Comment by FD3SA | Hacker News Reader

Comment by FD3SA | Hacker News Reader

Interesting that developed countries do not implement a similar system for their own poor. Friedman and Hayek both believed such a system was superior to merit-tested social assistance programs which require massive bureaucracy and are prone to abuse.

Hopefully, with the success of such charities in developing countries we will see increasing support for such systems here at home, allowing people to escape the vicious unemployment trap of western economies.

(Edit) Additionally, the implementation of basic income at this point would be extremely effective, as it would leverage the massive revolution in freely available online education (e.g. Khan Academy, EdX, Udacity, Coursera) and cooperative workspaces (e.g. hackerspaces). This would effectively transform the entire country into a startup incubator, giving those with the desire and talent to build new companies the resources to do so immediately, without going through the excruciatingly slow, inefficient and oftentimes counterproductive process of formal education.

I've been thinking a lot about basic income schemes lately, which do exactly that for everyone (not just the poor, though they'd benefit the most). You calculate how much it costs a person to pay their basic living expenses: food, a decent place to live, maybe a transit pass. Then you pay everyone in the population that amount of money each month, unconditionally (no means testing).

I once calculated that such a system, if applied in Canada, would require something like a 36% flat income tax if it were entirely funded that way, and it would have a break-even point at about $65k annual income (below that, you receive more than you put in). I expect the situation in the US to be similar.

Part of that cost could be offset by reducing or eliminating existing welfare and social security programs, including food stamps, employment insurance, and subsidized housing. It would also let you eliminate minimum wage, since you no longer have to be concerned about wages covering basic living expenses.

There are a lot of questions about how this would affect an economy. Would it cause massive inflation? Unemployment? Substance abuse? Or would it be the most effective social program ever? I have no idea. But I think it's worth a try. My hunch is that you will see all of those negative effects increase somewhat (inflation, unemployment, substance abuse) or in some people, but that the positive effects will greatly outweigh the negatives.

You needn't implement it all at once. You could apply it first to a random sample, say 1% of the population. Those people receive basic income and pay the tax required to fund it. They would also become ineligible for the social programs that would be removed if you rolled it out nationally (the details of that part may be tricky). Only roll it out to the whole population if the results are positive after a few years.

If wages fall, particularly if we remove minimum wage, the required tax rate to support the system will go up, as will the break-even point.

This may be true. But there are also be factors that may cause people to increase their income. Perhaps the extra money lets them invest in education (everything from skills training to a university degree), relocate to somewhere with a better market for the skills they have, or start a business using the basic income as their bootstrapping fund.

It's hard to say how things will balance out. That's why I'm in favour of some sort of systematic test of the concept.

Over the past two or three decades in the United States there has in fact been a big shift away from targeted anti-poverty programs in favor of just giving cash to the poor. At the federal level, this has meant big increases in the earned-income and child tax credits and relatively less funding for housing and food subsidies and other hand-outs in kind.

The idea that people can allocate resources for themselves better than somebody else can do for them has an interesting tie-in to today's debate about what policies we should pursue to stimulate economic growth. The basic Keynesian proscription for reviving a moribund economy is to put idle resources to work through more government investment, and for many years economists have tried to figure out which investments offer the best bang for the buck by measuring fiscal multipliers, etc. But this approach assumes that a dollar of output is a dollar of output, when in reality—if we're doing economics, and not mere accounting—people often value a dollar's worth of one good very differently from a dollar's worth of another. (And a disparity between accounting value and economic value is likelier to exist when investment decisions are made by politicians, at a remove from the mainstream of economic activity.)

This suggests we should try to allocate stimulus spending in a way that mirrors as closely as possible the distribution of resources we'd get if our economy were chugging along at a good clip, with all our people and capital doing the things the market would arrange if were working properly. Greg Mankiw, the chairman of the Harvard economics department, wrote a paper with his colleague Matthew Weinzierl [0] a couple of years ago that tries to get at what that would look like. Their simple model suggests, unsurprisingly, that traditional make-work government investment programs should be a last resort: getting the same amount of money into the hands of investors and consumers who can allocate it more effectively might be, well, more effective.

0. http://scholar.harvard.edu/mankiw/files/exploration_of_optim... [PDF]

I'd even go a step further. Do away with welfare, food stamps, unemployment insurance, minimum wage, etc. Instead, move to a basic income[1] system.

Everyone (well, every citizen between, say, 18 and 67, when Social Security kicks in) gets a guaranteed flat income from the government. Then raise income taxes accordingly such that the average middle class family more or less breaks even.

[1] http://en.wikipedia.org/wiki/Basic_income

Can you explain why I as a citizen have to work 40 hours a week with overtime sometimes just so someone can receive a paycheck for free?

What is my benefit for such a compromise?

It gives you financial security if you decide to tell your employer to go fuck themselves if they want you to work too much overtime. Since you no longer absolutely need a job to live, you have a stronger negotiating position with employers.

The problem is that if everybody decides to tell their employers to go fuck themselves, nothing gets done, and then there are no goods and services to buy.

And then the employers will have to stop abusing their employees to get them back.

The majority of people have a basic need to work in some form or another, regardless of compensation.

This is what welfare and employment insurance are for. Most developed countries do have systems for distributing wealth to the poor, to varying degrees.

FD3SA is suggesting that he/she considers this kind of wealth redistribution quite different from social welfare.

Honest question: What do you do about those who make poor spending decisions and use credit card debt as a piggy bank? Wouldn't this simply provide them with more income that they then leverage into more debt?

Or is the argument that the social good created by BI would outweigh such cases?

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