August 6, 2014


The Pragmatic Libertarian Case for a Basic Income Guarantee (Matt Zwolinski, August 4, 2014, Cato Unbound)

Every one of the more than 126 federal welfare programs comes with its own bureaucracy, its own set of arcane rules, regulations, and restrictions, and its own significant (and rising) overhead costs. A BIG, in contrast, requires significantly less in terms of administrative expense. A program in which everyone gets a check for the same amount is simple enough to be administered by a computer program. And even a more complicated proposal, like Murray's or like Friedman's NIT, could largely piggyback off of the already existing bureaucracy of the federal tax system.

Eliminating a large chunk of the federal bureaucracy would obviously be good from the perspective of a libertarian concern to reduce the size and scope of government. But it would also be good from the perspective of welfare beneficiaries. Actually getting signed up for all the various welfare benefits to which one is entitled is tremendously costly in terms of time, effort, and skill at bureaucratic navigation. Many people miss out on benefits for which they qualify simply because they don't know that the program exists, or what they need to do to draw from it. Getting the benefit of a BIG, in contrast, requires just a single signature on the back of a check. If we're going to spend money on helping the poor, shouldn't we make sure that they actually get the help we're paying for?

Second, a BIG could be considerably cheaper than the current welfare state. How much cheaper depends on the details of the particular proposal. Some, like Murray's, which involve a progressive tax on the BIG once a certain threshold of income is reached, appear to be considerably cheaper. Other analyses, like Ed Dolan's, suggest only that a moderate BIG would not cost more than what we currently spend.

Part of the explanation of the relatively low cost of a BIG comes from the reduction of bureaucracy, described above. But another reason is to be found in Director's Law: If you're like most people, when you hear "welfare" you think about transfers from the rich to the poor. But in reality, most political transfers benefit the middle class at the expense of the poor (and rich). If the BIG is going to replace the welfare state, then transfers to the middle class such as subsidies for higher education, the mortgage interest deduction, and tax benefits for retirement savings ought to be cut right along with (if not before) SNAP, TANF, etc.

Again, how much a BIG would cost relative to the current welfare state depends on the details of the particular BIG proposal. Various proposals need to be evaluated on their own merits, and of course I do not wish to claim that every BIG proposal will be more affordable than our current welfare state. But neither is there any reason to believe that no reasonable proposal could be.

Whenever there exists a bureaucracy with the power and discretion to take from some in order to benefit others, there will also exist powerful incentives for individuals to manipulate that bureaucracy in order to better serve their own private interests. Agents of the bureaucracy itself will seek to expand its scope and budget regardless of whether such expansion serves the interests of its clients. And special interest groups will use various political mechanisms to channel the organization's resources into their own pockets.

In theory, the welfare state doles out money and other resources on the basis of such factors as need and desert. But need and desert are both philosophically contested and impossible to measure objectively. And so, in practice, resources are doled out to those who can make the best political case that they need or deserve it. And this is a contest in which the genuine poor are at a serious disadvantage relative to the better educated, wealthier, and more politically engaged middle class.

A BIG, in contrast, allows virtually no room for bureaucratic discretion, and thus minimizes the opportunities for political rent-seeking and opportunism. It is, as the late James Buchanan once noted, a perfectly general policy that treats all citizens the same. It is thus entirely ill-suited for use as a method of political exploitation. We should therefore expect to see much less rent-seeking and opportunism with a BIG than we do with the present welfare state, and therefore a more effective transfer of resources toward the genuinely needy as opposed to the politically well-connected.

Of course, no policy is perfectly immune to rent-seeking or political manipulation, and others have expressed what seem to me to be some entirely reasonable concerns about a BIG in this respect. But nothing that I have seen has yet convinced me that the problems with a BIG would be worse than those we have now, and there still seems to me to be good reason to think those problems would be considerably diminished.

One of the main differences between a BIG and the current welfare state is the unconditionality of the former. Under a BIG, everybody gets a check. Under the current welfare state, only people who meet the various stipulated qualifications are eligible for assistance. The precise nature of those qualifications varies from program to program, but can include not earning too much, not earning too little, not being on drugs, not having won the lottery, making an earnest effort to find work, and so on.

Conditions are put on welfare in order to ensure that assistance goes to the deserving poor, and not to the undeserving. But distinguishing between the deserving and undeserving is difficult business, and requires a variety of invasive, demoralizing, and degrading inspections into the intimate details of applicants' lives. "Fill out this form, tell us about that man you live with, pee in this cup, and submit to spot inspections of your home by our social workers, or else."

Maybe the state shouldn't be in the business of giving out welfare at all. Maybe it shouldn't be running schools, or highways either. But, as Jacob Levy notes, since it does do these things, libertarians have good reason to demand that it does so in a way that is as "more rather than less compatible with Hayek's rule of law, with freedom from supervision and surveillance by the bureaucracy, with the ability to get on with living their lives rather than having to waste them proving their innocence."

The conditional welfare state is not only invasive, it is heavily paternalistic. Restrictions on eligibility are imposed in order to encourage welfare recipients to live their lives in a way that the state thinks is good for them: don't have kids out of wedlock, don't do drugs, and get (or stay) married. And benefits are often given in-kind rather than in cash precisely because the state doesn't trust welfare recipients to make what it regards as wise choices about how to spend their money. This, despite the fact that both economic theory and a growing body of empirical evidence suggest that individuals are better off with the freedom of choice that a cash grant brings. In-kind grant programs like SNAP (food stamps) persist in their present form not because they are effective but because they are the product of a classic Bootleggers-and-Baptists coalition: well-meaning members of the public like the idea that welfare recipients have to use their vouchers on food rather than alcohol and cigarettes, and the farm lobby likes that beneficiaries are forced to buy its own products. Poor people, meanwhile, are deprived of the opportunity to save that a cash grant would give them, and they are forced to waste time and effort trading what SNAP allows them to buy for what they really want.

The New Luddites : What if technological innovation is a job-killer after all? (Will Oremus, 8/07/14, Slate)

All of which has brought John Maynard Keynes' concept of "technological unemployment" back into the academic discourse, some 80 years after he coined the phrase. On Wednesday, Pew Research and Elon University released a report titled "AI, Robotics, and the Future of Jobs." The report compiles and summarizes the results of a sort of expert opinion survey in which the researchers asked 1,900 economists, management scientists, industry analysts, and policy thinkers one big question: "Will networked, automated, artificial intelligence applications and robotic devices have displaced more jobs than they have created by 2025?"

The results of the survey were fascinating. Almost exactly half of the respondents (48 percent) predicted that intelligent software will disrupt more jobs than it can replace. The other half predicted the opposite.

The lack of expert consensus on such a crucial and seemingly straightforward question is startling. It's even more so given that history and the leading economic models point so clearly to one side of the question: the side that reckons society will adjust, new jobs will emerge, and technology will eventually leave the economy stronger. Even Keynes in 1930 assured his readers that technological unemployment would be only a "temporary phase of maladjustment." This view has been so widely held for so long that the dissenters have taken on a derogatory label: Luddites. The original Luddites were handloom weavers in England who smashed and burned power looms and mills on the theory that technology posed a fundamental threat to human well-being. Who'd have thought that half the mainstream experts in the United States in the year 2014 would share the Luddites' basic view of automation's effects on the labor market?

"Automation is Voldemort: the terrifying force nobody is willing to name," declared one respondent quoted in the Pew report. "Good-paying jobs will be increasingly scarce," said another, NASA program manager Mark Nall. "I'm not sure that jobs will disappear altogether," allowed Justin Reich of Harvard University's Berkman Center for Internet and Society, "but the jobs that are left will be lower paying and less secure than those that exist now."

Is this dim view justified? I put that question to McAfee, who along with fellow MIT researcher Brynjolfsson helped to launch the current debate about the effects of automation with their 2011 e-book Race Against the Machine and 2014 follow-up The Second Machine Age.

McAfee, who specializes in the effects of information technology on business, is unreservedly sanguine when it comes to technology's effects on economic growth. "I'm super-optimistic about the size of the pie," he told me. But even he is increasingly nervous about its effects on employment, and middle-class jobs in particular.

"It's fairly unambiguous at this point that the middle class has been getting hollowed out," McAfee said. "The balance between capital and labor is shifting, and the best work on that shift clearly cites information technology as the reason."

McAfee believes the education system has to change to prepare young people for a world in which most of today's jobs are automated. He's just not sure whether it can change fast enough. "The closer we look, the more it seems like some of these transitions have not just been, you know, 24 or 36 months and then everybody's OK," McAfee said. "They've been long, they've been difficult in some ways, and they've required pretty serious policy responses. [Columbia University economist] Joe Stiglitz talks about how the mechanization of agriculture may have made the Great Depression last as long as it did."

It's possible that today's hand-wringing is simply a result of people underestimating the power of capitalist economies to adapt and thrive. They've certainly done so in the past. And remember, half of Pew's respondents still think we'll be just fine.

Still, there's no guarantee that the future will resemble the past. It should be deeply unsettling to policymakers that so many of the smart people who think about these issues believe this time could be fundamentally different.

Posted by at August 6, 2014 5:47 PM

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