The Basic Income idea has some great marketing behind it and superficially appears to solve problems. Unfortunately the tricks used to promote it come straight out of the propaganda textbooks — attributing miracles to the policy when there are not justified.
The main trick is to compare an income guarantee to the broken system we have at the moment. The result is a miraculous increase in output. But that has nothing to do with the merits of Basic Income. It is just what would happen with any system of increased spending activity that knocks our monetary production systems out of the persistent slumps they always finds themselves in under ‘laissez faire’ conditions.
It’s only when you compare Basic Income with other managed economy schemes that the issues with it come to light.....
The rest of the economy will respond to the monetary stimulus and increase its output to its structural maximum, which for the purposes of this article we will assume is identical for both schemes. Whatever distributional outcome is required can be created in the Rest of the Economy via redistributive taxation, and the amount of stuff (goods and services) delivered to Participants is the same.
The difference is that the basic income scheme represents an extraction of goods and services from the Rest of the Economy, whereas the Job Guarantee represents an exchange of 37.5 Labour Hours per week for goods and services from the Rest of the Economy.
In other words the Basic Income participant gets paid twice in real terms. Once in terms of output from some part of the labour hours of the Rest of the Economy and once from their own 37.5 labour hours per week — which are self consumed.
Basic Income injects money into the Rest of the Economy, but without any increase in output available to others. So the total amount of money in the Rest of the Economy naturally chases fewer goods and services. If you are in the Rest of the Economy, you will end up getting less for your money. And we usually call that inflation, but perhaps it is really just a form of theft.
But, But, But
The argument then continues. Of course people are not going to self consume all their hours, but are going to go out into the world and do ‘good works’. But this is a fallacy of composition. There is no more likelihood of enough volunteer opportunities springing up than there are job openings — both due to the matching problem. Instead of hearing those in charge berating people to ‘start their own business’, we will hear them imploring people to ‘start their own charity’.
Since there is no active mechanism to create things to do that are of service to others, the amount available will converge at the usual suboptimal point and a section of the population will be left high and dry — regardless of their intent. Laissez faire works no better with activity than it does with money.
The Job Guarantee solves this by creating things to do. It takes activity to the people where they are and creates roles for the people as they are. If there is to be enough useful service available for everybody, it has to be produced with a managed process.
Exploiting others
The essential weakness of the Basic Income system is known, but hidden in platitudes. Many an article on basic income will highlight the ‘experiments’ that allegedly show wondrous benefits to the participating area.
German Götz Werner is a master of these platitudes. There is a lot of drivel on his blog (in German language).
Read the full post here.
