How to Reform Welfare and Taxes to Provide Every American Citizen with a Basic Income
Scott Santens
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I appreciate the work you’ve obviously put into this but unfortunately I think it misses a very serious problem that most are overlooking in our move towards automation.

There are two critical issues with automation, the obvious is how will people pay for what they need if they aren’t needed as workers? The second is related but fundamentally different and potentially disastrous, yet easily overlooked. Backtracking, you have to realize that our economy isn’t one market, its two. Two markets that interact in complicated ways with mutual feedbacks that help regulate resource allocation and what is produced. The obvious market everyone thinks about is the consumption market, the market people tend to ignore is the labor market (there’s a third, capital, but its irrelevant for this discussion). The creation of the labor market (and yes it was created, when we outlawed the markets in slaves/serfs, etc.) was as much responsible for the advances of the modern economy as anything else.

We are now on the cusp of losing the (human) labor market. This will have much wider impacts that most people seem to realize — and why a straight up UBI will be almost worthless, and likely harmful. The direction we’re headed is to allow those that own the land, resources and the means of production to also own labor’s replacement — automation. There’s your income inequality. There will be differences for sure, but historically speaking this will be akin to the times when most labor was owned, either as slaves or as serfs. How’d that work out for us? (and this time could be even worse). Letting the owner class also own labor is a really really bad idea, even if that labor is “robots”.

We need the general populace’s decision making to be felt not just in the consumption market, but also in the labor market. People’s choices in the one are affected by their choices in the other and vice versa. Its the interplay between those two markets that not only helps optimize meeting people’s needs, but also helps weed out bad ideas and reduce waste. Lose the labor market and we largely lose control on what gets made. If the owners own it all, including labor, they no longer have a need to sell us stuff, because they won’t need money to pay us for our labors — they won’t need money at all (except maybe to pay taxes). Instead of having their robots make stuff to sell, then use that money to buy what they want, they’ll just have their robots make them what they want. Why bother with all the middle men? Production will be diverted from meeting everyday people’s needs to meeting just the needs/wants of the owners. (It won’t be quite that simple and won’t happen overnight, but it will happen). There won’t be much to buy with a UBI because there won’t be much being made for sale.

So, how in an era of automation do we hang on to the labor market? I don’t have the details and wouldn’t presume to dictate the exact mechanisms to everyone else, but in essence we need to help people continue to sell labor in a labor market even if it isn’t their physical/mental labor they are selling. Call it a Universal Labor Allotment (ULA) if you will. A recognition that something most humans are born with (their own labor) is being replaced and so they have a claim on that replacement.

It could work something like this. In order for a producer to use automation they have to buy ULAs on the new labor market (expanding anti-trust laws could accomplish this). People (“workers”) would be given a starting set of ULA rights (initially and also at birth and/or maturity) that allow them to sell ULAs to whomever they wish, for as long as they want at whatever price they can get (probably best to limit the contracts to 1 year at a time, but maybe not). They’d be paid on a regular basis for the use of the ULAs. How many ULAs a producer needs would be based on how much human labor the automation is replacing, perhaps a good proxy measurement would be CPU cycles or something objective like that.

There’d be a need to regulate the number of ULAs in the new labor market. ULAs would need to expand to meet increasing production but not expand to the point the market is flooded pushing the price of ULAs too low. I’m fairly sure a market based regulation could be worked out for increasing ULAs by allowing “workers” to purchase new ULAs rights but limiting that ability based on producers investing in both the new production capacity *and* an in-kind investment in new ULA rights. Only the “workers” receive a paycheck from the new ULAs and the producer would have no claim to the ULAs, he’d still have to purchase their use on the labor market. New ULAs would cost both parties to create, but only the one side gets direct benefit. The producers would have an incentive to avoid creating more ULA rights than necessary as it’d cost them, but not doing so costs them by increasing the price of ULAs on the labor market. “Workers” would have to balance the cost of new ULA rights vs. the price of ULAs on the labor market. If the labor price drops workers will be less incented to invest in more ULAs (lower return), if the labor price rises, workers will be more interested in buying more ULA rights. The trick will be in structuring the ULA rights market so that the balance point provides a good standard of living for those with only the base allotment of ULA rights.

The devil is in the details of course, but this is the basic idea I have for solving the problem. With a guaranteed allotment of ULA rights people will have a guaranteed income while also maintaining their say on what is produced by their decisions on who to/what for they sell their labor/ULAs — and no need for new taxes or (hopefully) ever more bureaucratic red tape and regulation.