Friday, December 6, 2013

Thoughts on Matt Zwolinski's Argument for Basic Income Guarantee

The blogosphere is abuzz with critique of Matt Zwolinski’s welfare proposal. Matt suggests that the government guarantee a minimum income in place of the welfare state. He gives 3 reasons to support this proposal: 
1) A Basic Income Guarantee [BIG] would be much better than the current welfare state.  
2) A Basic Income Guarantee might be required on libertarian grounds as reparation for past injustice.  
3) A Basic Income Guarantee Might be required to meet the basic needs of the poor.
On the first one, the answer is “no duh.” Economists agree that straightforward cash transfers are more efficient than in-kind transfers. He captures the spirit of his argument in his final remark on the issue:
Shouldn’t we trust poor people to know what they need better than the federal government?
His second argument, that “a Basic Income Guarantee might be required” is not so obvious to me nor is this obvious to David Henderson:

I think we can all agree that many people have what they have at least in part due to previous rights violations. It doesn't seem clear to me that they are on top in what I take to be Matt's narrower sense rather than my wider sense. I think, for example, of people who paid into Medicare and Social Security only a fraction, even in present value terms, of what they get back from taxes on the current young and middle-aged people. Sure, many of them are on top, but many are not. I don't see how a basic income guarantee redresses that rights violation.

Finally, the third argument seems too strong of a statement. That “a Basic Income Guarantee might be required to meet the basic needs of the poor” is at best ambiguous. I am skeptical that a BIG is required for any purpose in regard to basic needs. If implemented, it will reflect that individuals prefer to live in a society with a basic safety net. It can be promoted without being wrapped in a moral argument.

We need to ask some of the most important question in political economy. Under what rules shall we live? How shall we decide these rules? The BIG, along with its funding, is a potential rule. If some threshold of society, say 2/3s, votes directly or indirectly for a BIG, than a BIG has been legitimized in some respect. (i.e., via constitutional amendment) Philosophical foundation is helpful, but I am not sure there is any better reason than that enough of the U.S. electorate has agreed upon this arrangement.

Why would we want a BIG? Consider the impact on two accounts. Matt Zwolinski hits on the first. If we are to have a safety net, direct transfers are preferable. As suggested by Hayek, any payment must be distributed equitably, although this obviously does not require equitable taxation – in such a case there would be no possibility of a BIG. If we have to choose, BIG is better. Second, there is reason to prefer a society that encourages individuals to take risks and innovate. To encourage individuals not to fear failure! A large minimum income might incentivize this too much, but a small guaranteed income, say $5000, would probably not represent an economically destabilizing moral hazard. It would represent relative subsistence, which is probably optimal for a welfare program.

Matt Zwolinski also notes problems with a BIG.

1) Disincentives [to work]  
2) Effects on Migration  
3) Effects on Economic Growth
A $5000 BIG would probably not entail problems with 1) and 3). Problem 2), that a BIG incentivizes migration, can be fixed by a simple rule. If you are an immigrant, you must wait 5 years before receiving the BIG.

Those who want to see a complete disassembly of government will have problems with all of the above. While I sympathize, I do not expect the government to go away any time soon. I do not expect welfare programs to disappear any time soon. So we have a choice. Libertarians can present realistic reform programs or simply allow politics to continue as usual as our ideas are ignored. 

A program like BIG forgoes political paternalism and the narrative of equality that has dominated the politics of the last century. It instead, promotes a political program that embraces individual autonomy.

***Late Thought: We could also define BIG as some percent of average per capita GDP. 5000 would be about 10% by today's estimates.

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