The Foundation for Economic Education has had no sympathy towards a Universal Basic Income (UBI). Their latest piece by Brittany Hunter mainly criticizes Hayek’s reasoning for advocating it, along with name dropping Milton Friedman, Mark Zuckerberg, and Bill Gates.
Hayek is quoted saying
It will be well to contrast at the outset the two kinds of security: the limited one, which can be achieved for all, and which is therefore no privilege but a legitimate object of desire; and absolute security, which in a free society cannot be achieved for all and which ought not to be given as a privilege—except in a few special instances such as that of the judges, where complete independence is of paramount importance
Hayek believed that there were two kinds of security, a limited and an absolute one. The latter is incompatible with free society because it would be a complete surrender of our liberty for arbitrary privilege.
Accordingly, a basic income falls into this limited security, however, Hunter believes that any kind of security is incompatible with a free society for two reasons:
First, as discussed in previous liveblog entries, Hayek has already made the case that it is hard to restrain governments once it is given a little power. So this is a very slippery slope to descend.
It also neglects the very real fact that in order to supply individuals with their basic needs, money is required. And that money has to come from somewhere. Since the government itself provides no good or service that brings in profit, the money to fund such a program would have to come at the expense of the taxpayers. In other words, it involves theft at the hand of the government
Hunter implies an endorsement of anarchism. The state, even when confined to the simplest powers, will lead us down the road to serfdom. And even if this weren’t true, its entire functions are funded by taxation which is theft.
This is not a problem if she actually is anarcho-capitalist but that’s not the topic of this article. But she makes this outrageous claim that a UBI “advocate[s] institutionalized theft.”
Considering the fact she is affiliated with the Mises Institute and judging her by these comments, I’m gonna assume she’s part of the Cult of Rothbard. The reality is, humans are not an atomists species that will hire private defense companies to watch over their plot of land.
Humans are social people who create collective institutions which gave rise to the concept of the state. This is not to say we can’t do better than the state, in fact, I think that future is near, but the institutions of government such as taxation, police powers, etc. are institutions humans naturally accept. Bottom line: the state isn’t wholly illegitimate.
She also cites the Roosevelt Institute to argue that a UBI wouldn’t solve anything, specifically, she quotes:
When paying for the policy by increasing taxes on households rather than paying for the policy with debt, the policy is not expansionary. In effect, it is giving to households with one hand what it is taking away with the other. There is no net effect.
Note that it says specifically when taxes on household income is increased. A lot of libertarians, like Fred Foldvary, support a UBI that can be funded through ground rent or a value tax on land and natural resources and Hayek was very sympathetic to this Georgist paradigm.
Secondly, the Roosevelt Institute thinks of the size of the UBI as the grant amount multiplied by the population size. However, Dr. Karl Widerquist explains how a UBI should really be considered:
UBI is–and must be understood as–a negative tax. When you pay the government, that’s a tax. When the government pays you (without you having sold something to the government), that’s a negative tax. It doesn’t cost you anything for the government to give and take a dollar from you at the same time. If you want to know someone’s total tax burden, you need to subtract the negative taxes they receive from the positive taxes they pay.
Furthermore, in his own study he found that:
A UBI large enough to eliminate poverty costs on $539 billion per year–less than 16% of its often-mentioned but not-very-meaningful gross cost ($3.415 trillion), less than 25% of the cost of current U.S. entitlement spending, less than 15% of overall federal spending, and about 2.95% of Gross Domestic Product (GDP).
Hunter goes on to criticize the technology argument that a UBI is good for those people who are out of a job because new machinery has put them out of their job.
It is undeniable that automation will inevitably put some individuals out of work just as machines put laborers out of work during the industrial revolution. If automation proves itself to be more efficient and less expensive than human workers, it would be foolish for companies not to move towards this system.
But by creating a UBI as a safety net, the state is essentially incentivizing individuals to stay stagnant and abandon the endeavor of learning new skills that may help them create value in the workforce.
The only way this last paragraph could be true is if the basic income was large enough to fully provide everyone’s wants and needs without having to work.
Economists Djavad Salehi-Isfahani and Mohammad H. Mostafavi-Dehzooeifrom for the Economic Research Forum published a study on the 2011 Iranian UBI which “guaranteed citizens cash payments of 29 percent of the nation’s median income, which amounts to about $1.50 every day (about $16,000 per year in the U.S.).” The key results were that:
The report found no evidence for the idea that people will work less under a universal income, and found that in some cases, like in the service industry, people worked more, expanding their businesses or pursuing more satisfying lines of work. The researchers did find that young people — specifically people in their twenties — worked less, but noted that Iran never had a high level of employment among young people, and that they were likely enrolling in school with the added income.
People can quickly adopt new skills and find a new job with ease, especially if you’re a low skilled worker in today’s world where all the new jobs require secondary education. This frustration in the job market can be seen with coal miners in Kentucky, who supported Trump in hopes that his protectionist policies and deregulation would revive the industry.
A basic income could definitely appease these populist temptations. The Finnish basic income reports that the unemployed have lower stress and greater incentive to work.
The economic and moral arguments against a UBI are very weak. Ample evidence suggests that it would be more cost-effective than our current entitlement and welfare schemes, and be a net gain on the wellbeing and productivity of its citizens.