evaded. The second controls are praised as correcting "market failure."
Economics In One Easy Lesson-Henry Hazlitt; long-range, indirect, unintended effects of govt controls
Mises is also good on the long-range. I believe that he influenced Hazlitt. Hazlitt was fired from the NYT for identifying the long-range destructiveness of govt controls.
TBH the part that bothered me is Bryan's concern they might use it on alcohol or drugs. They are doing that anyways hence simply cutting costs on other necessities their kids need like clothes or educational supplies. That extra money will partially go to filling that hole.
Money is fungible as are means tested vouchers. Stand outside any liquor store and you can pick up EBT at a discount of 75% if you yourself as a middle class person are trying to get a great deal on groceries. Drug dealers take EBT as well. That cartoon was snarky but truthful and I find Bryan's moral panic distasteful here. At worst think of it as grift, sure 90% may go to methamphetamine but at least 10% will go directly to the children which is still a net win plus the dealer has kids too hence you are helping them to, likewise the liquor store and their employees families.
Meth, alcohol, a good streak, shoes .. what is it your concern that makes them happy, the goal here is to improve their quality of life, not appease your self-righteousness.
This doesn't address Bryan's points. He acknowledges that the welfare will go to good things sometimes. He just thinks targeted welfare prevents that while the UBI doesn't.
I'm sorry but this rebuttal seems to have been done in a hurry to get rid of it...
You still argue on cost while only considering the gross one. You don't engage Mr Zwolinski's point here:
"Note that the cost estimates above assume zero means-testing, either on the front-end or back-end. The net costs of either a Negative Income Tax or a UBI with a phaseout/surtax would thus be considerably lower."
Many people have calculated the net cost. If you're really interested in understanding the idea correctly, I suggest you search a little bit about the net cost of a NIT style "Subsistence Allocation".
All your major criticisms include this misunderstanding (and some really pessimistic takes on human nature). I'd be curious to see what's left of it once you argue with both dilligence and good faith.
Means testing the UBI isn't a straw man, it's a red herring. There's no difference between a universal $3.3 trillion UBI financed with a progressive tax on income, including income from the UBI, and a ... $1.5 trillion mean-tested benefit financed by a progress tax on income where net taxpayers do not receive income from the UBI. You may prefer one over the other depending on how hard you think it is to means test versus how hard it is to levy a progressive tax.
I don't get the math. Is it that the advocates of the UBI are proposing a minimum income of $6,000/year/person, means tested by household? In that case, a couple with 4 children would get $36,000/year, so for a lot of people it would make sense to quit their jobs.
Ed Dolan's blog is funny because he ends the piece by triumphantly proclaiming: "In my view, a calm dialog about details like these is the proper way to confront the dismissive 'We can’t afford a UBI!,'" and the affordable amount is $2,812 per year.
Which cherry-picked empirical evidence, short-range economics or the long-range effect on individual rights, incuding property rights? Science without philosophy is an unfocused mind.
What I want to know -- and I suspect there's no useful data -- is how a UBI would affect normal prices. Would rent go up? Would the cost of minor luxuries -- bread flour rather than all purpose flour -- go up? Who would capture the extra income, and what effect would it have on the lives of recipients? Is there a way to do a controlled experiment, or does it have to be all or nothing?
If you don't "print" money, prices should not go up. But if they do, it will be a signal to producers to produce more. That's the magic of the free market!
"every serious advocate of a UBI proposes means-testing of one sort or another"
Then what does the 'U' stands for?
Indeed. The closest I have seen in explaining this is that everyone gets a tax bill that starts at -$1000 a month, and as they earn more above some threshold that bill gradually goes positive. So at something like $35,000 a year it is break even, or whatever number your equations aim for, and above that you are paying net taxes in.
The trouble is that it doesn't change the math a great deal in terms of cost, although the gradual diminishing of the net payout helps a bit compared to a sharp cliff like "At $19,999 yearly you get $1000 a month, but at $20,000 yearly you get zero."
Of course many people might note that this all sounds remarkably similar to Friedman's negative income tax, so I am not sure why it isn't just that... I might well be missing something.
The negative income tax and a UBI are mathematically equivalent.
Yes. My basic attitude is that Say's Law makes *Universal* Basic Income impossible -- hence all possible implementations do not deserve the 'Universal' qualifier, thus making such name false advertising.
Which makes it even more worrisome that Sweden and other UBI exemplars have been trying to get away from the UBI for decades due to its high costs. It isn't universal so much as a "shall issue" sort of deal where you don't have to prove you need it to get it, but it is still very expensive. It suggests to me there are a lot more limitations on the math than advocates like to acknowledge (or have considered fully.)
I think there is something to be said for the nice incentive effects of UBI, but it seems that the level that would make it livable is just too expensive, so you either need a sharp decrease in payout/effective negative tax rate, or to really gut a lot of what the federal government does. If I believed the latter was on the table I would be willing to give it a shot but I highly doubt it will. Flat tax proposals have better numbers and seem to be highly unpopular with legislators, for... reasons I can guess at.
Universal means "You don't need to apply for anything, anyone can receive under a certain threshold". It is universal. But as I said above, "Subsistence allocation" would be more accurate.
Here's a viable example for the UK:
https://atlaspragmatica.com/ubi/#the-realist
The tax curve is practically unchanged. And yes, it is like NIT. And the "universal" part is about being "automatic". You don't need to apply for anything, anyone can receive under a certain threshold. Anyhow, that's why personally I don't like the term "universal". I prefer "Subsistence Allocation", because that's what it is.
Thanks for the link, that is interesting. I do note that the author includes a flat tax proposal in the UBI argument, one that significantly raises taxes on the average (possibly median) tax payer. The UBI is cheaper than the current system under that tax plan (by their estimates) but that seems like a pretty big lift, raising taxes on something close to the majority of tax payers to switch to a UBI. I am not sure I would call that "practically unchanged" in terms of taxes, as it is roughly 5-7% at the middle ranges. I also note that while the author mentions that the UBI is lower than the pension payments, 8000 vs 8546, he says this doesn't adjust the numbers much, but state pensions are the single biggest state benefit, representing almost half of the total. That 546$ a year difference represents just over 6 billion pounds. It seems a little... suspicious to just wave that away. I think it would be more above board to assume an UBI of 8500$ a year to match that pension benefit, because there is no way that pensioners are going to be taking a hit like that; there is good reason they are roughly 50% of the total benefits budget! Using the author's estimates for increasing the UBI by 500$ knocks the net (tax-benefits) down 26 billion, from 88 to about 62, which is more expensive than the status quo, although not awful. The author claims those benefits numbers don't include the costs of administering the programs, which I am skeptical of because usually government budgeting numbers include the costs of the program, but maybe things are different in the UK.
However, that is only UBI for everyone over 16 (nothing for kids, no child raising benefits, nothing like that).
So, if we are being honest, the proposal is to raise taxes and pay more for similar benefits (assuming those getting pensions are not also getting housing benefits or other categories... which I don't think is a good assumption), but possibly save money on the administration of the programs. I don't know if ~10 billion GBP is a reasonable number to save, but it might be. Flat taxes are good savings vehicles, not just for government but for citizens who no longer need to spend a lot on tax accountants.
Still, the plan hopes that raising taxes will lead to a linear increase in revenue, instead of a decreasing rate as is usually the case when taxes are raised, as well as no incentive effects on taxable economic behavior. I am a little skeptical.
Thank you for the detailed reply, it's great!
If I understood the plan correctly, the flat tax is reduced by the universal allocation (which is not taxed) so that for the majority, the tax burden is unchanged or increases a little. So that the overall curve is pretty much similar.
Or am I misunderstanding?
And about the decreasing rate of revenue, do we have empiricals about the strength of the effect at this kind of rate? Or only theory?
What about the effects of poor people exiting the so-called "fiscal cliff" and being able to work instead of strictly relying on benefits? Or the abolition of the minimum wage? Could these effects counteract those? I think a more free labor market could present many substantial advantages that we need to include when assessing potential results and effects of a subsistence allocation.
I think you are correct that the curve includes the UBI which is why the tax curve starts to the right a fair bit, but I don't think that you are correct that it is "pretty much similar". The majority of tax payers seem to be getting a tax hike, particularly those making what looks like 30-120K a year. Not just a little hike, either, but 4-5% as the author mentions. That's a very significant hike. If your effective tax rate was 25% and now you pay 30%, that's a 20% increase in your total tax liability. It looks a bit like ~30% of the total adult population is seeing that pretty sharp increase.
As to decreasing rates of revenue, that's a good question. It is held to be true by economists, sort of a "so obvious we don't worry about talking about it much" kind of thing. I am sure one could Google it, but it is basic supply and demand at root. Taxes on economic activity make those activities more expensive, so the amount of activity goes down. The effect is analogous to a company raising prices: you might get more per sale, but since sales go down a bit you don't get as much as a straight "multiply current sales at price X by (X+increase)" would suggest.
When it comes to poor people working and having more ability to pay taxes, I think it would depend more on where that fiscal cliff is. The author points out that the break even point for his 8000$ a year proposal is 31K, below which one is paying less in taxes for the new proposal than for the old. It doesn't look like he is including fiscal cliff sort of numbers in the effective taxation rates, so unless those people entering the workforce are making more than 31k a year, it would actually be quite bad for his numbers. As it stands, the median income seems to be around 25k or lower, so there would have to be a lot more earnings for that to work out. Likewise with abolition of the minimum wage: a good idea in general, but I don't think it helps here so much as one has to make something like 17k before they start paying taxes at all. (Going off the graph quick, which is tough to estimate with its log scale of income.)
Also note: all those numbers are from the author's assumption of 8000 a year, not 8500 which is the base pensioner's current receipts, nor 8500+whatever other benefits pensioners currently get. I am extremely skeptical that any UBI that is less than the total that old folks currently get is at all politically feasible, particularly seeing as how they get the lion's share of benefits currently. And if there is a higher payout level that shifts the break even between paying net taxes to the right further, and means either way less revenue or a higher flat tax rate to get numbers back down. Remember that we are looking at spending a very large percentage of the total government revenue just on this UBI as well. I don't know much about the UK national budget, but... maybe they want to aim for saving money?
I do agree that a more free labor market is a great idea and should be done no matter what other policies are enacted, but I don't think it helps the tax revenue side of this particular plan the way the author needs it to.
Again, great comment. Thanks for the exchange.
Not sure about the difference that the 500 pounds would make on state pensions and its effect on political feasability. But, that's exactly the kind of questions we should be asking and debating publicly to be better informed about the policy. I'm all for it!
As for the tax curve and its effects on revenue, again, not sure either. Surely it could be adjusted (I don't really mind the tax being flat or not) to change who pays what. We should be talking about these things instead of dismissing the policy out of hand for being "ridiculously unaffordable" or any other easy (and largely false) smear. So, thank you for that.
Finally, I know about the Laffer Curve, yes. It sounds good in theory but if I'm not mistaken, the threshold has never been really found and I've seen little studies about it. I'd say it's still debatable and should be considered in a public discussion, yes.
The crux of it all being that a subsistence allocation could have far-reaching negative and (mostly, I'd say) positive outcomes that we should be talking about in place of knee-jerk reactions about "unaffordability" and "laziness".
So again, thank you for that!
PS: if you're interested it'll be a pleasure to expose some of these positive projected outcomes.
I should expand a little on the point about decreasing rates of revenue: There is a difference between raising more/less total revenue and raising more/less rate of revenue. Whether or not a tax hike will produce more or less revenue depends a great deal on where you are on the Laffer Curve, or whether or not the increase will push you to the point where taxable activity contracts enough that you are on net losing revenue despite higher rates. That part is debatable because we don't really know where that point is ahead of time. If you imagine two kids with lemonade stands charging different prices, one selling lemonade for a penny might sell a lot of lemonade but won't get much money, while one selling lemonade for $100 a cup probably won't sell any at all and will make zero. ("But if I sell just one cup, I can retire!") Somewhere between 0.01$ and 100$ is the optimal price that will maximize revenue or profit, but it is a bit hard to tell where that would be ahead of time.
However, there is no debate that the RATE of revenue increase from increasing prices declines as you raise prices. Going from 1 cent to 2 cents might just double your revenue, but going from 50 cents to 1$ probably won't. Going from 1$ to 2$ almost certainly will not double the revenue. At some point those diminishing rates of return will even go negative, and you will lose revenue by increasing prices, but no matter what you won't have a flat relationship where doubling price doubles revenue at every price point.
That distinction sometimes gets people confused when discussing things like the Laffer Curve.
Here’s a challenge: If UBI is so simple, then it would be even simpler to apply it just to healthcare, since that likely eliminates almost all concern about labor market outcomes. So it should be easy to replace Medicare, Medicaid, the VA hospital system, tax-based subsidies for buying employer-based insurance, Obamacare subsidies, etc with a voucher to buy health insurance. Right?
That's a very good point. Part of me wonders though how much of those funds would go unused each year, and how long it would take for a secondary market for either laundering funds from those who don't use them to those who would, or for "medical food supplies" to start cropping up so people like me who almost never go to the doctor could use that voucher on something.
1) Government healthcare is a backdoor way to cross subsidize in the name of "insurance". We could do universal catastrophic like Singapore, but then you couldn't offer first dollar subsidization for favored groups.
2) Having a large dysfunctional underclass makes it difficult to offer anything but subsidized first dollar coverage unless you are willing to deny medical care. Singapore, not allowing a large dysfunctional underclass, doesn't have to deal with that.
File this under Deeply Unresolved Statements:
"So how much would a UBI end up costing? Well, it depends on how big the UBI is, and who is eligible to receive it."
Taking the U out of UBI? How.... interesting.
A more appropriate name might be Selective Basic Income. And as Caplan answered in his recent AMA on UBI, the UBI as proposed solves nothing, but I would add that it contributes to a greater problem that all inefficient tools create, which is the need for more tools.
Would you prefer "Subsistence Allocation"?
And here's a link to a UK proposition where the tax curve remains unchanged:
https://atlaspragmatica.com/ubi/#the-realist
It does absolutely solve many problems. I you're interested I'll give you more details!
My problem with the UBI proposal is the example of the Israeli religious scholar program's evolution over time. I think that its initial purpose and scope was appropriate - to regenerate a host of religious scholars after the losses of the Holacaust. But over decades it has evolved into a program that supports a large parasitical population. People will adapt to programs, values will adapt, and advantage will be taken. We saw similar changes in behavior in early welfare programs over the span of a generation or two. What is the equilibrium? Programs aimed at the elderly are more self limiting - they do not reproduce and they die off relatively rapidly.
Those economists with their advanced complicated models are so silly... :)
Even if UBI is "proven" to work, I will tell you what will happen - incentives will change. UBI will be taken for granted, feeling of entitlement will soon develop. Prices will adjust accordingly, negating all "proven" positive effects. It will be impossible to set the "correct" level of UBI - would it be the same for people living in Manhattan and Montana? If different, then strategies for maximization of your UBI will emerge. What would be the "basic" costs, covered by UBI - would it cover the cheapest way to get 2000 calories, what about rent (Manhattan vs Montana), clothing, latest iPhone? Would non-citizens be eligible for UBI? If yes, expect new migration flows, if no, expect drift towards hardening of citizenship laws (towards something similar what they have in Gulf countries - they have UBI now, but only for citizens).
In short, if you examine a kibbutz, you will "prove" that collective farming works. But if you try to scale it, you will get a kolkhoz. The result wil UBI will be the same.
Tie the amount to the average poverty threshold, which is determined in an apolitical way. No change for anyone anywhere.
Isn't it easy?
Even the kibbutzim required a lot of subsidies and protectionism and most dissolved or turned capitalist over time.
My question, Bryan, for these people is this: “What the goddamn hell are you even talking about??? The reason something like this is even considered needed is government taxes and regulation have stripped near 50% of our wealth from us. Now they want to raise taxes far more so they can return a portion of it (a large portion of all government assessments are siphoned off to the assessors and their cronies)as humane largesse.
I’ve got a far better suggestion: let me/us keep ALL our wealth and you all go pound sand.
You don't have to raise taxes to implement it in a gradual way, in a country like the UK, as shown here:
https://atlaspragmatica.com/ubi/#the-realist
Your statement clearly evades the fact that government is giving away money that they don’t have, don’t earn (since they produce NOTHING), and belongs to someone else!!!!!! What the hell are you even implying. Young lady, you appear to have a thinking problem.
Your statement is clearly aggressive and ideologically close-minded. The State can and does absolutely produce things and services even if you wish they did not.
Do they also redistribute money earned by individuals? Yes, and that is a voluntary contract between it and the people being a part of it. If you don't want to adhere to this contract, vote with your feet! Actions speak louder than words as some might say here. But I digress, since this isn't part at all of the point I was making above. Taxes exist and you don't have to raise them much to make sure people don't starve or can't put a roof on their head. But, hey, if you don't care about your fellow people starving, that's your right.
As for your assertion about my thinking, I suggest you take a good hard look in the mirror and ask yourself why you need to throw rocks while living in a glass house.
What delusions you possess! Wishful thinking that had no relation to reality. I won’t even attempt to debate you, little girl. God speed
Nice surprise on this morning!
I'm curious about these delusions I possess... Care to enlighten a little girl?
Statist economics: rent control and minimum house lot sizes decrease new housing; "affordable" housing subsidies praised by statists as solution to "market failure" in housing. Compartmentalization (Pragmatism) wins again.
I beg your pardon; you’re speaking in half-sentences and I cannot be sure what you are saying. What are you saying?
Govt controls decreases production. Markets are blamed. Then, as "solution," more controls subsidize production. The first controls are evaded. The second controls are praised as correcting "market failure."
Economics In One Easy Lesson-Henry Hazlitt; long-range, indirect, unintended effects of govt controls
Capitalism:Unknown Ideal-Ayn Rand
Yaron Brook Show-online
Henry Hazlitt’s EIOEL was my primer.
It makes mainstream journalists seem like children in their lack of long-range effects.
Hazlitt was my first wetting in Econ. I agree wholeheartedly with your viewpoint.
Mises is also good on the long-range. I believe that he influenced Hazlitt. Hazlitt was fired from the NYT for identifying the long-range destructiveness of govt controls.
One thing that has happened is that the traditional implied marginal tax rate for government assistance has climbed up the income ladder.
Obamacare subsidy reduction reaches a marginal tax rate of about a 16.8% up to $94k.
School vouchers in many states apply an effective marginal tax rate somewhere in the mid to high five figures.
Many of the child tax credits out there do the same.
When you start adding all this stuff up, practically all income below $100k is taxed another 20-30% on top of the actual marginal tax rate.
We aren't just talking "the poor" anymore. We are talking most of society being subject to this stuff.
TLDR: For the math to work, you need to touch healthcare and social security. Which would be politically difficult.
The status quo is because poor votes are cheap and olds are very good at voting.
"I don’t see that you’ve offered any evidence on the latter point."
Don't you think cash would help more than free public school? My county is up to $22k/student.
Apply that logic to basically every in-kind benefit.
TBH the part that bothered me is Bryan's concern they might use it on alcohol or drugs. They are doing that anyways hence simply cutting costs on other necessities their kids need like clothes or educational supplies. That extra money will partially go to filling that hole.
Money is fungible as are means tested vouchers. Stand outside any liquor store and you can pick up EBT at a discount of 75% if you yourself as a middle class person are trying to get a great deal on groceries. Drug dealers take EBT as well. That cartoon was snarky but truthful and I find Bryan's moral panic distasteful here. At worst think of it as grift, sure 90% may go to methamphetamine but at least 10% will go directly to the children which is still a net win plus the dealer has kids too hence you are helping them to, likewise the liquor store and their employees families.
Meth, alcohol, a good streak, shoes .. what is it your concern that makes them happy, the goal here is to improve their quality of life, not appease your self-righteousness.
This doesn't address Bryan's points. He acknowledges that the welfare will go to good things sometimes. He just thinks targeted welfare prevents that while the UBI doesn't.
>the goal
There is only the goal of individuals, no mystical "the goal" that rationalizes sacrificing the goals of individuals.
That is being far too kind. What is revealed is wanton foolishness.
Mr Caplan,
I'm sorry but this rebuttal seems to have been done in a hurry to get rid of it...
You still argue on cost while only considering the gross one. You don't engage Mr Zwolinski's point here:
"Note that the cost estimates above assume zero means-testing, either on the front-end or back-end. The net costs of either a Negative Income Tax or a UBI with a phaseout/surtax would thus be considerably lower."
Many people have calculated the net cost. If you're really interested in understanding the idea correctly, I suggest you search a little bit about the net cost of a NIT style "Subsistence Allocation".
All your major criticisms include this misunderstanding (and some really pessimistic takes on human nature). I'd be curious to see what's left of it once you argue with both dilligence and good faith.
Means testing the UBI isn't a straw man, it's a red herring. There's no difference between a universal $3.3 trillion UBI financed with a progressive tax on income, including income from the UBI, and a ... $1.5 trillion mean-tested benefit financed by a progress tax on income where net taxpayers do not receive income from the UBI. You may prefer one over the other depending on how hard you think it is to means test versus how hard it is to levy a progressive tax.
I don't get the math. Is it that the advocates of the UBI are proposing a minimum income of $6,000/year/person, means tested by household? In that case, a couple with 4 children would get $36,000/year, so for a lot of people it would make sense to quit their jobs.
Also, is getting rid of Medicaid and subsidized Obamacare part of their plan to make the money feasible? That would save $800 billion, serious money. https://www.kff.org/medicaid/state-indicator/total-medicaid-spending/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
But they have to be willing to let poor kids go without cancer treatment, or even money for fixing a broken arm.
Ed Dolan's blog is funny because he ends the piece by triumphantly proclaiming: "In my view, a calm dialog about details like these is the proper way to confront the dismissive 'We can’t afford a UBI!,'" and the affordable amount is $2,812 per year.
Which cherry-picked empirical evidence, short-range economics or the long-range effect on individual rights, incuding property rights? Science without philosophy is an unfocused mind.
What I want to know -- and I suspect there's no useful data -- is how a UBI would affect normal prices. Would rent go up? Would the cost of minor luxuries -- bread flour rather than all purpose flour -- go up? Who would capture the extra income, and what effect would it have on the lives of recipients? Is there a way to do a controlled experiment, or does it have to be all or nothing?
If you don't "print" money, prices should not go up. But if they do, it will be a signal to producers to produce more. That's the magic of the free market!