Universal Basic Income (UBI) - Caleb Jones

I was going to write a full analysis regarding this, but Stefan Molyneux, bless his heart, just came out with a video that went through all of my points and numbers for me. So instead of writing a big ‘ol blog post about this, just watch the above video. He makes literally all the same points I was going to make, and he even illustrates some of them better than I could.

Some of the key points I was going to talk about that he addressed:

– A massive welfare state can’t work long-term because of the basic laws of economics. Robots and/or automation doesn’t change the basic laws of economics. As I’ve said many times, socialism/communism don’t suddenly start working because robots.

– Similarly, a thing doesn’t automatically work because some conservatives, libertarians, or smart people think its a good idea. (It doesn’t matter if Milton Friedman thought UBI was a good idea. He himself said in interviews that the only reason he was for it was because he was emotionally uncomfortable with having poor people in a society.)

– Handing free cash to the poor always creates more poor. I’ve said this and demonstrated this a million times. His example is as follows. If you give $1,000 a month, or $12K per year, as a minimum income to all poor people, then everyone who is working and making $13K per year are suddenly working all those hours not for $13K per year, but for just $1K per year, since if they just quit they’d immediately get $12K. 13-12=1. A huge percentage of people making $13K, $14K, $15K per year would just stop working, collect their $12K, and enjoy all that free time.

Short-term, a UBI would probably work. Long-term, it would not. Short-term, just about everything works. You can’t judge a government policy based on short-term performance. Long-term, having something like a UBI would end up increasing the cost of living for everyone and eventually bankrupt your country. The same is true of having any large welfare state (and UBI is just another version of welfare).

– The two types of poor must be differentiated, and government welfare programs always refuse to do this. A UBI would as well.

Take a few minutes and watch the video. He goes through all the arguments and the numbers. Having a UBI won’t work long-term in any society.

19 Comments on “Universal Basic Income (UBI)

  1. Even though I’m a liberal I never bought into UBI. The main argument I’ve heard for it is that it’s a response to automation, but automation doesn’t reduce the total number of jobs, it simply shifts jobs from low skill workers to high skill workers. One of the most basic assumptions of economics is that humans have unlimited wants, and automation increases our productivity but doesn’t eliminate the need for human workers completely, s in total automation simply increases the amount and quality of goods and services each person can have.

    That being said, your argument on the person who makes $13k is wrong. If you give everybody $12k, then those people making $13k are still working for $13k, but now their total income is $25k. However, you are right that it would reduce the incentive to work, as there would be a ton of people who would rather live in poverty than work. And, at least in my opinion, our government policy should be written under the assumption that people are obligated to contribute to society in some way. Even if that means earning just enough to support yourself, that creates some amount of economic benefit.

  2. “If you get a raise you actually get less take home pay.”

    Yes.
    This in a nutshell is what is so wrong with a progressive tax code.
    A week ago I was at work talking with my manager. He was saying how he’d like to go back to being a regular employee because while he made more money per hour he was also in a higher tax bracket as well. So he actually got less take home pay while having way more stress.
    I actually ran into this problem my senior year of highsschool I was working 40 hours a week and had more money taken because I was working harder.
    And don’t even get me started about social security’s cut of my paycheck…….Jesus that would be a long rant.
    Time to move!

  3. > “If you get a raise you actually get less take home pay.”
    > Yes.
    > This in a nutshell is what is so wrong with a progressive tax code.

    A common misunderstanding of progressive tax. The higher tax rate doesn’t apply to your whole income, only to that part of it greater than the threshold. While there *are* situations where a person is better off not working (welfare cut-offs), progressive tax does not work like that.

  4. Wow, this is the first time I watch Stefan and he sounds like a really cool guy.
    Since I’m still hopelessly on the fence about economics (the different sides of the debate are, in my opinion, frustratingly good at sounding right), I can’t say if I agree or disagree globally, but I’ll say this: while almost everything he says rings true to me, there are at least two occasions where he seems to be attacking a straw man:

    -The “guy earning less than 12000 and gets 12000 welfare, and the guy who earns 13000 and gets nothing”. It’s all good and well to simplify things in order to illustrate a point, but not when the simplification seriously misrepresents the criticized idea. That problem is reduced to practially zero with the use of more subtle rules/sliding scales for who gets what and how much (And I second what Paul Murray said above). Then again, one might object that a UBI is only a UBI if it has a fixed value for everyone (the “U” would mean its value too is universal, not just its ubiquity). In which case I’d go back to saying, yeah, give the UBI to everyone including the rich.
    -When he runs numbers to show how funding UBI is impossible, admittedly he chose a value near the median of proposals ($1000), but that eclipsed the fact that a lower UBI, coupled with the suppression of a large part of all the other social aids, would invalid this. UBI should be about making misery, not mild poverty, impossible: you have enough money for a tiny roof over your head, water and bread, so even half the 1000 could do.

    “He himself said in interviews that the only reason he was for it was because he was emotionally uncomfortable with having poor people in a society”
    Not to disagree with the article, but being emotionally uncomfortable with a certain state of the world is another name for morality. Emotion is a bad thing when it distorts logic, but there is no such a thing as a value judgement “good”/”bad” that is not rooted in emotion. When someone says they *want* to solve energy or poverty or terrorism problems, that’s an emotion, and not in the bad sense: they want to means they’re emotionally uncomfortable with the fact that it is not yet solved.
    Maybe I’m missing the context in which Friedman said that but it’s strange that he should say such a thing unless he actually believed that poverty can’t possibly be solved without UBI.

    Anyway, I’ve pretty much given up on having a stance on economics for the moment. I’ve tried reading Henry Hazlitt and again felt that he makes the same mistakes (oversimplification and not thinking long term) that he criticizes leftists for, so I dropped out. If I ever acquire a real expertise on the subject, maybe I’ll finally budge from my agnosticism.

  5. I’m generally a libertarian, but I do think that overall the UBI would be a net positive, especially in the long term, IF the amount were enough to live relatively comfortably. Some thoughts:

    -People who are strongly financially motivated would continue to work work hard to make even more money, When has making 100k a year stopped someone from wanting to make 200k, even if their standard of living wouldn’t change much? Tim Cook makes 100 million a year and he still keeps working hard to make even more. The difference is motivated people with fewer resources would have an easier time getting where they want to go, thereby increasing productivity.

    -Less financially motivated people would have the opportunity to do the things they are passionate about full-time. The output of high quality art, for instance, would dramatically increase, which enriches our society (perhaps even in an economic sense). To illustrate my point consider that the arts is one of the few government funded enterprises that produces high quality output (national ballet companies, etc.) Why? Because people in the arts are motivated to excellence by something other than financial gain. With UBI many more of them would have the opportunity to do so.

    -Crime rates would dramatically decrease. This would be a huge gain for our society (you can put an economic value on this as well). Currently high-crime areas would flourish economically as businesses move in. The cycle of poverty and crime in black and hispanic communities would largely end, bringing in a huge swath of the population into civilized society and the work force. Again, a societal net win.

    -People in general would win the ability to choose their vocation, rather than do whatever job is most available/practical at the moment. People work a lot harder at things they actually like. Huge increase in productivity.

    -Yes, some people would be lazy pieces of shit and sit on their ass playing video games their whole lives. Who cares? Our society would be so much better by almost every metric that I’m willing to live with this.

    (This is colored by the fact that I work with very rich people at my job and they are some of the hardest working people I know, even though most could retire tomorrow at 35 and live very well and sit on their ass for the rest of their lives. Key point is they love what they do. I think the number of people who are lazy pieces of shit are fewer than you think.)

  6. That being said, your argument on the person who makes $13k is wrong. If you give everybody $12k, then those people making $13k are still working for $13k, but now their total income is $25k.

    That’s only if it’s the type of UBI that is automatically given to everyone regardless of income, which is not what Stephen was talking about.

    There’s two kinds of UBI – that given to everyone regardless of how much money they make, and that only given to people who lack basic income. Either way “everyone has an income.”

    being emotionally uncomfortable with a certain state of the world is another name for morality. Emotion is a bad thing when it distorts logic, but there is no such a thing as a value judgement “good”/”bad” that is not rooted in emotion. When someone says they *want* to solve energy or poverty or terrorism problems, that’s an emotion, and not in the bad sense: they want to means they’re emotionally uncomfortable with the fact that it is not yet solved.

    It’s not the emotions that matter; it’s the actions that result from the emotions.

    If you really like a girl and start calling/texting her every day telling her she’s pretty and that you love her, you are acting in a way that decreases results.

    If you really like a girl and thus control yourself stay reasonably distant, you’re acting in a way that increases results.

    People who are strongly financially motivated would continue to work work hard to make even more money, When has making 100k a year stopped someone from wanting to make 200k, even if their standard of living wouldn’t change much? Tim Cook makes 100 million a year and he still keeps working hard to make even more.

    Most human beings are not like that. Those people are the exception to the rule. Check the stats.

    The difference is motivated people with fewer resources would have an easier time getting where they want to go, thereby increasing productivity.

    Motivated poor people usually get their ass to work and eventually become not-poor or rich. The studies have clearly shown this.

    It’s the unmotivated poor who stay poor, and complain they “can’t” get ahead and need government to do it for them.

    Less financially motivated people would have the opportunity to do the things they are passionate about full-time. The output of high quality art, for instance, would dramatically increase, which enriches our society (perhaps even in an economic sense).

    The government has no role in the amount or quality of art in society or enriching society. If you’re really a libertarian (and I have my doubts) then you should know this.

    Crime rates would dramatically decrease.

    Possibly, but that’s debatable, since most crime is because of drugs, not poverty.

    People in general would win the ability to choose their vocation, rather than do whatever job is most available/practical at the moment.

    Incorrect. A UBI would have virtually zero effect on this in the long-term.

    Yes, some people would be lazy pieces of shit and sit on their ass playing video games their whole lives. Who cares?

    Who cares? Everyone else who suffers from higher taxes, higher prices, higher cost of living, and the eventual collapse of the government because they can’t support everyone. Go back and watch the video again.

    I think the number of people who are lazy pieces of shit are fewer than you think.

    Again, you need to check the stats. Most Americans are on some form of government assistance now. Being lazy, or semi-lazy, or financially irresponsible has now become a societal norm. (And will continue to get worse.)

    http://www.forbes.com/sites/merrillmatthews/2014/07/02/weve-crossed-the-tipping-point-most-americans-now-receive-government-benefits/#24b5de646233

  7. Hey Caleb,

    I found the article “7 Things People Who Say They’re ‘Fiscally Conservative But Socially Liberal’ Don’t Understand,” and I’m interested in how a Libertarian would respond to the points made. I am far from knowledgable at conservative fiscal policy, but even I can smell the heavy stench of Democratic bias between the words.

    Plus I’m interested in learning more deeply about your version of minarchist Libertarianism, but I don’t really know where to start, aside from your blogs. Any suggestions?

  8. Tony says “If you give everybody $12k, then those people making $13k are still working for $13k, but now their total income is $25k.”

    True, but their first $12k will become worthless.

  9. I found the article “7 Things People Who Say They’re ‘Fiscally Conservative But Socially Liberal’ Don’t Understand,” and I’m interested in how a Libertarian would respond to the points made.

    That article is way too dense for me to respond point by point. Scanning it, the writer is assuming things like not having a minimum wage somehow “creates” poor people, when it obviously doesn’t.

    Plus I’m interested in learning more deeply about your version of minarchist Libertarianism, but I don’t really know where to start, aside from your blogs. Any suggestions?

    Watch Stefan Molyneux’s older videos on YouTube. Also do some reading over at harrybrowne.org. Here’s a good video here:

    http://bigthink.com/videos/penn-jillette-on-libertarianism-for-beginners

  10. Let’s divide people into these categories:

    Motivated rich people — they need no UBI
    Unmotivated rich people — do these exist?
    Motivated poor people — UBI would help them, but there are very few of this kind of people because they tend to stop being poor
    Unmotivated poor people — at best, UBI would stop crime coming from them, but won’t do much good otherwise

    So benefits seem to be marginal for such a considerable level of spending.

  11. Speaking of income, I find the business model of freelancing/ business based on services to be flawed. You’re always trading your time for money, which means in spite of your flexibility, you still have to put in work.

    So my question is: how can I establish a residual stream of income? What are the methods with the highest odds of success and lowest overhead? Any suggestions Caleb?

    And if you, as a freelancer, become paralyzed and unable to work due to some accident, how do you continue your business and income? Or at least, how would you approach it Caleb?

  12. how can I establish a residual stream of income? What are the methods with the highest odds of success and lowest overhead? Any suggestions Caleb?

    Way too general. I address that in detail in chapters 19, 20, and 21 in my book.

    become paralyzed and unable to work due to some accident, how do you continue your business and income? Or at least, how would you approach it Caleb?

    As you implied, you have to ensure that a percentage of your total income is semi-residual, for just that reason. If you’re building an Alpha 2.0 business structure, you should have 2-4 businesses, and at least one of them should be residual or semi-residual in nature. (I just did a podcast for my membership program about this.)

  13. @The New Yorker

    I’m in the same boat as you, and I’ve done quit a lot of research and work so I can at least point you in the right direction (although I haven’t fully achieved it yet, so I hesitate to give advice). This is called Financial Independence (shortened FI or sometimes FIRE with the RE meaning Retire Early). There’s a lot of blogs out there about it, with the two most famous being Mr. Money Mustache and Early Retirement Extreme.

    In this community the big assumption is the 4% rule, which is based on a study that says that if you have a certain amount invested in stocks and bonds you can withdraw 4% of that amount every year to live on and not run out of money. So if you need $30k to live you need $750k invested.

    For me personally, I’m investing in real estate and find the returns are much better. I buy multifamily properties in a poor part of a low cost of living city (but not the ghetto where it’s dangerous to walk around at night). I make sure they have at least a 15% cap rate and pay a property manager to actually deal with issues (they normally take 10% of rent). The good part of multifamily housing is that you can have a vacancy r two and still stay above water.

  14. Let’s not forget that in small countries with free market welfare states (I.e. the Scandinavian countries), this model does (did) work. For a long time, even.
    Now, however, with the open-borders immigration policy as well as globalization, free EU-movement etc., the model has lost the value that it once had.
    But let’s not forget that my home country of Denmark, with a whopping 45 % income tax, is:
    The happiest country in the world
    The least corrupt country in the world
    The best country to start a business in the world
    Has (Had) one of the lowest unemployment rates in the world
    Has some of the best healthcare in the world (universal Health care model)
    … and so on.
    These models are at least one of the reasons that the Scandinavian countries are some of the richest in the world (per capita) and that our average income is higher even after taxes than most other countries in the world.

    Of course, the debt is now rising because of the general financial downfall of the West, as well as increasing welfare costs due to immigrants (over 50 % of middle eastern immigrants are unemployed), but don’t forget that the model worked for many years.

    (I agree that it no longer works, and that in any country with populations of more than 10 million it wouldn’t work)

  15. Let’s not forget that in small countries with free market welfare states (I.e. the Scandinavian countries), this model does (did) work.

    As I’ve said many times, one of the primary reasons Scandinavia has been able to get away with socialism is because:

    1. They are small countries. Just about anything works (at least for a while) if your country is small.

    2. They have a shitload of oil in the Norwegian Sea. Like in the Middle East, any type of government can “work” if you have shitloads of oil to keep your economy afloat with free cash.

  16. Denmark doesn’t have a shitload of oil. We have “some”, but the vast majority belongs to the Norwegians. A Danish politician (Per Hækkerup) was drunk during the negotiations of the oil in the North See and gave it all to Norway, costing the Danish government trillions of dollars and making sure Norway was the only Scandinavian country to trul profit from the Oil industry.
    (You can’t make this shit up).
    One of the reasons that the Danish economy still stood strong was a strange form of SP (that worked for the better). The general opinion was that since we had such a nice safety net and such a large universal system, you contributed what you could, and you should “feel bad” if you use that system more than what you deserve. Thus, people actually took minimum wage jobs despite only recieving a little more (couple hundred dollars more a month) than simply being on welfare. The rich had to pay more (too much in my opinion), but everyone had nice lifestyles and should not worry about much.
    However, that’s of course not the case today, and I whole heartedly agree that our UBI is way too high and in no way is it sustainable in a globalized society. People (Men) don’t feel responsible for their own lives at all anymore. But hey, aside from paying for other peoples moronic, irresponsible lifestyles, it’s never been easier to be succesful, since nobody else makes something of themselves.

  17. Denmark doesn’t have a shitload of oil.

    Per Wikipedia:

    “Denmark has considerably large deposits of oil and natural gas in the North Sea”

    “Denmark expects to be self-sufficient with oil until 2050.”

    “ranks as number 32 in the world among net exporters of crude oil” (That’s rank 32 for a tiny country of less than 6 million people.)

    Denmark has a shitload of oil.

    However, as I’ve said before, the party for Scandinavia is coming to an end, because it also says,

    “However, gas resources are expected to decline, and production may decline below consumption in 2020, making imports necessary.”

    Yep. Like the rest of Europe, Scandinavia’s long-term future is not very bright. The North Sea is starting to run dry. Let’s see what happens to its socialist welfare state when it can’t sell oil any more.

  18. I consider myself a Libertarian and I agree with comments from “Kant” up there, which feels weird to say. He covered most of what I think. I would clarify with the following: The proposals for UBI that I’m familiar with are actually universal with the payments – everyone gets it regardless of income. I would also propose that along with a UBI, we would eliminate SNAP, TANF, section 8, etc. Healthcare is a little trickier – it hasn’t been free market since WWII and I expect some sort of socialized system, but in the perfect world you could eliminate Medicaid, Medicare, and tax subsidized employer provided insurance, and so on. It would fly in the face of basic economics to an extent and not be perfectly libertarian, but a system that was universal would be “fair” and if it eliminated other welfare programs (and related overheads) it would be significantly more libertarian than what we have.

  19. I would also propose that along with a UBI, we would eliminate SNAP, TANF, section 8, etc.

    I’m not arguing that a UBI would be more horrible than our current horrible system IF you 100% eliminated ALL government welfare funds of ANY KIND to ALL people (healthcare included).

    The problem is:

    1. That wouldn’t happen if we enacted a UBI. Many government welfare programs would continue.

    2. It would still be horrible even if it happened.

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