It is distressing that so many have become 'useless' in this modern economy. I think we are all very aware of the problem as well as the fact that it is likely to get worse.
What can be done? I have seen very little on this subject. Guaranteed basic income is probably a step in the right direction. At least such a system offers a real opportunity to drop what you are doing currently and sincerely try for a new career.
Fully with you - it would seem that the trifecta of a modern and most productive society is:
- Education for all: To increase your productivity / fulfillment
- Healthcare for all: To keep you productive / happy for as long as possible
- Basic Income for all: To remove the risk that you can't earn your "living credits", thereby allowing greater risk taking and social beneficial / poorly compensated work to be paid (like volunteering, etc.)
how much education? Which educations are 'productive' or 'fulfilling'? Can I get a subsidized PhD in 1960s soviet literature? Or will we only do that for industrial chemists? Who decides?
how much healthcare? Which healthcare 'makes you happy'? Let's say a clever biologist comes up with a machine that keeps you alive indefinitely, no matter what, but the cost is that it burns 100 liters of oil an hour (and it has to be oil, because of the carbon in oil). Do you have a right to this healthcare? Who decides?
And how do you achieve education for all, healthcare for all, and basic income for all without central planning? And how do you achieve basic income for all without heavy regulation? Heavy regulation is the same as state ownership, except that the state then uses private investors as owners, but the owners don't get a say in the way the company is run (because of the heavy regulation).
Taxes? There doesn't seem to be a very high correlation between how many of these social programs a country implements and how heavily the state involves itself in businesses.
I'm not even arguing that these projects are good ideas, just that they're fundamentally from an entirely different political and economic philosophy than the actual system that existed in the Soviet Union.
Not even close. Communism is practically defined by the centralized direction of capital and the direction of the economy (see: Five-Year Plans). The idea that the removal of basic impediments to efficient capitalism IS Soviet Communism is a particularly laughable case of association fallacy.
what is 'efficient' capitalism? the whole point of free-market capitalism is that centrally directed plans cannot perfectly allocate resources and there is no such thing as 'efficient' capitalism, no matter how smart the committee who decides where to steer things is.
I hesitate to use the word 'strawman', but the replies to my comment seem to be debating something I didn't even come close to saying. Chapter 1 of a basic econ textbook will tell you that there are many pitfalls that make markets less-than-free (by the way, a "free market" in economics is not defined "free from any regulation", it's a market in which supply and demand can operate freely and efficiently. Regulation can be ONE of the ways a market becomes less free). Asymmetric information, lack of exposure to the cost (or benefit) of externalities, etc etc etc.
The goal of basic income (the basic part is very important; giving everyone the median income would be a disaster of the kind that you're thinking of) is to PRESERVE the ability for supply and demand to function correctly. Currently, the success of an idea is a function not only of its quality, but of its quality and the wealth of the parents of the person who thought of it (the US has some of the worst economic mobility in the developed world).
> centrally directed plans cannot perfectly allocate resources and there is no such thing as 'efficient' capitalism, no matter how smart the committee who decides where to steer things is.
I honestly have no idea at all where you thought I was making this point. The entire premise behind my comment was the preservation of the ability of the market and the profit motive to direct capital (i.e. capitalism), and I drew an explicit contrast to Soviet-style central direction of capital. "The whole point of free-market capitalism is that.... there is no such thing as efficient capitalism"? What?
Efficient capitalism is capitalism in which the flow of capital (by free markets) to where it will create the most wealth is unimpeded. Every time this flow is blocked or diverted by some external factor, that's a loss of efficiency. If some factor that was irrelevant to wealth creation determined that people born in the month of March (or people of a certain race) were not allowed to go to good schools (even if their parents can afford it), that would be a (somewhat silly) loss of efficiency in capital. "Deciding" that people born to middle class or lower parents don't deserve the kind of education that's increasingly critical to survive in the modern economy is basically the same thing in terms of its effect on wealth creation (though of course it's more palatable ethically).
All too often, people conflate capitalism with "government that's as small as possible", when it's blindingly obvious that this couldn't be farther from the truth. For an obvious example, contract enforcement is an essential for markets to function. Responsible regulation is another case (A company dumping toxic waste into a town's river and causing cancer among its citizens is a case of the company's capital direction decision-making process not being exposed to all the costs to the economy; the company could theoretically destroy more wealth than it creates for society).
To get to my point, a big part of America's historical economic dynamism (aside from the fact that we've got probably the richest geography in the entire world) was the fact that we didn't have class systems as entrenched as Europe did. Whether your idea was successful was (more) dependent on whether it was _good_ and would create wealth, as opposed to how you knew or how you were born. Arbitrarily closing off the class of potential entrepreneurs to people who are "high-born" obviously reduces the potential for new sources of innovation (and thus wealth generated for society). Being able to afford a private school or being able to afford to live in a district with a good public school (where you pay your "tuition" in the price of your house) is the modern equivalent of being "high-born" (it's certainly much more flexible than strict class systems, but it has much the same effect).
As far as healthcare and basic income, this should be particularly familiar to anyone reading HN. The idea that your healthcare should be tied to your employer is insanely stupid. This system very clearly incentivizes being an employee over being an entrepreneur which, again, is not the way to have a healthy, innovative economy*. Every time a person is prevented from building a startup solely out of fear that their kid might get sick and they won't have good healthcare, that's a loss of efficiency.
A similar argument trivially applies to basic income. The US (in contrast to our formerly deserved reputation of the probability of rags-to-riches stories) has worse economic mobility than most of the developed world. It's absolutely pathetic that we've gotten to this state given that this was a big source of our historical economic dominance.
TL;DR: Efficiency in capitalism is the unimpeded flow of capital to where it is most needed. This is best achieved by a meritocracy of ideas. Anything that affects that flow negatively is an inefficiency. Healthcare, education, and a basic income have nothing to do with the government directing the economy's capital but rather with the government ensuring that capital can flow correctly.
>Efficiency in capitalism is the unimpeded flow of capital to where it is most needed.
Who decides what is 'most needed'? What about 'wants' versus 'needs'? Are they chopped liver in capitalism? Where do you draw the line between a want, and a lesser need, and a most need?
>Anything that affects that flow negatively is an inefficiency.
What constitutes "negative" versus "positive" "flow"? Are you talking about net capital flows? Just the total amount of dollars that are being moved? Is this the same or not as actual value created? How do you measure such a thing?
>Healthcare, education, and a basic income have nothing to do with the government directing the economy's capital but rather with the government ensuring that capital can flow correctly.
Again, what is "correct" flow? Who decides?
Rolling back a few paragraphs:
> Every time this flow is blocked or diverted by some external factor, that's a loss of efficiency.
What is an 'external factor'? Last I checked, the economy is everything.
Lest these seem nit-picky comments, I'm trying to isolate some questions I have about your fundamental understanding of economics vis a vis mine. It's possible I'm missing something, since I have very little formal econ training.
> Who decides what is 'most needed'? Are they chopped liver in capitalism?
I almost feel like you're deliberately misunderstanding me. The only places you're disagreeing with me are _the places that I agree with you_. I am saying that capitalism is the best way to allocate resources, not centralized distribution as in Communism. Instead of trying to figure out where you're misunderstanding me, I'll start from extremely basic economics. I'm sure you know some (all?) of this, but just bear with me as we're clearly talking past each other here.
The goal of economics is generally to maximize utility.
[What is utility?]
Utility is best (and simplistically) described as "what people want". This is the end-all and be-all of what economics strives for. I'll be using "wealth" and "utility" interchangeably here. Note that 'wants vs needs' is irrelevant, since a person's "wants" are generally considered to be a superset of their needs (barring a few exceptions, like children or severe cases of mental disability).
[Who decides what is 'most needed/wanted'?]
Each person decides for themselves. The person who knows what I want is me. I express this preference by buying shit. It's as simple as that. No one needs to "draw lines" for every want and need, because (again), I'm not talking about fucking Communism (in which, theoretically, all resources are explicitly and centrally allocated).
[How does one "create wealth"? Isn't one person's gain necessarily another's loss?]
No. In order for a consensual transaction to take place, both sides (by definition) must be willing participants. Barring asymmetric information, etc, this means that both people are better off. If both people are better off, a net gain in society's wealth has just occurred. This is how the poorest person in today's society is better off than the average person 500 years ago: the accumulation of half a millennium of wealth creation across society.
[What constitutes a "negative" vs a "positive" flow of capital?]
Using the above definition of wealth creation, capital should flow to the places where it creates wealth (remember, this means more people will get what they want). A negative flow of capital is to a place that either creates wealth extremely inefficiently, or destroys wealth.
[How can wealth be destroyed or created inefficiently? Didn't you just say that every transaction creates wealth for both sides?]
In a simple transaction, this is always true, since a participant would not willingly participate if he were not going to be better off. In more complex transactions (basically everything in the modern world), this isn't the case. If you dump toxic waste into a town's river to save on disposal costs, and you cause a spate of cancer cases across the town, the cost that is being borne by the townspeople is not reflected in the transaction. Neither you (the seller) nor your buyer knows (and cares) what happens to the townspeople, and thus that cost is not reflected in the supply/demand graph that leads you to complete the transaction. This is known as an externality. The people bearing the costs are not the people whose incentives matter to the completion of the transaction (the townspeople have no direct control over your manufacture or the price the buyer pays you). This kind of trade destroys wealth when the costs borne by the newly stricken cancer patients are higher than the savings from avoiding proper waste disposal. In that scenario, the "wants" of the patients have been violated to a greater degree than the "wants" of the buyer/seller in the transaction.
[What is an 'external factor'? Last I checked, the economy is everything]
I don't blame you for not getting this one; Externality is a commonly used term in economics but probably not one you'd hear without formal econ education. With that association in mind, I thought it was clear that I meant "external to the parties whose incentives determine the parameters of the transaction". For example, see the above paragraph's description of the consumer and the toxic waste-dumping producer.
TL;DR: No matter how many times you keep trying to twist my comments into advocating central planning and Communism, the fact remains that every single thing I've said is in support of capitalism in its purest form. Preventing market failures is one of the things that's necessary for capitalism to work. Defining free markets as "free from regulation" is as stupid an economic policy as Communism is. Free markets means that capital is free to flow where the most wealth will be created, and wealth creation is a universal goal (There are disagreements on the degree to which it should be sacrificed for humans rights concerns, but that's another subject entirely).
100% in favor of guaranteed minimum income. I think its doable. All the research seems to say that people make poor decisions when in dire straits. It seems like a great optimization.
I've never seen the numbers worked out. Also, you'd certainly need to adjust birthrate globally to keep ahead of Malthusian pressures. I'll remain sceptical until I see an actionable proposal. Have a link?
There have been a few pilot programs in places like Namibia, India, etc. There's a couple of reasons to take early reports with a grain of salt: These programs are implemented with varying degrees of completeness (i.e. they're only regional, or they're only a partial basic income), and it's still early and on a relatively small scale.
That being said, early reports have been extremely positive: Variously, crime rates have plummeted, education has risen sharply, child malnutrition has dropped, new startups have skyrocketed, community income has risen by a substantial amount more than the grant amount, etc.
Given that anyone with a rudimentary knowledge of economics understands that a basic income is at least _theoretically_ sound, the (few and flawed) data points that we have so far are slightly encouraging.
I like the universal basic income idea too, but haven't we gone through a similar crisis during the industrial revolution? How did we pull out of that?
This is a genuine question, I'm a poor student of history.
It's not clear that we ever did pull out of it. A certain small class of people who couldn't move away from agriculture, say Native Americans who wanted to maintain their traditional lifestyles, suffered tremendously as the country industrialized and the valuable land was taken over for industrial agriculture. They have never recovered, and are the poorest people in the U.S. to this day.
What this means is that people need to move to whatever is next, and those who don't, or more importantly can't, will be left behind. But what's next? During the industrial revolution, people moved to cities to go work in factories. But what's the way forward today? Arguably the key difference between today and back then is that the industrial revolution caused a change in where labor was demanded, while the automation revolution reduces the need for labor across almost all sectors of the economy. Yes, some people need to program the machines, but not that many. After all, during the industrial revolution it wasn't mechanical engineering that offered job opportunities for the masses.
To me, the obvious "what's next" is this: those whose jobs are obsoleted by automation personally service those whose jobs aren't. It's possible that the future of America is 2/3 of the population acting as nannies, personal assistants, etc, to the 1/3 whose jobs haven't been automated. I bet there are a ton of people even now who would cook/clean/etc for $5/hour + board. You'd already see this in the U.S. if it wasn't for the minimum wage/welfare. What happens when automation drives the price of unskilled labor down to $2-3/hour? The U.S. becomes Bangladesh is what happens. I think it's a social disaster in the making, but I struggle to think of alternatives.
Essentially, this is the road back to serfdom. The key difference being that Medieval serfs worked land on behalf of landowners, whereas in this scenario, they simply provide services.
I agree that it's a social disaster in the making, but I suspect it's a real possibility.
Being a cook isn't (necessarily) unskilled labor. Neither is being a hairdresser, a personal shopper, a sommelier, or a yoga instructor.
You can make a very respectable income today in the U.S. at any of those jobs if you're sufficiently skilled. Certainly there are many more people doing those jobs today than there were a hundred years ago. And frankly, many of them would probably much rather be doing such a "personal service" job over their career options of decades ago.
And that's not counting plumbers, electricians, carpenters... Many of whom find it much easier to develop recurring revenue streams than your typical YC startup!
Automation is great. It helps most of those people. Just think about how much your local yoga studio or coffee shop relies on modern PoS systems for payment processing and customer tracking, the web and social media for marketing, Amazon-class logistics for supplies...
I just don't see things in such negative terms. I also don't think that today's rates of unemployment were somehow inevitable. We automated like mad in the '90's too (arguably even more dramatically than we are doing so today), and yet unemployment dropped, incomes rose and labor markets were tight from top to bottom. What's different today?
> We automated like mad in the '90's too (arguably even more dramatically than we are doing so today), and yet unemployment dropped, incomes rose and labor markets were tight from top to bottom. What's different today?
There are no vast failed commie economies left to piggyback on their recovery and imminent growth. Right before the Warsaw Pact collapse and China's conversion to capitalism, America and its allies were not doing particularly well, in economic terms.
I believe the key to this issue is to have more middle-class to increase the needs for a certain quality service. We all know good service is more than just fulfilled the basic needs. To make it more clear, there has to be more people with middle class consuming capability. We are hitting a bottleneck. If it cannot be raised in a certain period, bad things could happen. Human society has its own way to force the rebalance. However, it's quite ugly. And I wish we can avoid this.
I think that the general consensus is that the industrial revolution did end up replacing many of the jobs that it eliminated, and then some, it just took time. This new revolution in automation may do the same, or it may not.
I like to look at the very real possibility of self driving cars and trucks. How many truck drivers are employed today? They will be made obsolete very quickly once self driving trucks hit the market.
Where are they going to turn for work? Are they going to suddenly become a programmer, writer, graphic designer, etc? I don't think so. Manual labor jobs were much more interchangeable than labors of the mind.
It's mostly speculation at this point what will happen to the labour economy over the next few decades. Certainly it has gone through upheavals in the past and yet there's still a demand for labour today. It's even possible that Jevrons' paradox (http://en.wikipedia.org/wiki/Jevons_paradox) may come into play, whereby increasing the efficiency with which we use labour will actually increase demand for it. I think that is at least a partial explanation for the labour boom of the industrial revolution. We could see a similar thing happen again.
Or it could cause the value of labour to drop dramatically. But whichever happens I think basic income is worth exploring, because it offers other, immediate benefits:
1) It replaces the existing needs-based social assistance with something that's less intrusive and paternal, and that doesn't leave welfare traps: working more always means you take home more and do not risk what you currently have.
2) It adds financial security for the unemployed and students, which means that more people may pursue higher education and job training. That would help people adjust to a changing labour market.
3) It makes the labour market voluntary. In order for price discovery to work properly in a market, transactions must be voluntary for both parties. If the seller (i.e, the worker) cannot exit a market because they or their family will die or become homeless, then the price (i.e, the hourly wage) will be driven to zero.
(Aside: The same logic applies to patient-pays private healthcare systems, except in this case the buyer cannot exit, which means that the price is driven to infinity. This may explain the insane cost of healthcare in the United States.)
4) Relatedly to point #3, basic income would remove the need for minimum wage laws. Currently, they're necessary because the value of unskilled labour may be less than the cost of living.
Actually, it brought unprecedented power to the workers, balancing the power between employer/employee significantly.
It certainly was a tough period (hardly alone in that respect!), but the romanticised images of starving children chained by ankles in sweltering mines, whereas they had happily capered about their sunny villages all day long prior to the revolution, are way off [0].
If you restrict your survey of the condition of the working class to those who have published autobiographies and memoirs, you will have a distorted view of the condition of most workers during the period.
If you're referring to the linked article: it's true I haven't read her books, but I hope that a leading UK scholarly expert on the industrial revolution would have taken your point into account!
Picture a herd of elephants crossing the savannah. Each elephant carries 50 monkeys on its back.
A sudden mutation makes it so that each elephant can now only carry 30 monkeys, but also doubles the number of elephants in the herd.
This is terrible news for two-fifths of the monkeys currently riding. Some may never be able to climb back up an elephant and a few unfortunates may find themselves trampled underfoot.
On the other hand, the monkey-carrying capacity of the herd is now 20% greater than it was before. Assuming we can sort out the logistics properly, there is enough room for all current monkeys and their offspring, plus maybe a few monkeys from outside who hadn't had a chance to ride yet.
KEY:
Fewer monkeys per elephant = displaced jobs due to automation.
More elephants in the herd = economic growth due to automation.
Monkeys = workers.
Elephants = "the economy" or "the means of production".
People who tell you that automation is going to lead to long-term net job losses from are betting on something that has a very drastic job-displacement effect (WAY fewer monkeys per elephant) while having a very small effect on economic growth (few if any additional elephants). That doesn't make sense to me. The implausibly perfect technologies they tend to talk about would create a massive amount of new value in the economy, i.e. a great deal more elephants for us monkeys to ride on, even if only four abreast.
It's much easier to predict the jobs that will be displaced than the new jobs that will be created, so it's cognitively simpler to take the pessimist's side.
The displacement effect is the fact that the skill and education bar keeps getting ratcheted higher, making it ever more difficult for people to crawl onto a new monkey.
The growth-limiting effect is both intrinsic and extrinsic. Intrinsic, because with depressed labor wages there is no internal demand for more growth, and extrinsic as you run up against natural resource and energy limits.[1]
[1] I think the fact that oil is 4x more expensive than it was a decade ago is a dramatically under-appreciated reason for the tepid economic growth we have faced in that time.
Consider instead the scenario where the elephants don't really enjoy how smelly and messy the monkeys are and replace them with nice clean robot monkeys, who actively discourage the bio monkeys from climbing back up. That's a lot of trampled monkeys.
That's the "very drastic job-displacement effect". We're moving into a future where elephants just don't need monkeys anymore.
What if working would provide you with a basic income? Would it then not make sense for people working poor jobs to quit and just get the guaranteed basic income along with all their free time?
In most proposals, basic income is covered by dropping the programs it replaces (social security, disability, etc.) and raising income taxes in all brackets.
Basic income is something you get regardless of whether you work, so there is still incentive to work - if you want anything other than what basic income (which should cover little more than food + shelter in a relatively inexpensive area) can get you.
Because this gives low-income people more power over their employers than before (they don't need to work), it probably allows you to repeal minimum wage laws, and let the wage fall somewhere reasonable.
"As of the latest data released on September 6, 2013, the total is 47.76 million, which is more than the entire populations of many large nations."
source: http://www.trivisonno.com/food-stamps-charts
Compared to when Clinton was in office:
“Caseloads declined by 54 percent. Sixty percent of mothers who left welfare found work, far surpassing predictions of experts,” President Clinton wrote in a 2006 op-ed in the New York Times. “Child poverty dropped to 16.2 percent in 2000, the lowest rate since 1979, and in 2000, the percentage of Americans on welfare reached its lowest level in four decades.”
source: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/18/w...
There was something on people going on disability in a recent This American Life. People were going on disability because they just weren't useful in today's working world. They didn't know how to use computers. They had suffered some sort of injury and were no longer suited for manual labor. For these people the idea of working behind a desk never even entered their mind.
I mean, I would. But there still needs to be someone to work those jobs. Also, a lot of times people gain a sense of self-worth from doing work that is appreciated. Whether they are getting it or not, or whether it's right or not, I believe this continues to hold true.
I think that if those jobs can't pay a worker enough to maintain that worker, they should end. Business models based on slavery/poverty should be deprecated.
A guaranteed minimum income may heighten the importance of citizenship. Rather than a state being little more than a place to make money for any and all that arrive within a state's borders - in other words, a global free market - the state's prosperity would be tied to an individual's well being through ties of relation. Proof of citizenship would be of paramount in a guaranteed minimum income scheme, and yet the concept of citizenship seems to have been discarded for the notion of global citizenship in recent decades. It will be interesting to see how a guaranteed basic income survives in the age of border-less states.
Over six billion people inhabit earth, the majority of which do not live in a state with a guaranteed minimum income. An open border policy coupled with free money will likely lead to increased economic migration.
I am an emigrant to the United States. I had to flee the place I'm from for political reasons (the place was unsafe for me and my family). But yet still I want the people of that place to do well... for two reasons I guess: 1) I just simply want everyone on this earth to do well, no matter what country they're citizens to and 2) because the people I left behind, a lot of them were family, friends. I knew them well, I still keep in touch with them. They're still among my closest friends. I want them to live the remainder of their lives peacefully, happily, prosperously.
I know that you've got a somewhat similar background story as me... you/your family left Bangladesh for a better life. You were lucky in that you were privileged enough to have the means to get out of that place -- you know that a good half of the country did not. So, what about the people still there... surely you care a non-zero amount for their welfare. Right? We live in an interconnected world. Our actions, business decisions, political decisions have an effect on the entire world -- sometimes it's good, sometimes it isn't. An argument could be made that there are people out there in the world who are not doing well because of something that our country did. Right now you have Obama on a tour trying to drum up support for a war. His main reasoning is that America is the police of the world... 400 children were supposedly gassed, and so we have to step in to stop this injustice. There are injustices of different kinds being perpetrated in other countries... what makes them so different from Syria, that they don't deserve our help?
I can understand prioritizing ... first comes the welfare of our own American citizens, and then the rest of the world... but completely ignoring the other world seems like a cruel and selfish thing to do. How is this not obvious?
There is a difference between caring about people in other countries, and declaring nations irrelevant and everyone "global citizens." I'm all for foreign aid, international development, etc, but that doesn't mean giving up on the concept of liberal democracies animated by specific bodies politic tied together by national unity.
There is nothing empowering about the concept of "global citizenship." The marginalization of nation-states just means that there is truly nothing to stand up to the trans-national corporations and global capital owners. There is nothing to stop everything from becoming one big race to the bottom.
> There is nothing empowering about the concept of "global citizenship."
I think there is, I think it's a beautiful thought. It seems to me that the big challenges for the centuries ahead include problems with the planet... like global warming, pollution, ecosystems not working out right. Solving these problems will require intimate coordination among many big nations. If we start acting with greater cohesion, if we understand that global warming is as much of a concern (or should be) to a guy living in Arkansas as it is to a guy living in China, we can probably solve these problems more effectively. Mind you I'm not advocating erasing all country-lines right now, I just think there's probably a good balance between the two extremes. We probably weren't ready for the transition to happen a few decades ago, but now we are a little bit. I think/hope this continues.
> The marginalization of nation-states just means that there is truly nothing to stand up to the trans-national corporations and global capital owners.
It is distressing. I'm in favor of a living wage for everyone that works or is disabled/retired. What I can't decide on is what to do with those that will choose not to work. What if it was 1% of the population? Or 5%? Or...?
Indeed. In fact, when economists talk about full employment, they don't even mean 100% - it's thought that at least some unemployment is needed to control inflation.
You say that you have seen very little on this subject yet somehow you are able to judge what is a step in the right direction?
What is baffling is how many HNers who are apparently eager to downvote anyone in disagreement with the basic income argument and ask for counter-arguments yet fail to prove it in details (or even links) that the idea will work.
I think this stems from the fact that basic income is theoretically sound to anyone with even a rudimentary knowledge of economics. Now of course, it's DEFINITELY dangerous to assume that "theory supports it" is a slam-dunk case for anything, but preliminary results with pilot programs have also been encouraging[1] (the results have been fantastic, but the reliability of the data is not completely sound given how limited the programs are and how early it is).
Between the fact that theory supports basic income and preliminary pilot programs provide (on-balance) cause for cautious optimism, it seems that the burden of counter-proof is squarely on the side of those saying "Of course it could never work", particularly since I personally have never seen an HN comment providing anything to back that up beyond "It's just obvious, can't you see". I haven't seen any data OR plausible theoretical explanation provided as a counter to basic income.
Ah! A Link! Well after some review of the information on that Wikipedia article it is clear that all income pilot programs have only been administered to a minor degree in third world countries.
The ideas of administering this system on a LARGE SCALE in a 'well-developed' country such as the US would probably bring many of the problems Friedrich Hayek theorizes it would.
From Wikipedia:
"It is obvious that for a long time to come it will be wholly impossible to secure an adequate and uniform minimum standard for all human beings everywhere, or at least that the wealthier countries would not be content to secure for their citizens no higher standards than can be secured for all men. But to confine to the citizens of particular countries provisions for a minimum standard higher than that universally applied makes it a privilege and necessitates certain limitations on the free movement of men across frontiers... we must face the fact that we here encounter a limit to the universal application of those liberal principles of policy which the existing facts of the present world make unavoidable."
In other words people would flock from all over the world in DROVES to secure a spot in the unconditional free money system.
As with most economic policies, the degree to which it is implemented correctly is not linearly related to the quality of its outcomes: often one hole in correct implementation can torpedo the entire thing. In this case, providing a basic income is incompatible with open-borders immigration policy (i.e., limiting immigration to those who are likely to create more wealth than the cost of a basic income).
On top of that, this is almost irrelevant to the discussion of basic income. This is not a problem with basic income, but simply "differences in expected income across countries". The higher expected income that the US produces ALREADY has the effect of drawing immigrants from poorer countries here, and we already have a system in place to prevent this from happening (too) en masse. This has been happening for over a century. I don't see why providing a basic income would appreciably increase this effect, or why the "flocking in droves" issue would suddenly become insurmountable when we've already been dealing with the same issue (without ruining the economy) for decades.
Note that I'm discussing economic soundness here. It's totally possible that the vagaries of the American political system may prevent a key part of any economic concept from being implemented correctly, in which case all bets are off, of course.
It's really distresses me whenever I read economic discussions on HN because basic economics is relatively simple and objective and because most folks on HN have the chops to understand this stuff, but it seems like many don't. In particular, one big facet of economics is equilibrium as it pertains to markets and most discussions here completely gloss over this (even though everyone here is completely comfortable with the concept of equilibria in other domains.)
I think a lot still needs to be done, and can be done, to educate the public about basic economic principles. I hope to do my part to help by creating quality online resources for this in the near future.
To give a more concrete example of what worries me: It should be obvious to everyone here that an idea like "minimum guaranteed income" is a very dangerous idea. Yes, there are credible economists that believe these things are a good idea (and it might even be a correct idea) but they believe this for very different, and much better informed reasons than the arguments being bandied about in this forum. Many of the arguments made here in favor of "minimum guaranteed income" are wrong and even the Economists who support these things would agree that your arguments are wrong.
Anyway, as I said, I hope to create some online resources soon that will show more clearly what the difficulty is with these types of ideas.
EDIT: For those asking me what the precise problem is with "minimum guaranteed income", I can't give you a satisfying answer, because I can only make an obvious qualitative argument right now (i.e. people will stop taking minimum wage jobs if they can get the same income without working, or by working in some less efficient fashion prescribed by a "guaranteed minimum income" scheme.) What needs to be done is to bring this discussion into the realm of mathematical "economic models" so we can quantify these things and ask questions like "How much will a guaranteed income help people?" and "How much will poor people be hurt indirectly by putting such a scheme in place?" (and of course ask additional meta questions such as "Is this model appropriate?") But these types of questions can't be addressed in an HN thread and require a more in depth treatment.
Would you please describe some of the faulty arguments for the "minimum guaranteed income" and also maybe link to the credible economic arguments to contrast? Otherwise you aren't really providing any information to further the discussion. Thanks!
Would you mind expanding what you wrote in that third paragraph ? All the better if there was a nice youtube video interview with said economist explaining him/herself.
Came here to say the exact same thing; thanks for saying it better than I ever could.
I don't get the basic income thing - pay people to not work? What?
Where's the money come from? How to you prevent massive inflation and a massive decrease in economic output as people quit their jobs? Who decides who gets this basic income?
The money come from people who works, and everybody gets the basic income - so there are no need to track how much anybody deserves it, and no incentives to stop working to receive subsidy.
The idea is that some people will pay more than they receive anyway, but at any time that you can't sustain yourself, you still have the safety net and can survive until you can re-enter the productive workforce. Or if you're content with living with the bare minimum, that's OK too; you're not competing with others for scarce works, and you're not putting them at risk when you fight for your life - as it's not at risk.
Frankly, I am still waiting for a good introduction to general economic principles. I literally feel like an idiot when following economic discussions: it seems to me like it's all a long infinite chain of valid arguments and counter-arguments that are perfectly valid, true and completely opposite.
This book is an outstanding place to start. It addresses a myriad of economic concepts in simple language. It's available for free through the Mises Institute.
This book gives a simple overview of macro issues and is an interesting and well-presented tale about how economies grow from the basic "man on an island" scenario to a complex market. It also covers Austrian business cycle theory which explains the boom-bust cycle in economies.
Both of these books are from the "Austrian School" of economics, which is named for its Austrian founder, Carl Menger. I find these arguments compelling as they are firmly grounded in logic and are based on the principle that the human individual and her actions form the basis of all economic activity.
The giants of the Austrian school are Ludwig von Mises and Murray Rothbard (highly readable) if you want to seek out more advanced theory.
Do not do this. The Austrian school of economics is neither scientific nor respected in the wider economic sphere.
If you want a good introduction to economics that is 1) amenable to the perspective of an engineer (i.e., mathematical theory and significant amounts of modeling and game theory) and 2) close to how actual professional economists approach economic problems, the best free textbook is one originally authored by an economist at CalTech who is also Yahooo!'s head of an economic research team.
> The Austrian school of economics is neither scientific
This is a somewhat vague statement but I'm assuming you're referring to the Austrians' "a priori" approach to economics.
> nor respected in the wider economic sphere.
Given the adversarial stance that the Austrians take toward government intervention in the economy it is no surprise that their ideas are not endorsed by academics.
Individuals should make their own judgement about the persuasiveness of the Austrian arguments and not dismiss them because they are unpopular.
If you have the time, I'd welcome a critique of any argument contained in that Hazlitt book quoted above.
I assume that the complaint was not "no one should ever read the Austrians" but rather that it's not appropriate introduction to economics.
One may think that string theory is sound, but still think it unwise to introduce someone to physics starting with string theory.
"Individuals should make their own judgment about the persuasiveness of Austrian arguments"
I agree with this, but it seems wiser to do so once you have some basic knowledge of more mainstream economics so that you can critically compare the two schools of thought.
The only goal of the comparison to string theory was that it's an alternative theory that an educated observer should judge on its own merits. I'm saying that the background of one's introduction to economics should be based in the mainstream, just as one's intro to physics should not be based in mainstream physics vs string theory (saying nothing of how advanced the intro curriculum need be).
My fundamental point is that alternative theories are invaluable and essential, but being conservative and sticking with the mainstream is generally well-advised for beginners. Once you're confident in your grounding in the mainstream, you can approach alternatives with a critical, well-informed eye.
Say what you want about Austrian / free market economic schools, but these people and groups predicted the financial crisis and housing bubble: https://www.youtube.com/watch?v=LfascZSTU4o
That's because economic principles aren't scientific theories, they are political opinions (and weapons). That's why you have left-wing and right-wing economists, and a broad range of theories on how things work, but no agreement on the premises.
There's also the fact that real-world economy is a much more complex beast than any existing models precisely because there are so many variables. Which is why most economical "predictions" are just post-hoc justifications.
A considerable amount of macroeconomics is constructing airtight justifications for what you would like to be true, without any fear that your theories will ever be subjected to rigorous testing. Hence the situation you describe.
I am beginning to turn to Praxology: economics is just psychology under conditions of scarcity. Because most discussion on economics and minimum wage is a peak behind people's own perceptions and prejudices.
So peak behind my veil. It may not be a coherent argument, but it is trying to form from a different direction I usually see on here.
1. Welfare payments (paying people not to work) are about avoiding the human cost of moving from one equilibria to another. We do not have an ethicall acceptable way to judge if one person is deservedly poor and another is a scrounging parasite. So we pay everyone.
2. Welfare payments are getting really expensive. Partly because of their complexity, partly because we fiddle with it too much.
2.a. Welfare payments act as insurance for society. You have a bad year its not worth forcing you and your family onto the streets.
2.b. Forever welfare payments (benefits scroungers, 13 kids and never had a job etc) may be a reflection of a persons true economic worth. see below
3. Paying everyone a minimum guaranteed income is not so crazy - it is merely a monetary reflection of the value and utility derived from other public goods like medicine, science, roads, clean air. I get a lot of value from these things. The NHS means I don't monetarily pay a US level insurance. So I can put a pretty accurate number on a minimum payment already made to me.
For me the situation now is paying people who are not currently econmically productive enough to survive, and turn into productive citizens. It is messy, it has problems, but for my ethical point of view it beats not having a welfare system and seeing people starve. Thats why we brought it in and thats why we want to keep it.
However we are seeing demographic changes (which is what the article is about) that may well negate a lot of this - more and more human beings, with moral value, may find they are no longer economically in the black.
So we might have a future that is golden, of robots growing food, houses built from nanostructures in days, of the human basics for 10 bn provided for tiny effort or cost.
But getting there is not a clear road. And for my money holding the people who will fail to cross that bridge to the future, and giving them a decent life with the bounty of new productive technologies, is a moral duty. And also a sensible hedge for hubris.
In short, we pay for welfare because it is the right thing to do, it is usually short term for each individual, we might need it personally, and as we transition into a new world, we have no idea how bumpy it will get - so safety nets are a good idea. But is the current system(s) perfect, desirable or sustainable. Almost certainly not, and we shall see wide experimentation with different variations before settling on something similar to Singapore.
> we pay for welfare because it is the right thing to do
Or, it might be "the right thing" to give funds to fight poverty in some other way and welfare is counterproductive. Making such a claim a-priori is the crux of the problem.
Perhaps then i should rephrase it as We pay for welfare because protecting the weakest and must vulnerable is the right thing to do and so far history has taught us that market forces can take a generation to come round and Workhouses are inhumane.
In short welfare is the economic equivalent of Churchill's "democracy is the worst form of government - apart from all the rest"
Again, I ask, why do you automatically assume paying for welfare "protects the weak and vulnerable"? If you've ever been to a strong welfare state like any country in Europe, etc, you'd know they also have homeless, broken people, as we see in the US. Where, I ask you, is the evidence that "lots of guaranteed welfare"->"better off poor people"?
I'm just saying that by making these a priori assumptions we're arguing past each other- I can't respond to an argument that says "Anyone against welfare is a morally inferior person" because I am not arguing against the moral aspects of welfare, I'm just saying that poverty can't be solved by handing poor people a check every month.
I'm not calling you a morally inferior person (I set a very low bar anyway :-). I agree that "ending poverty" cannot be achieved by handing people a cheque each month. Ending poverty is (or should be) a long term cross governmental policy issue. How it is achieved is an important, possibly the most important question in economics.
However "welfare" (note not the purely US term but a wider more European term) is in my view a smaller usually short term provision. IIRC The majority of non-retired welfare recipients recieve help for less than 14 months, and by far the biggest portion of welfare spend goes on retirees.
I am suggesting that welfare is mostly either a short term handout to prevent a vicious spiral of debt / problems or is a long term care for elderly.
Welfare is not a means to cure poverty but is a means to prevent the unlucky or vulnerable from falling into poverty.
I see the "scrounger" as a cost to be paid for such a system. Perhaps means testing can remove that cost, or perhaps not. But I know we shall not fix poverty this way but then a surgeon will operate to save me from a heart attack, even if he knows the real solution is better diet and exercise.
Edit: as for European countries having broken people, yes it's very true here in the UK as well as elsewhere. I also know from personal experience (and lots of well done studies) that the majority if the broken are either I eligible for help (often migrants) or far more common mentally unstable and often having substance issues.
Giving them a cheque helps far far less then the same cheque to a welder and his family who just got made redundant after his wife fell ill.
Lots of welfare in his case gives time to find new jobs or retrain and prevents a family joining the ranks of outcasts. That helps. We could even reduce the impact by extending welfare to immigrants (despite the likely consequences). But far and away, the biggest visible poor in our society are mentally challenged - and we have no fixes or cures there. Handing out welfare or withholding it is not going to help if the reason you can't hold down a job is the voices in your head.
All good points, lifeisstillgood. But I'll point out this thread was mainly about "guaranteed minimum income" and this is the first time you stated that you consider "welfare" to be a short term provision :-)
Ok, so welfare as an ideal is enough to cover the life-altering disasters that afflict us all, some more than others. Cover as in ensure they can be dealt with, and life return to normal productive one in reasonable amount of time.
That is the theory - in practise we have many muddled implementations of this - and I don't see a guaranteed minimum income as automatically bad. It will have market distorting effects but then the market has not historically been fast enough moving to help relieve people who have suddenly lost a job / limb. In fact a more laissez-faire period produced workhouses.
So ideally welfare is a short term provision. The current implementations are all a bit crap and I see no major reason why minimum incomes would be automatically worse.
I agree and I am looking forward to what you come up with! :)
Passing around statements like 'give everyone a guaranteed basic minimum income' seems to be no better than Marie Antoinette saying "Let them eat cake" ... it's cute because it has a bit of merit(cake would feed people as a basic gauranteed income would give people some money) but it completely and naively oversimplifies everything. :P
People get very attached to their theory of how economies and civilizations work.
On one side we have "Luddites" who think that machines are taking over. We have no use for most people's labour and we need to start dealing with that by having a guaranteed basic income or somesuch. Seems like common sense. What use are all the people that were working in factories or data entry or whatnot in the robot age!
On the other side we have Misans? Ludwigians? (I dunno, I need a name for Ludwig von Mises people). They point out that this current crop of Luddites are just following in the footsteps of historical Luddites that think everyone will be unemployed because of tractors or looms. The sky never fell. Economies sort themselves out.
Realistically, we don't know. Technology has been moving very fast for a long time and its accelerating. We don't know what this does to economic paradigms. How can anyone be as confident as so many people seem to be about this stuff.
Actually, the Luddites in the current conversation are the ones decrying technological advancement itself. On the policy side, they tend to favor propping up old, inefficient industries (essentially subsidizing them at the expense of the rest of the population).
A basic income has been considered common sense in economic theory for a long, long time (as in, it's been discussed by economists for at least a century). It has less to do with the obsolescence of human labor than it does to the fact that it's simply grossly inefficient to tie "the ability to take entrepreneurial risk" to "I was born middle-class or higher".
Economic models would show that low wage jobs are such due to lack of specialization and supply/demand for that job. Nonetheless, articles like this make "the Economy" sound more and more like the Matrix. Do humans exist merely to serve the Economy?
>It means fixing inequality without the need to resort to redistributive taxation.
National taxation in Britain doesn't redistribute, it regulates demand. The British government does not need to tax a pound to spend a pound. The limits on spending are inflation and real resources.
It's interesting that this article has garnered so much interest on hacker news. Automation, streamlining, and outsourcing appears to have worked its way "up" to the STEM fields. The technical minded may soon received a taste of what the factory labor received in the eighties.
The pool of idle and unwanted labor will likely increase until the assumptions underlying the industrial revolution are questioned. Great public works of art and architecture are scarcely being erected today as their mere existence is seen to be "inefficient". Efficiency is a means rather than an end.
From Tawney's "Acquisitive Society":
"Such societies may be called Acquisitive Societies, because their whole tendency and interest and preoccupation is to promote the acquisition of wealth. The {30} appeal of this conception must be powerful, for it has laid the whole modern world under its spell. Since England first revealed the possibilities of industrialism, it has gone from strength to strength, and as industrial civilization invades countries hitherto remote from it, as Russia and Japan and India and China are drawn into its orbit, each decade sees a fresh extension of its influence. The secret of its triumph is obvious. It is an invitation to men to use the powers with which they have been endowed by nature or society, by skill or energy or relentless egotism or mere good fortune, without inquiring whether there is any principle by which their exercise should be limited. It assumes the social organization which determines the opportunities which different classes shall in fact possess, and concentrates attention upon the right of those who possess or can acquire power to make the fullest use of it for their own self-advancement. By fixing men's minds, not upon the discharge of social obligations, which restricts their energy, because it defines the goal to which it should be directed, but upon the exercise of the right to pursue their own self-interest, it offers unlimited scope for the acquisition of riches, and therefore gives free play to one of the most powerful of human instincts. To the strong it promises unfettered freedom for the exercise of their strength; to the weak the hope that they too one day may be strong. Before the eyes of both it suspends a golden prize, which not all can attain, but for which each may strive, the enchanting vision of infinite expansion. It assures men that there are no ends other {31} than their ends, no law other than their desires, no limit other than that which they think advisable. Thus it makes the individual the center of his own universe, and dissolves moral principles into a choice of expediences. And it immensely simplifies the problems of social life in complex communities. For it relieves them of the necessity of discriminating between different types of economic activity and different sources of wealth, between enterprise and avarice, energy and unscrupulous greed, property which is legitimate and property which is theft, the just enjoyment of the fruits of labor and the idle parasitism of birth or fortune, because it treats all economic activities as standing upon the same level, and suggests that excess or defect, waste or superfluity, require no conscious effort of the social will to avert them, but are corrected almost automatically by the mechanical play of economic forces.
"Under the impulse of such ideas men do not become religious or wise or artistic; for religion and wisdom and art imply the acceptance of limitations. But they become powerful and rich. They inherit the earth and change the face of nature, if they do not possess their own souls; and they have that appearance of freedom which consists in the absence of obstacles between opportunities for self-advancement and those whom birth or wealth or talent or good fortune has placed in a position to seize them. It is not difficult either for individuals or for societies to achieve their object, if that object be sufficiently limited and immediate, and if they are not distracted from its pursuit by other considerations. The temper which dedicates itself to the cultivation of opportunities, and leaves obligations to take care of themselves, is set upon an object which is at once simple and practicable. The eighteenth century defined it. The twentieth century has very largely attained it. Or, if it has not attained it, it has at least grasped the possibilities of its attainment."
I don't know why I'm responding to such a poorly phrased question, but interpreting it in the most charitable light: The unemployment graph I linked to is clear evidence that previous automation has not "automated away humans".
I have and found that one man could comfortably support a family of five on a 40-hour-a-week factory worker salary. Such niceties began to fade in the 70s and 80s, though, as the world progressed.
Now, do your part and honestly evaluate the world around you. Keep in mind that the appeal to progress is just as much of a fallacy as the appeal to tradition. Tomorrow is not inevitably better than yesterday.
That's news to me: So when the man's wife needed an MRI, his salary could cover this back in the 70s? He was able to buy a car with airbags using his salary? He was able to give his wife a cell phone in the 70s that she could use in an emergency? He was able to buy himself a carbon monoxide detector for his house? If he got testicular cancer, he would live more than a year with his salary? etc. etc.
Once open spaces are now subdivided, health care motivated by usury, and wages lie stagnant since the seventies. Water crises, hemispheric pollution, and thermonuclear warheads, all are modern innovations which the prewar generations would be thankful to escape.
The present isn't inevitably better than the past. The future will not necessarily be rosier.
What exactly is the difference between a guaranteed minimum income and welfare? Are people talking about you get paid X regardless of what you do, because if you want to see what that kind of thing looks like, look at life on an indian reservation. In many cases, that doesn't really solve the problems of poverty, alcoholism, etc. even if there is humungous opportunity to work, get a free education, etc.
Some people don't want to do what society asks of them. How do you solve that?
What can be done? I have seen very little on this subject. Guaranteed basic income is probably a step in the right direction. At least such a system offers a real opportunity to drop what you are doing currently and sincerely try for a new career.