After Universal Basic Income, The Flood

What if we implement UBI and it makes everything worse?

Give a man a fish and he will eat for a day. Teach a man to fish and he will eat for a lifetime. Wait, scratch that, he won’t eat for a lifetime. Automation took over and fished the metaphorical seas dry.

Meanwhile, some bold tech leaders pipe up: “I have a brilliant idea. What if we just give everybody fish?”

California Optimistic: When 20,000 people move to LA each year to become famous actors and only 5 of them really make it, it suggests a special kind of optimism, an outlook so extreme that it actually becomes gloomy. California Optimism is an admixture of this hope and desperation. LA weather fits the ethos: Sunshine every day, as they say, makes a desert.

Imagine falling asleep in the 1990’s and waking up today. You nodded off watching the news explain looming pension crises, a need to raise the retirement age, and some really old guy talk about “cost disease.” You wake up in 2017 and all of that happened, we really are out of money, Baumol is dead, and many “millenials” aren’t sure what the definition of a “pension” is, exactly. Then you read about UBI. Many an article explain proposed positives, but none explain quite how we’ve made the leap from “we can’t pay for people’s retirement anymore” to “let’s give everyone money and see what happens.”

If you really were asleep all that time you might suppose we entered a new age of plenty, or at least solved some political problems with an era of robust cooperation. I just checked Twitter, these things did not happen, and that’s how you know that UBI is California Optimistic. The future speak is forcefully positive, but it’s desperation that’s doing the talking. Most advocates propose UBI not because we have solved mankind’s big money problems and the next stepping stones clearly lead us to Star Trek. They advocate it because they foresee the future to hold even more problems if we do not try something in the near future to stave off real pain.

I do think that a thoughtfully planned future is a brighter future, but in recent history some top-down society engineering projects tended to resemble accidental dystopias, so scrutiny of any “grand scheme” is warranted and necessary.

Math Assumptions

Math-based objections are the most common, so I want to skip them almost entirely, except:

Price inflation of basic necessities

Rent is currently eating the world. Rental income just hit an all-time high. If everyone is given a very predictable amount of money, it may be seen as a system that can be gamed by landlords and maybe other essentials producers. Implementing UBI without reforming land use and zoning regulations may end up as nothing more than a slow transfer to landlords. What are the odds of that happening? Well, it seems like it already did happen with healthcare and college tuition (loans) in the US, and if those are our guide, the “money” part and the “meaningful reforms” part should be done in a very particular order.

Since housing does work well in some places (Japan and Montreal come to mind) I think this is a problem that can be fixed. But without the fix first, UBI may be punting real political problems while giving the appearance of solving them (until years later), and making the price inflation obvious for landlords, just like it was for healthcare companies and colleges getting guaranteed loans.

Payments as a solution to a broken system is not the same as fixing the system. If UBI punts this real problem, we’ll be creating a financial time bomb.

UBI Is a Transfer of Wealth from the Needy to… Everyone

UBI can be a hard sell because it is a koan of fairness, activating one’s empathy and rage simultaneously. The income is meant to support people who desperately need it as well as wealthy hipsters who just don’t feel like working. The one hand clapping begins to feel like a slap.

Many of the funding ideas for basic income involve replacing all social safety programs: Disability (SSDI), SSI[1], Social Security, food stamps, medicaid, etc. The money saved eliminating all these programs (and their overhead) can be used to give everyone a modest basic income, many proponents suggest.

On the face of it this makes the numbers come close to acceptable, but it also means that Basic Income schemes essentially take money out of the pot currently reserved for the needy and disabled, and distribute it to able-bodied people plus the needy and disabled. Such a scheme may have good effects, like encouraging people to enter the workforce by removing the welfare traps that can make people who switch from benefits to paid work worse off. But if that’s the main plus, why not just restructure the existing benefits so that these traps don’t exist, instead of blindly re-allocating money from the for-sure needy to wealthy hipsters who don’t feel like working? This is the same problem structurally that rent-eating-the-world, college-costs-eating-the-world, healthcare-costs-eating-the-world (okay, USA) have. Providing the funds as a fix is not adequate, and may make the problem worse. We must make sure that our optimism for UBI is not really masking very real and hard problems in society.

(Nothing against wealthy hipsters who don’t want to work, they’re just a socially agreeable punching bag. You can insert your own personal despised out-group and the point is still true.)

If you want a less inflammatory fairness example: Removing all welfare to create UBI (to give everyone the same amount) is a de facto pay decrease to anyone with needs outside their control, such as diabetics, who need all the things you do, plus insulin, to live. So after cost-to-stay-alive is factored in, they get less money than you do from UBI. In this way, giving everyone the same amount results in its own kind of inequality starting from the very first check.

Medicaid is under-appreciated in its difficulty

Speaking of hard problems in society, the bad thing about the “remove the old programs” assumption is not the numbers, it’s that programs like medicaid provide more than just money or medicine. They provide case workers and associated footwork, and it is needed: There’s a much higher no-show rate among Medicaid patients than other cohorts. They don’t sign up, they’re afraid of doctors, they don’t have addresses, and so on. We know that the problems some groups face are deeper than others, and helping them may require difficult and not-very-efficient overhead, but overhead that may still be worth doing in a society. This is what medicaid and medicare workers are doing every day.

If the government is already doing something that is difficult and not easy to scale, but they are (so far) the best organization to do it, why not let them keep doing it? We are serving some populations better this way. I think that when people speak of removing the “overhead” of other social programs, in their optimism they overlook the work that many of these programs are already doing, which includes helping people who can be very difficult to help.

The PT Barnum Objection

Very in favor of UBI. One of the reasons I like the idea is because it’d hold everyone accountable for their bullshit choices. What’d you do with your money this month? Spent it all frivolously? Fuck off…until next month.
— some guy on reddit

Ponder: Is a person with two children and a gambling addiction better off with food stamps and housing vouchers, or UBI?

There are a lot of difficulties facing the poor in the US and “not enough money” does not begin to capture the whole picture. The complexity of modern life is huge, and the complexity often increases for the poorest and those who can least understand it. It is especially grim for those who have a hard time navigating financial instruments, such as the functionally illiterate, which is about 11 million adults in the US, or 30 million adults (14% of the US) with “below basic” literacy.

What percent of people are poor because they hit a snag or were dealt bad cards, and what percent of people are poor because they are unable to understand money in a modern economy? And there’s not just incompetence or lack of education, what about elderly people who are simply too trusting so that they are scammed easily? I don’t know the answer, and I’m not bringing up demographic delineations to be mean or to argue that it’s some amount or the other, just that the second percentage has to be “more than zero.”

Current poverty reduction programs are not perfect, but they do make attempts to stop those most vulnerable from being exploited. What happens to these people on UBI? Are they simply to be continuously scammed? I don’t think we can call that an improvement. (The U.S. legal system already acknowledges that this is a problem, and not just for poor people. Conservatorship has helped many a life stay on track, maybe most famously Britney Spears.)

Giving the poor direct cash may help some of them more than food stamps. People are usually good at sorting out their own priorities (say economic studies and libertarian internet commentors). But for some percentage of people, this alternative might be more harmful than helpful. Are they worth forsaking? The poor in the US are faced with some pernicious financial instruments: Payday loans, car title loans, furniture leasing, fees for keeping a low balance, lottery tickets, and of course everyday hucksters. This is the PT Barnum objection: There’s a sucker born every minute, and we’re stuffing their wallet with plums for the taking.

If UBI is implemented at the expense of every other social program, it makes the presumption that people helped by those programs are competent and capable of shifting to a life of managing their own money, budgeting, and not being exploited by the thousands who will line up to do so. Think of the most vulnerable people you’ve ever encountered and remember that they get the same amount of money. Now think of everyone from cigarette companies to bling social status brands to landlords who will want a piece of their easily divested wallets. There are forms of poverty that we have spent a long time partially solving, and UBI may make those forms of poverty much worse. We must be careful to make sure UBI is not a transfer of wealth from the needy to hucksters.

The Existential Problem

…a basic income means they don’t have to work 40 hours a week just to survive so they can do what they really want to do in their spare hours.
— some guy on HackerNews

The data suggests that men, at least, really want to watch TV and take drugs. They don’t spend much time raising children or on civic engagement or other higher pursuits. Other people have written a lot about this, so I don’t want to spill more ink on the subject. The Commentary Mag article discuss the fact that most of those who are consuming disability benefits are not, in fact, physically unable to work[3], so we already know what many people will do in their spare hours. Suggesting a more Utopia-laden vision may be unrealistically optimistic, and when dealing with civilization, sobriety of view is suggested.

In light of this behavior, it’s possible that for many people the “not having money” part of their problems is the easy part. People may hate being unemployed more than they hate not having money. What if we implement UBI as a “solution”, but lack-of-money was not nearly the most important problem in the death of jobs?

I am worried that the problem here is often under-discussed because the kind of person who advocates strongly for UBI (or at least writes articles) is probably on the right of the bell curve. This is a defect of their imagination. Just as you can find Silicon Valley techies who think Soylent is the only sustenance a person will need, intellectuals tend to think everyone could be as content as they would be living life in their heads or inventing their own destiny. Most people need to be doing something to feel satisfied and UBI addresses this just as poorly as disability checks. Cue drug epidemics.

We have at least hints from current behavior that UBI may be fundamentally attacking the wrong problem and I think many UBI advocates under-appreciate this. These advocates need to make the case for how writing “UBI” at the top of the check instead of “disability” will produce a better outcome than the ones we know about today.

I think there are good alternatives to UBI that have a better shot of addressing this, which I’ll cover in another article.

The Systems View

The Nassim Taleb view of things is that to be sustainable and stable, the world needs to be decentralized and Antifragile. In other words: Instead of 1 government, better to have 100 functional governments with small, local democratic governance. Large systems have difficulty adapting quickly, or at all, and miss the nuance of local conditions. Large systems failing could fail millions or billions of people. Large systems may make evolution, tinkering, idea sharing, and other positive forces difficult or impossible.

All systems can eventually be gamed. Sometimes this takes 20–30 years. Sometimes the gaming makes them useless or degraded, sometimes it causes them to crash. I hope this is trivial enough that it does not need examples. (see: tax evasion schemes, Utopian projects of the 20th century from hippie communes to the USSR, patent trolls, every example in Seeing Like a State). Therefore it is a nice feature when systems are light, flexible, easy to adapt to local conditions, or replace altogether. When lives hang in the balance, this feature may be more of a necessity. If your small hippie commune fails, you can always rejoin the capitalist hellscape, or whatever everybody did in the 80’s. On the other hand, if UBI has been running for 20 years and fails…

Well, how do you do that with UBI? How do you make it flexible and easy to replace if it isn’t working, a few decades on? You don’t build a nuclear power plant (or even a dam) without a plan for what to do if it goes critical. Any serious UBI plan needs the same thing, a contingency for what to do if they run out of money, or cannot distribute the money, or need to somehow draw down and close doors.

When you read about UBI schemes, do they have such a plan? Go look at your favorite pro-UBI plan so far, do they have a section titled And This is What We’ll Do If The Lights Go Out? If not, you’re not looking at a plan, you’re looking at California Optimistic.

The absence of contingency is a fatal design flaw. Top-down complexity has a cost. If UBI fails 10–30 years into the future we may have a non-trivial population percentage that has never done any work and suddenly needs to. Since any UBI program failure would mean something like “we ran out of money”, failure may be catastrophic for some communities which produced nothing and have no means of even trucking in subsistence food. Kind of like Venezuela lately.

Venezuela digression: The ruling party under Chavez used oil money to launch a number of programs to combat poverty in the country which can be thought of as the “hold my beer” version of Basic Income, plus some socialist style expropriations. Unintended consequences followed. The mission for quality food lead to increased reliance on imports, and Venezuelan farmers were harmed by the food subsidies, plus “Expropriations performed by the Venezuelan government resulted in a drop in production in Venezuela.” If the free food makes it no longer economically viable to produce food within the country, and then the free food stops, you might have problems, which is more or less the trouble Venezuelans are in today. Something this dramatic probably wouldn’t happen under proper UBI alone, but it shows that what the state chooses to invest in (or not) can have some serious second-order effects. Venezuela wasn’t trying to kill their local farms, they were trying to increase access to food.

For grand schemes, good intentions are not enough. Contingency plans are a must and robust or anti-fragile plans are preferred. UBI as commonly designed is super fragile. The correct solution to a problem is not always a top-down scheme with recurring, nebulous future obligations, and we should think very carefully before implementing one.

(Note: I deleted a section on “UBI as slavery or clientism” because it’s too easy to hand-wave this objection away and I didn’t want to get political. It may still be worth mentioning that communist-ish regimes have made populations financially dependent on a state, which could be seen as a kind of slavery, even if the intention was originally one of philanthropy.)

What you spend government money on matters

It is nice when civilization-level spending has a return on investment. Very broadly, some spending will disappear when great change or collapse occurs, and other spending (like roads or most infrastructure) is more of a civilization-grade durable good.

Giving everyone $XX,000 a year won’t create the highway systems, subway systems, nuclear power plants, hoover dams, space programs, water filtration systems, etc. In fact, if the total UBI system cost as a percent of tax receipts becomes large, UBI may preclude these things from ever being built. If most tax money is merely being redistributed, it will stop new feats of civil engineering from getting done or even envisioned. We need to think very hard about the trade-off this makes. Think for example of Haussmann’s renovation of Paris, or the Paris metro project, or the Hoover dam in the USA. What if instead of building that infrastructure, the money was distributed among all Parisians (or Americans) over those years. What would be the difference in positive effects, 200 years later?

Put another way: If you could take from the rich and give to everyone, or take from the rich and (say) create or double a city metro or make a clean water or power supply, which is probably a better use of the money, decades on?

(Of course it already seems that the US is doing neither of these things: It is not creating UBI nor creating many more durable public goods. Very much a pity. We do big government all wrong, there are not nearly enough Bonapartist madmen in it anymore.)

Other Ideas That Might Work Better

The next article (Part 2) will be about alternatives to UBI. Small preview: I’m fond of exploring “guaranteed minimum agriculture” or “basic job” ideas. Such plans are more resilient to shock or system collapse.

Basic agriculture could de-industrialize parts of local U.S. economies, softening the blow of what’s happening regardless. This may result in more diverse regional ecosystems, which (comparing small town US to small town western Europe) may be worth the cost on its own merits. Besides it would be great impetus for different parts of the country to develop their own fancy opinionated cheeses.

Having some agriculture everywhere might be a nice plus. We as a society probably spend too much on military system backups (in event of catastrophe), and not enough on civilian backups. What’s the point of a network that can resist a nuclear attack if the people afterwards starve anyway, because the food is centralized? Basic Job or Agriculture schemes may also have more predictable second-order effects on improving the existential problems of community that many seem to face.

Basic Job schemes should also pass the “systems view” of things. If we pay people to do basic jobs (building infrastructure, local farms, local economy gigs), and then we have no more money to pay them anymore, at least we built stuff that can still be used. In comparison, giving everyone UBI is much more hope oriented: It (often optimistically) predicts that some people unburdened with work will create lots of value. This could very well be true for some people, but it sounds awfully California Optimistic and doesn’t seem to jive with the existential issues we’ve already seen. Even if it does happen, we can expect such fruits to be more rare, less distributed, and less predictable. Inequality is almost guaranteed.

Part 2, here:

I would be happy to read any thoughts, especially about uncommon UBI plusses or alternatives.

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[1] Supplemental Security Income, the program that’s kind of already basic income under the guise of psychiatry, or something. SSI is funded through income taxes, not Social Security taxes. There are ~8.2 million people on it.

[2] There are lots of great examples in the book, but if you don’t feel like reading it you could read SlateStarCodex’s review or this other great summary.

[3] This should be apparent from the fact that disability claims are strongly correlated with the economy; recessions do not cause people to become paraplegics. And this rise is in spite of workplaces becoming safer over the decades.

NPR also has an expose on rampant disability fraud, in their own polite way: http://apps.npr.org/unfit-for-work/