Acid Capitalism

July 20, 2021
Oshan Jarow

It's common-enough knowledge that if you ingest a couple tabs of lysergic acid diethylamide - LSD, or 'acid' - it will transform your consciousness, provoking a psychedelic 'trip' that may last up to 16 hours. What is not common-enough knowledge is that the economic organization of society is itself a psychedelic arrangement that transforms consciousness, provoking a trip that gets disguised as "ordinary consciousness". The effects may last a lifetime.

This, I contend, is very bad. We're subliminally dosed into believing that our holistic experience of what being alive is like - our consciousness - is a given, rigid, natural phenomenon that cannot be meaningfully altered by such man-made, social constructions as economic policy. All the while, exactly that is happening.

We don't suspect that one of the most potent ways to evolve the panorama of human experience towards a more beautiful condition is by altering the economic structures that guide that condition along in its development. We don't suspect this, because 'the economy' is thought of as something fundamentally othered from consciousness; like comparing apples and supernovas.

What follows is an attempt to display the common loom upon which these two phenomenon - the economy, and consciousness - are strung, with an eye towards revitalizing each by way of the other.

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Psychedelics provide a guiding resource throughout this project, both in metaphor and actuality. The most explicit attempt at tying together the consciousness-transforming properties of psychedelic drugs with the economic organization of society might be the cultural theorist Mark Fisher's writing on Acid Communism. Before taking his own life in 2017, Fisher wrote 20-or-so pages that were meant as an introduction to a book, tentatively to-be-titled Acid Communism: Post-Capitalist Desire.

Fisher was interested in what we might learn from the 60's and 70's, how we might "regain the optimism of that Seventies moment" that was subsequently "deflated" by the "machineries of capital". For Fisher, the heart of acid communism was the belief that altered states of consciousness could be used to galvanize anticapitalist movements. The neoliberal form of capitalism that arose in the 70's deflated the revolutionary mood, quieting the collective movement for fundamental changes to the economic system. But the use of psychedelics, Fisher believed, could remind us that just as the basic categories of consciousness can be transformed - such as how we experience space, time, self, and other - so, too, can the basic categories of how the economy is structured, and the subsequent shape and textures of our everyday lives.

Crucial to Fisher's vision for the acid communist project was a historical study of how the five decades of capitalism following the 60's deflated an entire country's, if not a world's, consciousness. Fisher:

"...we must carefully analyse all the machineries that capital deployed to convert confidence into dejection. Understanding how this process of consciousness-deflation worked is the first step to reversing it."

Such an analysis requires a direct focus on the relationship between economic institutions and consciousness. But a divide was ripped between the disciplines studying economics and those studying the broader vistas of human development, and they grow wider by the day.

Bringing these discourses together could provide fertile ground to rediscover an emancipatory project of human and economic development. Fisher provides a good starting point. The acid communism project requires precisely this sort of psychedelic investigation of capitalism, seeking to understand how economic decisions of the past 60 years affected consciousness, and exploring how we might realign economic institutions with a shared, enriched vision of progress.

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In service of this need, this essay constructs the subsidiary idea of acid capitalism. Acid capitalism is an analytical framework that sees the economy and consciousness as complex systems always mutually transforming each other.

If acid communism envisions a strategic use of altered states of consciousness to mobilize economic movements, acid capitalism flips this strategy on its head: a strategic use of economic movements to enable and empower altered states of consciousness. By surveying how neoliberal economic policy altered consciousness, we can develop a countervailing vision, an explicit framework for transforming consciousness once again by transforming the economy.

Notice that the project is not to break the connection between economies and consciousness. As we lean into a globalized, digitized, interdependent age, the avenues by which economies influence consciousness will only grow wider. The question, then, is two-fold. Thomas Metzinger, a philosopher of consciousness, gives the first leg:

"As soon as we concern ourselves with what a human being is as well as with what a human being ought to become, the central issue can be expressed in a single question: What is a good state of consciousness?"

This question is primarily dealt with in the young field of neuroethics. But acid capitalism connects it with the social sciences, asking what kinds of economic institutions, policies, and practices can best design our social environments to support the cultivation of these 'good' states of consciousness.

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The Molecular Structure of Capitalism

To show capitalism as a psychedelic system requires a shared understanding of what I mean when I write "capitalism" - no easy feat. We can understand psychedelic compounds in refreshingly clear, molecular fashion. Acid is a molecular compound, lysergic acid diethylamide (LSD), that activates the brain's 5-HT2A serotonin receptor. Psychedelic mushrooms contain psilocybin, which after ingestion, is converted into psilocin, then activating the same serotonin receptor.

What are the active ingredients in capitalism that provoke psychedelic effects? If we broke capitalism down into its molecular components, they might be: private ownership of the means of production, the pursuit of profit, and wage labor.

There's a long history stretching back to at least Jean-Jacques Rousseau of social philosophers who claim that as our civilization has developed atop these building blocks, they've given rise to psychedelic effects that have shaped the kinds of consciousness that our capitalist society provokes.

But in the spirit of Fisher's inquiry, I restrict my exposition of acid capitalism to the period from 1971 to the present. This serves two purposes. First, it makes this essay more manageable for reader and writer alike. But more importantly, this period represents the psychedelic aspects of capitalism at their most potent, at the peak of their impact on the trip of ordinary consciousness. A phenomenon at its most potent is also in its prime for analysis.

Many names have been given to this time period in capitalism's evolution, none of which I'm eager to use. "Neoliberal capitalism" may be the most common, though neoliberalism is a phenomenon relatively separate from the digital revolution, which is crucial to the consciousness-transforming elements of the period. "Digital capitalism" is the inverse, focusing on data-driven practices to the exclusion of neoliberal policymaking. One of the chewiest labels may be the most encompassing, at least to date: hyper-capitalism. The term was developed explicitly to suggest both neoliberal and data-driven practices.

Above and beyond capitalism's basic ingredients, hyper-capitalism is defined by at least two distinctive ingredients:

I. Rising precarity

II. Algorithmic and cognitive determinism

By analyzing each in turn, we'll gain a richer understanding of how the landscape of American capitalism is shifting, how these shifts are driving changes in consciousness, and how we might redesign our economic landscapes so as to provoke better trips.

In addition, drawing upon the psychedelic principle of 'set and setting', we'll explore how the organization of the American workplace can foster a growing sense of 'alienation', and what role economic democracy could play in designing a better set and setting for everyday consciousness.

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Precarity Is Psychedelic

Painting by  Marcus Jansen
Painting by Marcus Jansen

Precarity In the Age of Hyper-capitalism

One may think of precarity as the politically shaped distribution of existential precariousness. That is, all life is precarious. Poised upon a knife's edge that may cut into oblivion at any moment. Precarity is a measure of our political successes, and failures, in managing that precariousness.

The philosopher Judith Butler writes:

"Precariousness and precarity are intersecting concepts. Lives are by definition precarious: they can be expunged at will or by accident; their persistence is in no sense guaranteed. In some sense, this is a feature of all life, and there is no thinking of life that is not precarious...Political orders, including economic and social institutions, are designed to address those very needs without which the risk of mortality is heightened. Precarity designates that politically induced condition in which certain populations suffer from failing social and economic networks of support and become differentially exposed to injury, violence, and death."

The hyper-capitalist period, breaking from previous trends, is marked by an increase in precarity for a growing segment of the population. So much so that the economist Guy Standing calls for a new socioeconomic class: the precariat. The precariat is a class defined by a disproportionate lack of material and psychological welfare. If minting a new class sounds hyperbolic, consider that nearly 1/3rd of the U.S. population lives below 200% of the poverty line, which has been called the threshold for "economic insecurity".

The affect theorist Lauren Berlant, alongside Standing and others, sees the rise of the precariat as a direct consequence of neoliberal practices. She writes of the connection between the "spreading precarity" that "provides the dominant structure and experience of the present moment", and the "neoliberal feedback loop, with its efficiency at distributing and shaping the experience of insecurity throughout the class structure and across the globe."

What is the neoliberal feedback loop, and how does fuel a spreading precarity? The rise of neoliberal economic practices is associated with a list of factors: a shrinking, means-tested welfare state; rising levels of financialization and debt; deregulation of controls on capital and top-tier compensation; declining pension plans; declining union coverage; rising costs for healthcare, housing, and education amidst a period of wage stagnation; and the rise of 'flexible' practices that classify workers as independent contractors rather than employees.

If precarity has indeed risen to provide the "dominant structure and experience of the present moment", the question of its psychedelic effects are crucial. What does precarity do to consciousness?

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Scarcity

There is growing literature on the relationship between economic insecurity - a parallel, if not synonym, for precarity - and mental health. The findings are as you might expect: economic insecurity is no good for mental health.

More penetrating research has been carried out on scarcity, of which precarity is a sub-category. In Eldar Shafir and Sendhil Mullainathan's book, Scarcity: Why Having Too Little Means So Much, they define scarcity simply: scarcity is a condition where you have less than you feel you need. Their research studies not what the experience of scarcity is like, but how scarcity changes the way that people experience things in the first place. In other words, they study not how the condition of scarcity shows up in consciousness, but how it transforms consciousness.

"Scarcity captures the mind. Just as the starving subjects had food on their mind, when we experience scarcity of any kind, we become absorbed by it. The mind orients automatically, powerfully, toward unfulfilled needs...Scarcity is more than just the displeasure of having very little. It changes how we think. It imposes itself on our minds...scarcity’s capture of attention affects not only what we see or how fast we see it but also how we interpret the world...Scarcity is not just a physical constraint. It is also a mindset. When scarcity captures our attention, it changes how we think...By staying top of mind, it affects what we notice, how we weigh our choices, how we deliberate, and ultimately what we decide and how we behave.”

The mind warps around the object of scarcity. Economic insecurity - a scarcity of money - "automatically", meaning beyond or beneath our conscious perception, orients the mind around money. Of the torrent of perceptual stimuli that crash upon our nerve endings in each moment, we begin to pick out stimuli associated with money more quickly, more efficiently. Our daydreams begin veering towards topics of money. Our impulse control pertaining to areas of money dwindles. A summary of a Shafir & Mullainathan paper reports:

"The authors suggest that when faced with chronic resource scarcity, the resource that is scarce (e.g., money) becomes the main focus of people’s cognitions. In support of this, the authors demonstrate that lower-income consumers are more likely to falsely recall hearing the word “money,” have more difficulty suppressing thoughts related to costs, and are faster to identify stimuli that have been associated with money than higher-income consumers."

Another example of how scarcity subliminally warps the mind comes from the anthropologist David Graeber. He notes how visions of paradise in medieval and early modern Europe varied, depending on one's socioeconomic class. The paradise envisioned by peasants and the urban poor revolved around objects they lacked: food. Thus:

"When peasants, craftspeople, and the urban poor tried to imagine a land in which all desires would be fulfilled, they tended to focus on the abundance of food. Hence, the land of Cockaigne, where bloated people loll about as geese fly fully cooked into their mouths, rivers run with beer, and so forth. Carnival, as Mikhail Bakhtin (1984) so richly illustrated, expands on all the same themes, jumbling together every sort of bodily indulgence and enormity, pleasures sexual as well as gastronomic and every other kind. Still, the predominant imagery always centers on sausages, hogsheads, legs of mutton, lard and tripes, and tubs of wine. The emphasis on food is in striking contrast with visions of earthly paradise in other parts of the world at that time (such as those prevalent in the Islamic world), which were mostly about sex. Erotic fantasies are usually strikingly absent from the literature on the Land of Cockaigne; if they are present, they seem thrown in rather by way of an afterthought."

While food-starved peasants imagined utopias of food, and sex-starved Muslims imagined utopias of sex, the medieval nobility envisioned utopias of "elite consumables". Spices, incense, and perfumes. The elite, too, Graeber writes, "constructed their ideal of desire around that which somehow seemed to escape their hold."

But "constructed" gives the impression that they chose to do so. They did not. Their ideal of desire was constructed in tune with their set and setting, unconsciously, warped around their objects of scarcity.

Economics is commonly defined as a system for managing our scarcities. In doing so, we manage everything from how we weigh our choices, to how we envision our utopias. Scarcities define the social topology around which consciousness flows.

We might then spend more time considering how exactly the scarcities we maintain affect the kinds, patterns, and qualities of consciousness that develop. The above provides a few specific examples. But we can dig deeper.

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Polar Opposites: Functional Rigidity, Mental Autonomy

Theories that take a more holistic view of consciousness are scarce. In part, because we lack a consensus theory as to what consciousness actually is, how it came to be, or how it works. Thomas Metzginer stands among those who've nevertheless ventured a real, meaningful attempt at providing such a theory.

Two concepts in particular from Metzinger's work can help us understand, if only at the level of hypotheses, the veiled relationship between precarity, consciousness, and economic development. Namely, functional rigidity, and mental autonomy.

The two form a spectrum, or rather, a zero-sum relationship. More of one means less of the other. Considering them in light of hypercapitalism provides us both with a grounds for critiquing the present situation, and developing a pathway for positive change.

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Metzinger uses the metaphor of a dolphin-filled ocean to describe consciousness. The water level is the line separating the surface of conscious perception from the depths of the unconscious. Thoughts are like dolphins, bursting from the deep, hanging in the light of day for a moment, maybe a few, and then plunging back in, disappearing.

The thing is, the human body sends about 11 million bits of information per second to the brain, and our conscious minds can only process about 50-or-so bits per second. Imagine then, you're on your back porch looking out over a stretch of ocean. Beneath the visible stretch of water lurk 11 million dolphins. Unconsciously, you perceive them all. Each gets registered by your nervous system, translated into electrical impulses that travel the body's labyrinthine network. But only 50-or-so pierce through the surface of the ocean. Only a handful get 'sent upstairs' to be consciously perceived by you, or what Metzinger calls your 'self-model'. Our conscious awareness is populated only by this small handful of thought-dolphins. So whatever filtering process that decides whether this-or-that dolphin gets sent upstairs plays a pretty large role in determining the contents and quality of our states of consciousness. The question, for Metzinger, regards this filtration process:

"The really interesting question then becomes: how do various thoughts and actions ‘surface’, and what’s the mechanism by which we corral them and make them our own? We ought to probe how our organism turns different sub-personal events into thoughts or states that appear to belong to ‘us’ as a whole, and how we can learn to control them more effectively and efficiently. This capacity creates what I call mental autonomy, and I believe it is the neglected ethical responsibility of government and society to help citizens cultivate it."

To a large degree, we already know how this filtration process works, and why. Areas such as the salience network of the brain work to select stimuli for perception that are relevant for our chances of survival. But it's also true that, in varying degrees, we possess the capability to choose what we attend to. The degree to which we can exercise this rational, reflective, intentional self-selection of attentional objects is the measure of our mental autonomy. Do the contents of our consciousness simply happen to us, or do we play a role in shaping those contents?

Mental autonomy is then both capability and a skill. The second concept, functional rigidity, is then like an injury that damages that capability. Crucially for our inquiry, functional rigidity has a close relationship with precarity.

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In his magnum opus, Being No One, Metzinger writes that not all contents of consciousness are created equal. The seascape of consciousness is populated by all sorts of dolphins, some being more difficult to notice, or ignore, than others. One's mental autonomy may determine their "flexibility and autonomy in dealing with these contents", in selecting which get held in the small window of conscious perception.

Functional rigidity is one dimension of the many different kinds of contents that populate consciousness. Some types of experience are easier to control, such as deliberate ideation. For example, my vision rolls over a small jade plant potted near my window. I may choose to rest my vision on the plant, imagining the slow movements it makes, waltzing with the sun. I may also decide to end this line of thought, and think about something else.

Other types of experience are more difficult to control; more functionally rigid. These hold their place in consciousness with greater resilience, like a boulder withstanding gusts of wind. Metzinger writes:

"...the degree of flexibility and autonomy in dealing with the contents of self-consciousness may vary greatly: emotions and sensations of pain and hunger are much harder to influence than, for instance, the contents of the cognitive self. There is a gradient of functional rigidity, and the degree of rigidity itself is available for phenomenal experience.”

Generally, the more threatening to one's survival or basic wellbeing, the more functionally rigid any given experience will be. All of those affective states, those types and textures of experience associated with precarity, then, instill a greater degree of functional rigidity into the overall seascape of consciousness.

So here's a hypothesis: If the hyper-capitalist period is distinguished by a rise of precarity, then the varieties of consciousness being produced under this paradigm are growing more functionally rigid.

Functional rigidity reduces mental autonomy, which Metzinger claims is a crucial skill if we are to be the authors of our own lives, or to possess 'agency', as we like to call it nowadays. But we can get more specific. By looking at the burgeoning cognitive science of psychedelics, we can hypothesize that higher levels of functional rigidity across society as a whole locks the evolutionary trajectory of consciousness in place. Higher degrees of functional rigidity may reduce our capacity to reinvent ourselves, explore new modes of consciousness, or reimagine the basic tenets of how society is organized.

Adaptability has always been a most important evolutionary skill. In an age of accelerating risk, where the global landscape can change as much in a month as it used to change in a century, nothing could be more important to cultivate in ourselves than the capacity to adapt; to reimagine our ways of living in light of rapidly shifting circumstances. Functional rigidity is growing deadweight that impedes such capabilities.

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Predictive Ruts: Cognitive & Algorithmic Priors

Image by  QMENTA
Image by QMENTA

Whereas traditional psychedelic drugs wear off within a day, perhaps leaving behind subtle changes to one's dispositions, psychedelic systems such as capitalism normalize and sediment the very states of consciousness they provoke.

Hyper-capitalism, with its unique relationship to rising precarity and thus functional rigidity, is growing in its capacity to normalize the psychedelic transformations of consciousness it provokes. High degrees of functional rigidity work like anchors that hold existing paradigms in place, of consciousness and economy alike. This is largely because of the relationship between functional rigidity and our brain's capacity to imagine, to conceive of, possibilities that radically depart from the configuration of the past.

What I'm calling the "imagination" here is given in more technical terms by Metzinger as "our phenomenological possibility space", that space of what is possible for us to experience at all within consciousness. Or by the philosopher of psychedelic cognitive science Chris Letheby as "the brain's hypothesis space". Fisher himself is most famous for crystalizing this dynamic into the concept of capitalist realism: how neoliberal capitalism increasingly swallows 'the real', eroding our capacities to even imagine alternatives to the neoliberal way of organizing the economy. The precepts of neoliberal logic are progressively transformed from one logical structure among many alternatives, to the only conceivable logical structure in town. This, despite the sociologist Max Weber's caution:

"It must not be forgotten that one can 'rationalize' life from a vast variety of ultimate vantage points. Moreover, one can do so in very different directions."

As attractive as 'capitalist realism' may be to sympathizers, it remains highly abstracted. How does one logical structure impose itself upon our minds, crowding out alternatives? Recent literature in computational neuroscience and psychedelic therapy can help explain.

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Priors Build Worlds

Putting capitalist realism in the terms of this essay, the claim goes: functional rigidity shrinks our brain's hypothesis space. How? To venture a theory, we turn to a prevailing view in cognitive science, the 'predictive processing' (PP) paradigm.

In short, this paradigm views brains as systems that aim to reduce prediction error. Through trial-and-error experience, our brain's construct internal models that aim to predict the world 'out there'. Brain's constantly check the predictive output of their models with incoming sensory experience. When the sensory experience confirms the prediction, great, the model is deemed successful, and gains more confidence in its veracity. If the sensory experience contradicts the model, an error-correction process occurs where the brain searches for a more appropriate prediction, and/or updates the parameters of its model to better fit the data.

A good way of understanding what these internal models of the world are like, and how comprehensive they are, is to think of dreams. Every dream is an eerie reminder of how comprehensive and convincing a world our brain's can internally construct.

Brains advance in their quest to reduce prediction error by developing priors. Priors are assumptions about the world that are so repeatedly confirmed by incoming sensory data that they sink deeper and deeper into the construction of the model. As the brain's confidence in the predictive efficacy of any given assumption grows, the amount of conscious deliberation it devotes to making that assumption diminishes.

For example. If I jump up, I will fall back down. Every time I have jumped, I have fallen back down to earth. This has become a part of my bedrock understanding of how the world works. It is taken as given; I do not spend any time or energy deliberating whether, upon jumping, I'll fall back down. These most basic assumptions about how the world works are called hyper-priors.

The sedimentation of hyper-priors looks a lot like what the process philosopher Alfred North Whitehead calls civilizational progress: "Civilization advances by extending the number of important operations which we can perform without thinking of them."

But it's important to understand the tradeoffs - all hyperpriors come at an imaginative cost. Once we grow so confident in an assumption that they become unconscious, we lose the ability to readily imagine a world in which that assumption is overturned. Hyperpriors are essentially limiting assumptions. Chris Letheby writes:

"On the PP scheme, the [neural] networks...implement the highest levels of the brain’s generative model. This is to say that, among other things, they encode our most abstract, fundamental beliefs about self and world—our bedrock, unconscious, domain-general assumptions concerning space, time, and causality, the laws of logic, and the existence of the self. Philosophers have repeatedly noted the existence and significance of these foundational beliefs. Riding roughshod over important subtleties...In ordinary cognition, these “hyperpriors” play a crucial role in constraining the brain’s hypothesis space, drastically limiting the kinds of world-models that it can generate..."

Often, such limitations are worthwhile. But things really start to get problematic once we see that the encoding of hyperpriors does not differentiate between natural law and social constructions.

The brain doesn't only encode such solid assumptions as the laws of gravity into the unconscious givens of our world-making imaginations. Even socially constructed, biased experiences, if experienced consistently enough, or early enough in one's life, can get encoded with the same facticity as gravity.

This may occur at both the individual and collective scale. For example, an individual may have a highly critical and condescending father who sneers at any ventured opinion other than his own. Throughout childhood, any opinion expressed is met by scowls and criticism. The child may learn the simple maxim that expressing an opinion leads to criticism, leads to Dad not loving you, and will guard her opinions for the rest of her life. Of course, this is an arbitrary lesson, having less to do with how the world works in general, and everything to do with the child's particular world. But this subtlety gets lost in the PP meshwork.

On the collective level, we may find ourselves born into a world where working 40 hours a week at a less-than-enjoyable job is a given fact about how the world works. This gets encoded as a given, insulating it from critical reflection. Of course, it isn't a solid fact about the world, like a rock or gravity. Working hours have fluctuated throughout our species' history, and today more than ever, we have the resources to change such norms. But givens about our socially constructed world get encoded into our cognition via socioculturally transmitted hyper-priors just the same as natural laws.

Ok, so what's any of this have to do with acid capitalism? Clearly, hyperpriors have nevertheless changed throughout history, especially those concerning social constructions. But the rising functional rigidity that characterizes hypercapitalism poses a unique threat to our brain's capacity to revisit its hyperpriors.

Specifically, recent insights from psychedelic science are illuminating what we have to gain from the periodic revisitation of such priors, and what we have to lose as functional rigidity grinds away our capacity for such revisitations.

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Psychedelics & Possible Worlds

Psychedelic drugs are proving far more effective at treating a range of afflictions - from depression to addiction - than any other therapeutic strategy we have. Accordingly, the scientific research is finally being liberated from inane restrictions to understand why.

At the forefront of theories regarding the psychedelic mechanism of action is the REBUS model, or RElaxed Beliefs Under PsychedelicS model, as developed by Robin Carhart-Harris and Karl Friston.

It suggests that psychedelics work by relaxing the brain's confidence in its priors, temporarily liberating cognition from the strict determinism of hyperpriors. Carhar-Harris and Friston write:

"...via their entropic effect on spontaneous cortical activity - psychedelics work to relax the precision of high-level priors or beliefs, thereby liberating bottom-up information flow, particularly via intrinsic sources such as the limbic system...With regard to their potential therapeutic use, we propose that psychedelics work to relax the precision weighting of pathologically overweighted priors underpinning various expressions of mental illness."

Building on this premise, Letheby is interested in the ways such relaxed beliefs expand the kinds of conscious experience available to us:

"Meanwhile, when we shift our focus to the other varieties of psychedelic experience, we can see why high-level priors should constrain cognition, and relaxing them unconstrain it...Hyperpriors constrain cognition by deeming many logically possible (and, indeed, logically impossible) worlds so improbable that they become cognitively and phenomenologically impossible. By diminishing the brain’s confidence in its foundational axioms, psychedelics expand the phenomenological possibility space...expanding the space of phenomenologically possible worlds."

The imagination does indeed have boundaries. But they're buried out of sight, set by the hyperpriors that determine what our brains deem even worth considering, or rather, what they deem probable enough to allow cognitive reflection.

Psychedelics thus reveal to us the value - therapeutic and existential alike - of transcending our priors. Doing so allows us to revisit entrenched patterns that no longer serve us, and induces a heightened state of plasticity and awareness to change them.

And by revealing the value of transcending priors, psychedelics also suggest the perils of a socioeconomic system that heightens precarity and functional rigidity. Here, again, the fundamental difference between drugs and capitalism is illuminating. The transformations of consciousness induced by drugs wear off, perhaps leaving behind subtle changes in disposition. These drug-induced psychedelic states of consciousness are practically defined by their otherness, their non-normality, the contrast they generate between our ordinary waking state and the trip. But as capitalism transforms consciousness by reshaping both our social environments and our landscapes of possibility, there is no perceptible departure from normality. Instead, there is a paving-over, an appropriation of normality. A new normal is created and cemented, the durability of which may be directly related to the general degree of functional rigidity throughout the population. Thus, a socially constructed variety of consciousness is disguised as natural, inevitable, and our imaginations grow confined within its parameters, like plants growing inside an empty wine bottle whose roots cannot break through the glass.

Already, the picture is discomforting. But applying this same framework that values the periodic transcendence of priors to data capitalism - in which data has replaced oil as our most 'valuable' (as defined by its profitability) resource - digs the hole deeper.

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Algorithmic Minds

Man-made algorithms in the age of information capitalism follow the same maxim as human brains, as understood via the PP model: algorithms and humans alike are systems that seek to minimize prediction error. For humans, the fuel that drives the minimization of predictive error is sensory experience. For algorithms, it's data.

Data is mainly valuable as an input into machine learning algorithms that predict future behavior on the basis of surveilled past behavior. But as algorithms grow more pervasive, as they govern more and more of the information we encounter day-to-day, their predictive power begins to transcend mere prediction; powerful algorithms are beginning to shape the future. They function as high-probability, self-fulfilling prophecies. By predicting with 80% accuracy that showing me a particular advertisement, at a particular time of day, will lead me to purchase the advertised product, they increase the probability that I will, in fact, purchase that product. Had I not been intentionally shown that product by the company using the algorithm for ad placement, the odds I would've bought that same product would've been lower. The role of algorithms in online advertisement is an obvious example, but it covers over the rise of algorithms in a far greater spectrum of human affairs, from medicine to policing.

Algorithms both predict and shape the future, then, on the basis of the past. They project insights gleaned from prior experience (data) onto the future, and seek to minimize the prediction error, pursuing a more perfect projection of the past onto the future.

In other words, algorithms are not only fully determined by their 'priors', the project those priors onto the future, thereby preserving and entrenching them.

We can now make a surprising, but retrospectively obvious connection between the rise of functional rigidity in humans and the rise of algorithms in a data-driven society. Both functional rigidity and algorithms solidify priors, and make their transcendence more difficult. Thus, the same problem confronting human minds on the individual level is facing data-driven society on the collective level: we are losing the capacity to transcend our priors. Simultaneously, psychedelic science is confirming that it is precisely this capacity to transcend our priors that leads to some of the most potent healing, creativity, and innovation known to humankind (I don't even think that's an exaggeration).

Andy Clark, a philosopher of cognitive science at the forefront of the PP model, agrees that if humans are understood as systems driven to reduce predictive error, that process appears at odds with human flourishing: "Prediction error minimizing agents are driven...by a fundamental information-theoretic goal that is itself inimical to human flourishing."

His response is to acknowledge the role that cultural environments play in continually shaking up the world we live within, thereby ensuring that our quest to minimize prediction error never gets too far; we never get good enough to minimize so much predictive error that we venture into the terrain where it becomes "inimical to human flourishing". Cultural evolution forces the predictive processing system to start over each time there's a fundamental shift in the social environments they set out to predict. Novelty and innovation, then, can be understood as responses to novel environments generated by human activity:

"An implication may be that true conceptual novelty, when it arises, is better explained as (at least in large part) a result of the framing and scaffolding of human activity by shifting cultural practices and changing sets of concrete constraints."

This ties back into the framework of acid capitalism, which claims that the socioeconomic environments we exist within are fundamentally psychedelic - that our mind's are manifested in different ways depending on those economic landscapes we inhabit. The evolution of the economy is the evolution of those "shifting cultural practices and changing sets of concrete constraints". Clark suggests that by changing our cultural environments, we change the conditions that give rise to, constrain, enable, or otherwise deeply modulate cognitive processes, to the point of shaping what kinds of worlds it is possible to imagine.

The question faced by individuals embarking upon a psychedelic trip is thus the same question faced by a democratic society that designs its own economic, cultural, and political institutions: what kinds of consciousness do we wish to enable, and how best might we do so? This is, at heart, the driving question of the acid capitalism framework.

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Better Acid

Image by  QMENTA
Image by QMENTA

Here's the story so far: the hyper-capitalist period beginning around 1971 began reversing the trends of economic progress by concentrating wealth in fewer and fewer hands, leading to increasing inequality in the distribution of precarity in our lives. For perhaps the first time in capitalism's development, the general level of precarity for average people began rising. These higher degrees of precarity have a range of cognitive consequences, ranging from reduced executive control, lower fluid intelligence, less bandwidth, less grey matter density, and a warping of the mind around objects of scarcity. Together, these raise the general level of what Metzinger calls functional rigidity, or inversely, lowers the general degree of what he calls mental autonomy. Lower mental autonomy and higher functional rigidity make it more difficult to break from prevailing patterns of consciousness and economic ideology alike, as it grows more difficult to literally imagine alternatives to existing patterns and perspectives.

All of this is a psychedelic interaction that influences the evolutionary direction of consciousness. Acid capitalism is thus interested in asking how to design a better trip-of-everyday-consciousness via redesigning our economic environments.

So far, we've already hinted towards one leverage point: reducing precarity so as to reduce cognitive determinism, creating environments more conducive to innovation, creativity, and mental autonomy (otherwise known as "agency").

In addition, drawing upon the psychedelic notion of set-and-setting to analyze how our environments influence our states of consciousness, a program of economic democracy may help counteract a phenomenon that's gone by many names, from "alienation" to "burnout".

...

Against Precarity

America has a long, bipartisan history of thinking about progress as a march against precarity. In 1841, Ralph Waldo Emerson published one of his most celebrated essays, titled Self-Reliance. Precarity was defined by Berlant precisely as a condition of dependency where one lacks the resources to rely on themselves. Prior to the emergence of corporations and industrial modes of production, the picture of freedom in America was the self-reliant farmer. He owned his own land, and sustained his family through the labored-upon fruits of that land. Self-reliance was freedom.

The American homestead acts beginning in 1862 sought to democratize this vision of self-reliance to all citizens. These acts granted a plot of land, usually 160 acres, to any American - man, woman, immigrant, black, or white - willing to settle on and farm the land. The land was given for free. In sum, more than 160 million acres, or 10% of the total area of the US, was given away as part of these programs.

But the shape of American life changed when agrarian society was superseded by what the political theorist Robert Dahl calls "corporate capitalism". He writes:

"By 1900 and even before, it was increasingly evident that the ideology of agrarian democratic republicanism had developed during a pe­culiar moment in world history—a moment of ex­traordinary importance, but a moment nonetheless. For the agrarian socioeconomic order was destined to be wholly superseded by corporate capitalism...What no one could fully foresee, though advocates of a republic constituted by free farmers sometimes expressed worrisome anticipations, was the way in which the agrarian society would be revo­lutionized by the development of the modern corpo­ration as the main employer of most Americans, as the driving force of the economy and society. The older vision of a citizen body of free farmers among whom an equality of resources seemed altogether possible, perhaps even inevitable, no longer fitted that reality of the new economic order in which eco­nomic enterprises automatically generated inequali­ties among citizens: in wealth, income, social stand­ing, education, knowledge, occupational prestige and authority, and many other resources."

Ever since, we've taken half-hearted measures to rediscover a coherent and democratized stance against precarity. There were bright moments, such as the establishment of the weekend, or social security. But since 1971, a neoliberal economic ideology rose to power that has rationalized the increase of precarity in a growing number of American lives.

It's becoming increasingly popular to mark Joseph Biden's 2021 presidential inauguration as the 'end of neoliberalism'. There have indeed been historic signs of changing tides, but as of yet, no sweeping policy changes to cement a meaningful transition (the fully refundable child tax credit aside). Two such policies that could kick off a meaningful march against precarity have also been the subject of increasing public debate: universal healthcare, and a progressively designed basic income.

I have written extensively about the various forms of basic income - a set of varied policies that all guarantee, in their own way, a minimum level of income below which no American can fall. Most recently, Hamilton, Zewde & co. released a proposal that does well to integrate political feasibility with a progressive vision.

Debates over universal healthcare are largely giving way to what kind of universal healthcare fits the American landscape best. Universal catastrophic care only, or should plans include dental coverage? Psychotherapy? Should it replace the private system entirely, or remain as one option among other private offerings, as a 'public option'?

Taken together, a guaranteed income and some form of universal healthcare - as complements, rather than replacements, for the existing welfare system - could go a long way towards ushering in a new paradigm of American life by abolishing the lowest levels of precarity that still threaten some 106 million Americans who live below 200% of the poverty line.

Abolishing the lowest levels of precarity would also do away with some of the most potent, and man-made, causes of functional rigidity. National mental autonomy would rise. A heavy set of the strictures placed upon consciousness would lift, an anchor holding consciousness in place would be released, allowing for a multiplicitous bloom of phenomenological possibility.

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Your Mind On Economic Democracy

If the rise of the modern American corporation is what unsteadied self-reliance, perhaps it is changes to the American corporation that can reaffirm it.

Dahl spent a lifetime expounding the philosophical and moral case for extending the principles of democracy to the workplace, summarized in his short book, A* *Preface to Economic Democracy. But showing the logical inconsistencies in a commitment to democracy that ends where the workplace begins is not proving an effective mode of argument to win the hearts and minds of a populace.

Seen through the framework of acid capitalism, the workplace is a crucial component to the development of consciousness. Its effects can be understood by using what the psychedelic community calls "set and setting". Psychedelic science finds that deeply meaningful psychedelic experiences are not singularly dependent on taking a certain dose, but also on having a certain kind of experience. The kind of psychedelic trip one has is less dependent on the kind of drug one takes than the set and setting during the trip. In his guidebook to psychedelic experiences, Timothy Leary writes:

"Of course, the drug dose does not produce the transcendent experience. It merely acts as a chemical key — it opens the mind, frees the nervous system of its ordinary patterns and structures. The nature of the experience depends almost entirely on set and setting. Set denotes the preparation of the individual, including his personality structure and his mood at the time. Setting is physical — the weather, the room's atmosphere; social — feelings of persons present towards one another; and cultural — prevailing views as to what is real."

Here, too, we see the role that freedom from "ordinary patterns and structures" plays in facilitating new kinds of conscious experience. The converse, of course, is that the more deeply entrenched we are in our cognitive patterns, say the more functionally rigid our consciousness is, the more difficult it will be to have a conscious experience that 'transcends' these ordinary habits of consciousness.

The workplace is a dominant setting for the everyday life of most Americans. Whatever dynamics and qualities pervade the workplace, they will also bleed into the kinds of consciousness that we develop as a result of so frequently being in these environments. This raises two questions.

First, how has the American workplace affected the kinds of consciousness that arise? And second, how might implementing the principles of, and institutions for, workplace democracy change those dynamics that sculpt our states of consciousness?

The first question has a deep history, often under the heading of alienation. Alienation, as Stephen Bronner puts it in Critical Theory: A Very Short Introduction, "imperiled the exercise of subjectivity, robbed the world of meaning and purpose, and turned the individual into a cog in the machine." No small matter!

Since Karl Marx's writings on alienation in the Economic and Philosophic Manuscripts of 1844, the term has proliferated in meanings, uses, and contexts. Like a weed, or a flower, depending on your stance. Broadly, alienation is when a subject (a person, or a group) is problematically estranged, distanced, or otherwise separated from an object. In Marx's use, alienation occurs as the capitalist mode of production forces workers to labor in conditions that estrange them from their inmost human potentiality. As their labor is guided by the unquestionable will of their employer rather than their own agency, a rift grows between an employee's interior and exterior lives. The products of their labor are increasingly separated from their own intrinsic motivation. What they are doing grows insulated from what they are thinking, or imagining.

This situation changes the nature of the human imagination, a capacity that Marx saw as central to what makes us most human, and what allows us to develop our inmost potentialities. For Marx, an intrinsically motivated human is one that uses their imagination as the source of inspiration for their labor. The fruits of one's labor are the concrete manifestations of the ideas born of the imagination. This connection between the imagination and labor is what distinguishes humans from other animals, whereas its absence erases the distinction. Marx:

"A spider conducts operations that resemble those of a weaver, and a bee puts to shame many an architect in the construction of her cells. But what distinguishes the worst architect from the best of bees is this, that the architect raises his structure in imagination before he erects it in reality. At the end of every labour-process, we get a result that already existed in the imagination of the labourer at its commencement. He not only effects a change of form in the material on which he works, but he also realises a purpose of his own that gives the law to his modus operandi, and to which he must subordinate his will. And this subordination is no mere momentary act. Besides the exertion of the bodily organs, the process demands that, during the whole operation, the workman’s will be steadily in consonance with his purpose. This means close attention. The less he is attracted by the nature of the work, and the mode in which it is carried on, and the less, therefore, he enjoys it as something which gives play to his bodily and mental powers, the more close his attention is forced to be."

Alienation is a product of this forced close attention. Almost like a measure of psychological strain. Workers under the capitalist mode of production do not subordinate their will to a purpose that arises from their own imagination, but from their boss'. Alienation is what accumulates as one must sustain forced, close attention upon externally given purposes. The consequence is not only that "work" is often experienced as a drag; as a persistent phenomenological experience, 'the drag' begins to raise overall levels of functional rigidity, albeit in a different way than classically functionally rigid experiences.

Classically functionally rigid experiences, like persistent hunger, take up space in one's consciousness, are difficult to move one's attention away from, and warp the rest of one's conscious experience around them. Alienation raises levels of functional rigidity a little differently. It increases overall rigidity by subtraction and neglect, rather than addition. That is, rather than increasing the load of functionally rigid experiences held within one's consciousness (think of someone who barely makes enough to feed her children, and incurs significant medical debt, and her car breaks down, and her rent is going up, etc), alienation raises overall rigidity by preventing one from exercising their more flexible, imaginative, agentive capacities. Rather than adding more functionally rigid experience to one's bandwidth, alienation simply fills the space with lifeless activity.

When Fisher writes that "Populations are resigned to the sadness of work," or calls for an "Understanding of how this process of consciousness-deflation worked", precarity and alienation are two prime suspects.

In its introduction to the concept of alienation, the Stanford Encyclopedia of Philosophy comments, perhaps rather wryly: "So understood, it [alienation] appears to play a largely diagnostic role, perhaps showing that something is awry with liberal societies and liberal political philosophy." Something being "awry" is a gentle way of suggesting that the primary organizing principle of modern life is one that "imperiled the exercise of subjectivity, robbed the world of meaning and purpose, and turned the individual into a cog in the machine."

What if the off-note in liberal societies is the deepening echo of our failure to adapt our institutions of democracy and freedom when the basic fabric of society evolved from agrarian to corporate capitalist? Though we espouse a rhetoric of freedom and democracy, we spend half our waking lives in what the philosopher Elizabeth Anderson calls private governments. The phrase private government should be a contradiction, a paradox existing only in unreality. Instead, it's a plausible sociological description of the primary institutional environment shaping most of our lives today. What's at stake goes well beyond corporate governance, reaching into the depths of the human imagination, and what sort of role it might play in our socially constructed worlds.

...
cogs.jpeg

Economic democracy is one way to begin rebuilding a pathway between what's going on inside the minds of workers, and what they're actually doing. It can rebuild bridges between the imagination and labor.

To understand how, we can return to the 'cog-in-the-machine effect' commonly ascribed to the present, generally non-democratic system of labor. A cog either performs its specified function, or doesn't, in which case it gets repaired or replaced. There is no 'will' internal to the cog, it has no relevant mind of its own. The interiority of workers-as-cogs, then, similarly has no relevance to the production process. It does not matter how the worker feels, what the worker thinks; what matters is whether the worker performs the specific function given by their boss.

Institutions of economic democracy change the relationship of the workers interiority to the production process, and thereby, to the work environments on the whole. By providing pathways for workers to participate in the production process itself - whether in determining its direction, or improving its conditions - their interiority is made to matter, it's given an avenue by which to be a causal force. In short, the worker gains a form of agency that they'd lacked. No longer is work a matter of forcing close attention to labor that is utterly disconnected from the worker's own imagination and will.

But by speaking of economic democracy in the abstract, rather than in the actual policies that might be considered to implement it, we risk painting a rosier picture than would be merited by a renewed commitment to economic democracy.

For example, some might argue that Employee Stock Ownership Plans (ESOP's) would instill a sufficient commitment to economic democracy. ESOP's align incentives between workers and executives by providing employees with stock ownership in the company. This creates new incentive for employee engagement, but would hardly provoke a revolution in the relation between workers' interiority and their work environments as suggested above. In 2018, there were already.) 6,501 ESOP's in the US, holding assets of over $1.4 trillion, covering 14 million employees, mainly in the manufacturing industry. These industries are yet to display the revolution of dis-alienated labor suggested above.

Moving beyond ESOP's, policies such as codetermination apply a measure economic democracy to precisely the institutions that imperiled it: large corporations. Codetermination mandates that a certain percentage of corporate board seats be held by worker-elected representatives, though the specifics of implementation vary across countries.

For example, in Germany, codetermination laws have been in place for decades that stipulate companies with more than 2,000 employees must have 50% of their supervisory board seats held by worker-elected representatives. This grants employees voting rights on company decisions, ranging from executive bonuses, to how corporate profits are spent. Again, it's difficult to parse the evidence and determinate how much of a difference codetermination actually makes, insofar as alienation is concerned. Evidence from codetermined European countries tends to suggest either null or minimal gains in almost every measurable dimension, from firm outcomes like productivity, innovation, to job satisfaction.

Crucially, alienation is not a measurable dimension. Thus, for advocates of economic democracy on these grounds, the absence of economic effects supports the argument for codetermination. If it does nothing else but implement the principles of democracy in a primary site of our lives (the workplace), and there are no economic consequences, then there is no reason not to do so. But again, the question looms: has German codetermination squashed alienation? Or does this, too, fail to provoke the revolution of dis-alienated labor?

Among the strongest instantiations of economic democracy are worker owned cooperatives, where all employees have not only an equal say, but an equal stake of ownership in the company's assets. The paradigmatic example of how this strategy scales is the Mondragon Corporation in Spain, which employs over 81,000 people across 257 companies.

The principle underlying cooperatives - the democratized ownership of capital assets - can be pursued in other ways, such as public investment banks, baby bonds, social wealth funds, or government retirement accounts. It can also be extended to domains beyond capital assets, such as natural resources.

For example, Alaska has democratized ownership of their oil reserves for over 40 years. All oil revenues received by private companies are subject to a 25% tax that feeds a public wealth fund, the dividends of which are distributed equally to all Alaskan citizens (averaging between $1,000 - $2,000, annually). The same principle can be extended to natural resources ranging from broadband spectrum rights to land.

The debate over the best way to apply the principles of economic democracy to the actually existing American economy is wide open. But a revitalized commitment to the idea would go a long way towards furthering the necessary debate. I'll give Robert Dahl the last word here:

"Like a state, then, a firm can also be viewed as a political system in which relations of power exist between governments and the governed. If so, is it not appropriate to insist that the relationship between governors and governed should satisfy the criteria of the democratic process - as we properly insist in the domain of the state?"
...

Integrating

Together, a platform against precarity and a recommitment to economic democracy could redesign the American socioeconomic landscape, the daily set and setting that modulates the varieties of consciousness that emerge. By reducing the functional rigidities put in place by rising levels of precarity and alienation, we could gain more freedom, or greater mental autonomy, in designing our own trips, rather than having them imposed upon us by circumstance.

Edging towards a conclusion, we can return to Whitehead, who wrote:  "In some measure or other, progress is always a transcendence of what is obvious." In light of our analysis, we discover that the inverse is equally true: progress is also a revisitation, and reformulation, of precisely that which was taken to be obvious.

We can also add more precision as to what the term "obvious" means in this context. What we take as obvious is the group of assumptions coded so deeply and reliably into our predictive cognition as to become hyperpriors, and thereby, to elide critical reflection.

Acid capitalism is a framework for elevating our everyday experience of consciousness, of what it is like to be us, to be alive, from this bedrock of hyperpriors. Our experience of consciousness is not fixed and determinate, but fluid, plastic, and always responding to our environments. And we are responsible for creating and maintaining one of the largest socially constructed sets of institutions that shape how consciousness evolves: the economy.

It's exciting, then, that we're now living through a revolutionary period in both economics and the study of consciousness. Acid capitalism offers a framework to bring these frenetic moments together. The study of consciousness can help us understand what kinds of consciousness we value, while the study of economics can help us design social institutions that support the emergence of those kinds of consciousness.

Fisher suggested that the rise of capitalist realism was directly correlated with the "receding of the concept of consciousness from culture." Now, amidst the resurgence of the concept of consciousness back into culture, the question that remains open is what economic visions will arise as the fertility of the socioeconomic imagination is restored.

In this essay, I've offered one such vision. I hope it gets trampled by 1,000 more, and we're forced into the task of sifting through innumerable visions of a more beautiful world, and building the economic institutions that may empower us to live them into existence.

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Acid Capitalism

Oshan Jarow  -  May 9th, 2020

The purpose of this document is to facilitate sense-making on what’s become a complex, tribal, and absolutely vital subject of debate: universal basic income (UBI).

Think of this as a not-so-brief policy brief. A policy long, if you will. What policy briefs offer in brevity and distillation, they sacrifice in complexity and nuance. UBI’s surging popularity is producing an abundance of briefs, but a scarcity of longs. Briefs present fixed ideas, whereas longs reveal the flux and uncertainties beneath them.

Ironically, I only encountered UBI after receiving a degree in economics. I spent the next 5 years studying UBI, and the broader terrain of economic thinking that’s usually left off university curriculums.

Regarding UBI, I’ve occupied every position along the spectrum. I’ve been the starry-eyed supporter enthralled to its promises, and I’ve been the disillusioned skeptic, dismissing UBI as a well-intentioned, but naive lurch for utopia.

My hope is to provide an easy-to-navigate document that offers exposure to the many questions and conflicts driving the UBI debate. Hopefully, by offering the depth so many UBI puff-pieces lack, this policy long might help unsteady some of our fixed ideas, and lead us deeper into the labyrinth of considerations a UBI provokes.

Here’s a map of what’s covered below. Feel free to click & jump around to whatever interests you:

The Basics
What is UBI?
How much is "basic"?
What does UBI Cost?
Critiques Against UBI
It won't change anything
Humans would become lazy
Free riders
Who will clean the toilets?
Long-term sustainability
Price inflation
Political tyranny
Optimizing UBI
Poverty level
Split-tier payouts
High-end phaseout rates
Complement, not replacement
How to Pay for UBI
Taxes & programs
Putting taxes together
Alternatives
Negative Income Tax
Universal Basic Services
Universal Job Guarantee
Codetermination
Shorter Working Weeks
Social Wealth Fund

Next Step: Modernized Negative Income Tax

After exploring each of these areas in relative depth, I’ll conclude with a broader sentiment: economic insecurity has a dampening effect on human consciousness. The world is far more mysterious, wonderful, and stimulating than human perception can grasp, but economic insecurity further inhibits our capacities, like a horse with blinders on.

Despite being surrounded on all sides by enchantments, our lives are too often squandered in forms of suffering and anxiety that, in the 21st century, are preventable. The motivation behind UBI is one we all share: it’s time to build a better world. The motivation behind policy analysis is to ask: would UBI move us in that direction?

I recently published an in-depth exploration of the impact UBI might have on human development, consciousness, and social complexity. You can read that essay here.

What is Universal Basic Income?

UBI is an unconditional cash payment provided to all citizens, in an amount sufficient to meet their basic needs, on a (minimum) monthly basis. Most proposals include a reduced rate for minors.

Universal: Given to every individual, regardless of employment status, earnings, or demographic.

Basic: Sufficient to meet basic needs

Income: cash.

How Much is "Basic"?

The most common UBI amount - $1,000 per month - is based on the federal poverty line. The 2019 poverty line was $12,490, or $1,041 per month. Equating “basic” with the poverty line is consistent with the work of seminal economists and philosophers such as Amartya Sen and Martha Nussbaum.

Pinning the UBI amount to the poverty line requires adjusting the payout level for both inflation, and changes to how we define poverty.

How Much Would UBI Cost?

UBI has two relevant costs, gross and net. The gross cost reflects the total revenue the government must raise to fund the program. The net cost reflects the actual expense to taxpayers.  

Since funding a poverty level UBI requires progressive taxation, an upper portion of recipients will wind up paying more in new taxes than they receive from UBI. This creates a canceling out effect, where one receives $12,000 in UBI, but pays $14,000 in higher taxes. The effective cost to them is $2,000, rather than $14,000. The cost of UBI that takes these cancellations into account is the net cost.

The gross cost of a UBI equal to the poverty level in 2019 ($12,490) for all citizens above 18 would’ve been $3.2 trillion. Adding a 50% UBI for minors would increase the gross cost to $3.6 trillion.

Moving from gross to net cost is difficult to forecast, as it depends on the specific taxes used to fund it. But we can establish a range for the net cost from existing estimates. Political philosopher Karl Widerquist used a series of simplified assumptions to calculate the net cost of a $12,000 UBI for adults and $6,000 for children, totaling a gross cost of $3.42 trillion. His estimates yielded a net cost of $539 billion, or 15.7% of the gross cost.

For a similarly designed UBI, Scott Santens estimates a $900 billion annual net cost.

On the upper bound of the spectrum, economist Philip Harvey estimated the net cost of a similar - though not identical - UBI at $1.69 trillion.

Why UBI?

Elsewhere, I’ve written on the philosophy of UBI, exploring it as a means of decommodifying time and diversifying human development. But in popular discourse, there are at least six categories of motivation for UBI:

I. Immediately ending official poverty in the US
II. Reducing the imbalance of power & wealth between labor & capital
III. Boosting demand by raising purchasing power of lower income groups
IV. The threat of automation & detaching a basic amount of livelihood from labor
V. Improving markets by providing for basic needs outside of markets, making remaining exchanges more voluntary
VI. Beginning to implement the cultural conditions for 'post-scarcity'

Automation

“There is no reason why in a society which has reached the general level of wealth which ours has…that the security of a minimum income should not be guaranteed to all without endangering general freedom.”

— F.A. HAYEK

Automation is simultaneously the easiest narrative to stir up support for UBI, and the weakest one to build it upon. There is no critical consensus as to whether impending waves of automation will be any different than ones we’ve witnessed throughout history. Whether or not automation lives up to the hype, the case for UBI remains.

But there's a nuance in this argument worth pulling out. How will automation benefit society? How can we distribute and democratize the gains? How do we keep society from devolving into a class struggle between those who own the robots and those being replaced by them?

The question of who benefits from automation is firstly a question of power. If we’re concerned with power dynamics within firms, we can explore policies like codetermination, where worker representatives are given direct seats on company boards. This gives workers’ interests direct voting power in company decisions. Democratizing decision making power changes how productivity gains are implemented and realized in the first place, rather than relying on redistribution to take care of those who are left out of the gains.

But the sentiment of detaching labor from livelihood goes beyond automation. Since at least the 1800’s with Henry George’s Progress and Poverty, the stubborn tendency for wages to remain at the minimum that affords subsistence despite massive gains in capital accumulation has raised questions. As our accumulated wealth increases, why can we not guarantee a basic degree of livelihood irrespective of labor?

The case for UBI in this dynamic is best presented by a dialogue across 150 years, between George and the great novelist Marilynne Robinson. In 1879, George asked: “Why, in spite of increase in productive power, do wages tend to a minimum which will give but a bare living?” A century and a half later, Robinson ventures an answer: “because they can, neither ethics nor laws intervening.”

If livelihood is to untether itself from labor, it will not occur as a natural outcome of economies informed by neoclassical economic theory. Rising tides may lift all boats, but without explicit interventions, the distance between working class wages and subsistence levels in society will remain minimal.

UBI, whether as a response to automation, global pandemic, or whatever other shocks unsteady the economy, strives to ensure a basic dimension of survival security to all. By instituting an earnings floor in the economy that lifts the bottom up, it increases the distance between the lowest wages and the subsistence level.

Poverty

“The association of poverty with progress is the great enigma of our times...From it come the clouds that overhang the future of the most progressive and self-reliant nations.”

— HENRY GEORGE, 1879

In the 21st century, domestic poverty in the US is a choice, rather than necessity. It is an outcome of policy choices (and lack thereof), rather than an enigma of progress, as it was in George’s day. And yet it rages on.

The cost of directly ending poverty for every citizen in the United States, by simply providing them a tax subsidy equal to the amount that would raise their incomes to the poverty level, would cost less than $200 billion. That’s 29% of the defense department’s budget.

Simply giving everyone exactly the amount they need to reach the poverty line creates all sorts of work disincentive problems. But the closest functional approach to formalizing that logic comes in the form of a negative income tax (NIT).

Rather than giving people the exact difference between their income and the poverty line, NIT’s use a phaseout tax rate that slowly decreases NIT benefits as earned income increases. This helps preserve work incentives and avoid poverty traps.

Incidentally, although NIT and UBI might appear quite different on the surface, the closer you look, the more difficult it becomes to tell the difference between NIT and UBI.

Economists agree that NIT and UBI would have the same net transfer effects, meaning the overall redistribution of income is identical either way. UBI gives everyone the full poverty-level amount, and then taxes some of that payout back - known as the clawback rate - from those higher in the income distribution. In UBI’s case, the clawback rate is implicit.

NIT, by contrast, adjusts payout levels to people’s incomes, avoiding the necessity to tax it back. The clawback rate is explicit. Studies suggest implicit clawback rates have psychological advantages. But the debate over which policy is preferable, UBI or NIT, is far from settled, and will hopefully come into full bloom as we commit ourselves to the eradication of poverty.

The 21st century US exhibits a confounding juxtaposition of poverty with prosperity. What Henry George wrote in 1879 is all the more true today:

“It is as though an immense wedge were being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down.”

Policies like UBI and NIT seek to reposition the wedge of progress underneath society, so that all are lifted.

Inequality

But crucially, UBI is not merely a measure to eliminate poverty. Framing UBI as just a countermeasure for poverty sells its reformative potential short, like a grandparent who uses an iPhone for nothing but phone calls.

Prior to the 1960’s, poverty was rarely considered separate from wider inequalities between labor and capital. Poverty is only the tail-end of inequality, a white-cap on the surface of a vast and deep ocean. Narrowing the focus of social reform from inequality to poverty, as sociologist Daniel Zamora wonderfully documents, was a project closely associated with the rise of neoliberal, free-market ideology.

It’s no coincidence that the first serious NIT proposal was made by none other than Milton Friedman, whose edifice of economic ideas supported the rise of neoliberal economics that dominated the period from 1972 - 2008. Zamora writes:

"In his view, a focus on “poverty” was the only reasonable social policy within a free market system. If we followed a policy that tended to reduce inequality we would inevitably affect 'the heart of the dynamism of the market economy.' A program directed specifically against poverty, on the other hand, as argued by Friedman himself, 'while operating through the market' would 'not distort the market or impede its functioning,' as did Keynesian programs.”

But at least since Thomas Piketty’s landmark 2013 book, Capital in the 21st Century (not to mention his more recent, and more ambitious Capital and Ideology), the broader spectrum of inequality is back in the spotlight of popular discourse.

UBI critics on the progressive left are concerned that UBI, on its own, is not only insufficient to combat inequality, but might actually further entrench the forces that generate inequality in the first place.

From this angle, UBI is categorized as merely a redistributive reform, doing nothing to change the underlying dynamics that create wealth inequality, and so power inequalities, in the first place.

These criticisms are important, but partial and often misleading. UBI can be considered alongside reforms that more directly target power dynamics. However there is no reason to use an either/or framework, rather than a both/and. UBI offers a unique kind of power distribution that other reforms such as codetermination cannot.

Where codetermination democratizes power inside firms, UBI increases the bargaining power of labor from outside. This is often referred to as the power to "say no” to exploitative labor contracts. With UBI, workers have a foundation of security that allows them to more readily reject undesirable working conditions. This appeals to a broad base of economic thinking, as it’s in line with Adam Smith’s vision for “perfect liberty”.

For Smith, perfect liberty meant every worker is free to choose what job suits them best, and to change as often as they like in search of the best fit. He writes of perfect liberty as a state:

“…where every [hu]man was perfectly free both to choose what occupation [s]he thought proper, and to change it as often as [s]he thought proper. Every [hu]man’s interest would prompt him to seek the advantageous, and to shun the disadvantageous employment.”  

An adequate UBI creates an environment in which workers enjoy greater fluidity between jobs, enabling their search for the right fit. But once they accept a job, UBI’s effects on power subside. Within firms, codetermination can then take over, giving workers greater say over how their places of employment make decisions.

UBI Fixes Markets

What are the necessary conditions for freedom in a market society? Prior to enclosure movements that began claiming all land under the legal jurisdiction of private property, individuals had a choice. One could participate in 'society’, whatever that entailed. Or, if society was of no interest, you were free to find a plot of land, cultivate the earth, and survive on your own.

But ever since all available land was swept up into private ownership, this ‘exit option’ is off the table. In order to access the resources we need to survive, the only choice available to most people is participating in the market economy and earning enough income to buy what you need.

Effectively, people lost the power to say “no” at a basic level. Participation in market society is the only option, and this creates opportunities for exploitation. UBI recreates the lost exit option. By unconditionally providing people enough to meet their basic needs, UBI empowers people with the means to exit exploitation.

By giving workers the power to say no, UBI provides what political philosopher Karl Widerquist calls the physical basis for voluntary trade. From a different angle, anthropologist David Graeber frames UBI as the safe-word in a safe-word theory of social liberation. By affording people the real option of saying no, of opting out of exploitation, it increases the freedom with which we can say “yes”.

Extending UBI to everyone, the social and labor relations that hold society together would be remade. People could opt out of exploitative relationships without sacrificing their basic needs. The relations that remain, and the new ones that take shape, would be based on increasingly voluntary decisions.

Without these sufficient conditions that assure all transactions in a market economy are voluntary, the entire theoretical justification of market economies collapses. Widerquist writes:

"...when neoclassical economists theorize about the world, they assume voluntary exchange is taking place. Building on this assumption, neoclassical economics goes on to conclude a variety of important results such as that market activity is efficient, that free trade has net positive effects and that markets in which economic agents participate voluntarily make them better off...Although the legitimacy of the market economy is premised on voluntary trade, without a reasonable exit option, the trading system as a whole lacks an acceptable alternative.”

We are left with two choices. Either unconditionally provide everyone with the physical basis for voluntary trade, or abandon the appeal to voluntary trade as a justification for market economies.

UBI Stimulates Demand

Whether UBI would shrink or grow the economy depends on a dazzling web of interdependent factors, making all predictions tenuous at best. As you might expect, economists have constructed models that give all sorts of contradicting reports. Some models predict UBI stimulates growth, while others expect precisely the opposite.

But most models agree on one important element: The lower one is on the income distribution, the higher the likelihood they will spend any additional dollar they receive. Conversely, the wealthier one is, the more likely they are to save each marginal dollar they receive. This has important implications for forecasting how UBI might stimulate economic activity.

Even if UBI does not increase economic growth, and functions as a pure redistribution of income from the top towards the bottom, economic activity would likely increase. Shifting money from those at the top who are more likely to save, to those at the bottom who are more likely to spend, we can expect an increase in aggregate demand. High income inequality, writes John Maynard Keynes, “causes a separation between the power to consume and the desire to consume.”

By redistributing money to where the desire to consume is highest, overall consumption will increase.

Post-Scarcity

The 2008 financial collapse stirred our socioeconomic imaginations. Business as usual lost its appeal. But what comes next? The term post-scarcity is a phrase used to gesture towards a society where scarcity is no longer the organizing principle of human behavior. As the economic historian Robert Heilbroner writes:

“For the introduction of technology has one last effect whose ultimate implications for the metamorphosis of capitalism are perhaps greatest of all. This is the effect of technology in steadily raising the average level of well-being; thereby gradually bringing to an end the condition of material need as an effective stimulus for human behavior”

Reaching all the way back to Keynes, post-scarcity refers to a society where the marginal value of capital goods drops to near zero. Consider a pencil today. We have no problems asking each other to borrow pencils. It’s considered rude, if you have extras, not to give someone a pencil who asks. And most tellingly, if you forget to give the pencil back, it isn’t a big deal.

This is because the marginal value of pencils - a capital good - is near zero. People’s lives are hardly improved by gaining additional pencils. They’re easily accessible at low costs. Keynes imagined a society where all capital goods were as common as pencils, and therefore shared with those who need them without so much as a second thought. He writes:

"The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed. The critical difference will be realised when this condition has become so general that the nature of one’s duty to one’s neighbour is changed. For it will remain reasonable to be economically purposive for others after it has ceased to be reasonable for oneself.”

With material goods receding to occupy a negligible portion of our aspirations (not because we somehow become less materialistic, but because everyone has abundant access to all capital goods they could want), new stimuli for human behavior would naturally emerge. Different forms of immaterial capital (social, cultural, etc) would become the focus of our energies.

UBI, a program that gives everyone a baseline of unconditional income (access to capital), begins to implement these conditions of post-scarcity. In market economies, unconditional income (for which one needn’t trade any time, labor, or money) provides immediate access goods and services we’d otherwise need to trade our time in order to receive. The more unconditional income provided, the less of one’s life-time that must be traded to acquire the goods and services we need.

This lowers the threshold of earnings required for people to meet their basic needs and, should they choose to, devote their time to unpaid activities. Human behavior becomes unbound from the imperative to earn income. Unpaid activities become more viable life-choices.

The theory of post-scarcity has to do with marginal value and rate of return on capital. But the praxis of post-scarcity shows up in the kind of cultural logic that emerges out of a society with wide-spread decreasing returns on capital goods.

As the scholar Robert Chernomas writes: “Keynes’s concern is with achieving the logic, humanity, and culture of a society that could be built only when preoccupation with economic concerns becomes unnecessary."

UBI does not achieve post-scarcity. In fact, some critics suggest the redistributional nature of UBI precludes it from ever being able to fully realize post-scarcity. Since UBI is restricted to redistributing existing wealth, it remains dependent upon a society organized around the accumulation of financial capital. If capital accumulation withers away, no longer the central stimulus driving human behavior, the overall quantity of wealth created will also shrink, reducing the available funding pool for UBI.

These criticisms are important, but not damning. While it is theoretically conceivable that a networked economy with increasing returns could actually skim off enough of those returns to fund a post-scarcity inducing UBI, in practice, this remains beyond immediate reach.

But a UBI can still create spaces of post-scarcity within the interstices of the broader capitalist system. These interstitial post-scarcity spaces allow us to begin experimenting and exploring with new ways of organizing ourselves. These shallows of experimentation, however incomplete and piecemeal, are vital for developing our imaginative capacity to design new systems.

The Problems of UBI

The more radical a proposal, the more scrutiny it should receive. Given the magnitude of UBI, in terms of both implications and costs, it merits abundant scrutiny. I’ll cover a range of critiques, responding to them where possible, and indicating those that remain unanswered.

Here’s a navigable menu:

I. UBI won't change anything
II. Couldn't UBI collapse the economy?
III. We'll all become lazy & dependent
IV. Who will do the ugly jobs?
V. What about free riders?
VI. Won't prices increase?
VII. Won't the majority of net recipients just demand more and more UBI from the rich?

UBI Won't Change Anything (The Capitulation Critique)

Counter-intuitively, one of the sharpest polemics against UBI comes from the progressive left. In Daniel Zamora’s brilliant The Case Against a Basic Income, he writes:

“UBI isn’t an alternative to neoliberalism, but an ideological capitulation to it. In fact, the most viable forms of basic income would universalize precarious labor and extend the sphere of the market — just as the gurus of Silicon Valley hope.”

This view builds from Luke Martinelli’s assessment: an affordable UBI is inadequate, and an adequate UBI is unaffordable. If all that’s affordable is a UBI well below the poverty level, then these critics argue that nothing will fundamentally change. An inadequate UBI fails to grant workers sufficient means to reject exploitative jobs, fails to eliminate poverty, and fails to establish the physical basis for voluntary trade. Effectively, all an inadequate UBI would do is provide a cash stimulus to existing markets.

Moreover, even an adequate (poverty level) UBI could function as a capitulation to neoliberalism if it’s conceived as a full replacement, rather than supplement, to existing welfare and social programs. When Milton Friedman proposed his guaranteed income in the form of a negative income tax, this is precisely what he had in mind. Same with Charles Murray’s more recent UBI proposal.

The validity of this critique then relies on two factors: the UBI amount, and how we pay for it.

But as Zamora himself notes, funding an adequate UBI is a question of political, rather than economic feasibility. Of course we could fund an adequate UBI. The capitulation critique does not doubt this. Rather, they doubt that it’s realistic that the necessary taxes could make it through the political process.

The capitulation critique, then, does not apply to a poverty level UBI funded by progressive taxation. It merely doubts its political viability. Far from a nail in the coffin, this points to the conspicuous lack of rigor applied to existing progressive funding proposals for an adequate UBI. If we are to overcome this sense of politically impossibility, we need to put forward realistic funding models.

Won't We Just Become Lazy & Dependent (The Human Nature Critique)

If we manage to fund an adequate UBI, won’t we all just become idlers? Won’t we just waste the free time we’re afforded? Is it worth enacting the largest program in American politics simply to enable people to spend more time watching Netflix and going to the beach?

At heart, this is a question of human nature. How would humans behave if they weren’t compelled to act by the threat of starvation and homelessness? Is human nature fixed, or does it adapt to changing social circumstances?

In fact, this is one of the main divergence points between Adam Smith and Karl Marx. Both believed that society thrives by maintaining an artificial scarcity. But Smith believes maintaining artificial scarcity is the only way to incentivize humans to engage in socially productive activities:

"And it is well that nature imposes [artificial scarcity] upon us in this manner. It is this deception which rouses and keeps in continual motion the industry of mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealth, and to invent and improve all the sciences and arts, which ennoble and embellish human life"

Marx held a more adaptive, evolutionary view of human nature. He believed that how we spend our leisure time is inextricably linked to the working conditions and modes of production present in society. He writes that “all history is nothing but a continuous transformation of human nature.”

Both John Maynard Keynes and Henry George side with Marx on this question. The transformation of material and social conditions, they believe, will lead to the transformation of human behavior. George writes, in what I suspect is a direct counter to Smith:

“But it may be said, to banish want and the fear of want, would be to destroy the stimulus to exertion; men would become simply idlers, and such a happy state of general comfort and content would be the death of progress. This is the old slaveholders’ argument, that men can be driven to labor only with the lash. Nothing is more untrue.”

Worrying that UBI would amplify our idleness, our ‘time wasting’ behaviors, is a fallacy that assumes present behaviors would continue unchanged in radically altered social conditions. It fails to account for how economic distress presently weighs upon, and influences, how workers spend their ‘time off’.

As I’ve written about elsewhere, an adequate UBI must be considered in light of its implications for human development. The kinds of humans we become by living in society would likely change.

But there is a deeper assumption that motivates the human nature critique of UBI: that we have a right to judge how others spend their time.

In terms of UBI, this assumption arises because people’s free time would be, in part, funded by redistributing the earned income of some to all. Do we owe this kind of financial support to each other?

This critique is commonly known as the free rider problem.

The Free Rider Critique

The free rider problem suggests that even if UBI wouldn’t create “universal basic idling”, it isn't fair to redistribute earnings from hard-working citizens towards those who don’t contribute value to society. By receiving tax-funded income without contributing their own labor income to the tax base that funds UBI, they’re ‘free riding’ off the earned income of others. In this view, UBI gives people “something for nothing”.

A poverty-level UBI of $12,490 is hardly a living wage for even the most ascetic of citizens; most will continue to work and earn additional income. However, it is plausible to imagine at least some percentage of the population who choose to live off their UBI alone. It’s more likely to see a proliferation of full-time workers drop to part-time. UBI could make up enough of the difference so that they can maintain relatively similar lifestyles, while generating fewer taxable wages for the overall pot.

How might this criticism change if we apply it to parents who choose to stay home and raise their children? Does the same sense of unfairness come into play when recipients use UBI to fund socially valuable activities that markets fail to compensate? Surely a devoted parent is worth more to society than an unmotivated office administrator, or insurance salesman?

What about aspiring scientists who use the newfound financial and time freedoms to focus on exploring new theories? Or artists who dedicate their time to creativity? In this sense, UBI functions to extend earnings to those engaged in socially valuable pursuits that markets fail to compensate for.

Where free riding turns problematic is the assumption that willfully unemployed UBI recipients will live in ways that do not create value for society. Receiving “something for nothing”. But this is not only assumed, it stands in direct conflict with empirical studies on how UBI affects labor force participation. Even beyond the question of whether UBI would stimulate or stifle economic activity, a larger question looms: are we comfortable letting markets be the judge of what constitutes value?

Using wages as the prime indicator of value-creation solidifies the market's role in determining social value. But much of the progressive left’s movement is about displacing earnings as sole indications of social value. There are forms of value markets systematically fail to recognize, and forms of socially valuable (usually long-term) investments that markets fail to incentivize. Not to mention the forms of negative value that markets stimulate.

In this sense, the free-rider problem might not be a problem at all, but a solution. It functions alongside the market to stimulate forms of social value that markets leave behind.

Another proposed response to the free-rider problem is to shift the narrative frame of UBI. Since progressive taxes that draw from high-earning sectors of society would fund UBI, some claim that UBI is not redistributing the rightful ‘earnings’ of others, but distributes the portion of collective wealth that’s captured by high private earnings. In this sense, UBI is more of a social dividend that formalizes the collective nature of value creation on modern economies.

Consider how this logic of social dividends applies to raising the corporate tax rate, for example. Mariana Mazzucato has demonstrated how much of the iPhone's signature technology is a result of publicly funded R&D. Although taxpayers effectively socialize the risk of this R&D, the financial returns on that investment are privatized, none of which goes back to the taxpayers who (partially) funded the investment.

Should not a small portion of the financial earnings from publicly funded innovation return to those who funded the initial research? Isn’t the public entitled to share in the financial returns on innovations our tax dollars paid for?

Similar logic is at play for many high-earning sectors of society. From Google, Apple, to Tesla, Mazzucato shows how stories of value creation systematically neglect the role of public investment. Framing UBI as a social dividend formalizes the collective nature of value creation, paying dividends on the public’s investment in innovations that spur private fortunes.

A common example is the Alaska Permanent Fund, which taxes all mineral (primarily oil) royalties a minimum of 25%. They reason that Alaskan oil belongs to all Alaskans, rather than whoever manages to dig it up first. Anyone who uses the oil must compensate all other collective owners for excluding them from using it.

The tax revenues are deposited into an investment portfolio that each Alaskan shares an equal share in, receiving annual dividends that fluctuate with the stock market. Applying this logic nationally, Matt Breunig’s proposal for a social wealth fund makes every American an equal shareholder in a collectively owned portfolio.

Framing UBI as a social dividend only makes sense if the funding mechanisms draw from areas of society where large private earnings are bolstered by neglecting public contributions. To sufficiently appease free-rider concerns, UBI advocates must demonstrate what sectors of society wind up paying for UBI under their funding proposals.

Who's Gonna Scrub the Toilets? The Division of Labor Critique

In Zamora’s polemic against UBI, he asks a cutting question: if an adequate UBI gives workers the ability to say “no” to undesirable labor, how can we be sure all the work that needs doing, would get done?

“...a ‘utopian’ [by which he means at least poverty level] UBI raises questions about how the distribution of work — that is, the division of labor — would be determined in a society where we could choose not to work...A “utopian” UBI...simply assumes that in a society liberated from the work imperative, the spontaneous aggregation of individual desires would yield a division of labor conducive to a properly functioning society; that the desires of individuals newly freed to choose what they wish to do would spontaneously yield a perfectly functional division of labor. But this expectation is assumed rather than demonstrated.”

First, it’s worth nothing that by “utopian” UBI, Zamora means a poverty level, or $1,041 monthly UBI. This is hardly enough for even the most ascetic citizens to live on alone. We should certainly expect radical changes to the labor market. But the work incentive, while perhaps marginally dampened, is far from “liberated” by such a UBI.

Liberation aside, Zamora’s point remains. What if nobody chooses to work as a janitor anymore? What if no one is willing to clean the sewers? Unless technology fulfills its promise and automates all of the work humans would rather not do, the full division of labor required to maintain society may include jobs that people, given the means, simply wouldn’t take.

This is one of the greatest fissures in UBI discourse. The ‘work imperative’ is both the glue that holds the system together, and a bleak reality that suffocates working classes. We cannot yet outsource all undesirable jobs to robots. While a work incentive remains even with a poverty level UBI, critical attention must be turned to reflecting on how to maintain the necessary division of labor.

On one hand, David Graeber believes with a UBI, bullshit jobs might simply disappear, because people wouldn’t take them. Alternatively, those unattractive jobs that still require doing for society to function may be forced to offer higher wages. The ways in which wages might respond to UBI lead us into the fascinating territory of the sustainability critique.

The Economic Sustainability Critique

We can imagine that huge amounts of people may choose to drop from full to part-time work, supplementing the gap in income with UBI. On the whole, this may lead to a decrease in taxable wages. As taxable wages decrease, so does the pool of money taxes draw from to fund the UBI.

The magnitude of this decrease depends largely on what kinds of taxes are used to fund the UBI. A system that relies heavily on income taxes would face serious issues with a decreasing taxable wage base. But if UBI were funded with land value taxes, carbon taxes, wealth taxes, consumption taxes, capital gains taxes, etc., UBI’s dependence on taxable wages would be lessened.

Still, what if UBI, by dampening the work imperative, succeeds almost too well in allowing people to engage in more unpaid activities? What if the size of the formal economy shrinks, tax revenues wither, and UBI winds up eroding the very capital flows that sustained it?

There’s a relevant concept in economics known as the Laffer curve. It says that as you increase a tax rate, you'll raise more revenue until a certain point, after which the tax rate is so high that it discourages people from engaging in the activity, and the tax revenues begin to decline.

For example, imagine a carbon tax. If a carbon tax increases the price of gasoline from $2.50/gallon, up to $2.85/gallon, most consumers won’t change their behaviors. They’ll consume just as much gasoline, yielding higher tax revenue.

But if the tax shot the price up to $10/gallon, many consumers would change their behaviors to consume less gas, yielding less tax revenue:

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We can apply the Laffer curve to UBI, asking how overall tax revenues respond to the level of UBI. Just like the Laffer curve, beginning with a UBI of 0, we’d have today’s present tax revenue. As the UBI increases to $50, $100, $200, we’d expect tax revenues to increase for two reasons.

First, because of the increased tax revenues required to fund the UBI. Second, a UBI funded by progressive taxes redistributes money from higher ends of the income distribution to the lower. The wealthy are less likely to spend each marginal dollar they receive, while lower income groups are more likely to spend any additional dollar they receive. So we can expect that UBI would stimulate economic activity, leading to more taxable revenue.

But as the UBI increases, the imperative to work decreases, and the progressive taxes required to fund the UBI grow steeper. At some point, we reach the peak of the curve, beyond which overall tax revenues begin to decrease as people stop working, and others cease chasing large fortunes that would just be reclaimed by taxes.

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In this case, we’re faced with a design project: find the optimal level of UBI that maximizes the payout without decreasing tax revenue.

But the sustainability question can go a step further. What if we find this optimal balance point that provides a sufficiently high UBI to cover people’s basic needs without eroding its own tax base or tanking the economy. How does the economy change? As we explored in the division of labor section, a high enough UBI threatens to eliminate the incentive to do undesirable work.

In a wonderfully provocative 1986 paper - The Capitalist Road to Communism - Philippe Van Parijs and Robert van der Veen explore this question. Assuming a sustainable and adequate UBI, they hypothesize a “twist” in capitalist logic, whereby wage rates for undesirable work will increase to attract workers, while wages for desirable work will decrease, since people have enough to cover their basic needs and are more free to accept more interesting work for lower pay. “Consequently,” they write:

“...the capitalist logic of profit will, much more than previously, foster technical innovation and organizational change that improve the quality of work and thereby reduce the drudgery required per unit of product.”

How will the twist in capitalist logic create incentives that reduce the “drudgery required per unity of product”? Consider the cost of human labor relative to its automatized equivalent. Presently, it’s usually cheaper to hire human workers than invest in the machinery and automation that can perform equivalent work. But already, we’re seeing roaming robots replace supermarket workers, self-driving cars replacing drivers, and tablets replacing waiters at restaurants.

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If this twist of capitalist logic drives up the wage rate for undesirable work, the cost relation will flip. It will become more expensive to hire humans at higher wages where machines can do the equivalent labor. The costs of automation will become a rational choice for capitalists when the equivalent cost of labor surpasses it.

These are uncertain speculations, to be sure. And the assumption that there exists an optimal level of UBI that covers basic needs without grinding down its own tax base is little more than an assumption. We have economic models that suggest UBI would decrease growth, while others say just the opposite.

In the face of these uncertainties, we may nevertheless rest assured that UBI would fundamentally change the economy, and in so doing, the kinds of lives we lead. We should speculate as widely as possible, and survey the many possibilities as diligently as we can.

If we can conclude anything from these concerns and speculations, perhaps it’s that moving in the direction of UBI merits prudence. While we must understand that how the economy responds to a $250 UBI cannot be extrapolated to suggest its response to a $1,000 UBI - the two are fundamentally different - we do have the option of moving towards UBI, rather than diving straight into the unknown.

The "Won't UBI Inflate Prices?" Critique

If everyone receives an extra $12,490 annually, won’t producers raise prices to absorb this extra capital? Won’t landlords raise rent, retail stores raise prices, ultimately absorbing the UBI entirely such that no meaningful changes remain?

In brief: maybe a little bit, but probably not much.

Inflation is not so simple as: people receive more money, therefore producers increase prices. Inflation only occurs when aggregate supply is unable to keep up with increasing demand. So long as people’s purchasing power increases, and supply can scale to match, there is no inflation.

Moreover, most UBI proposals do not even propose to increase the money supply. UBI funded by progressive taxes just shuffles existing money around. But even if a UBI were funded entirely by printing the requisite $3.6 trillion every year and adding it to the economy, it’s not clear how much inflation would actually occur.

While prevailing logic assumes such an action would cause so much inflation as to render the idea obviously detestable, the matter is far from obvious. For example, Ellen Brown writes that, by virtue of how money is created, “our money supply is in a chronic state of deflation.” When banks approve a loan, that money is created and assimilates into the economy. But the subsequent interest owed is not created, so money creation always furthers the deficit that divides money owed from money circulating in the economy.

This gap between debt owed and the money supply creates a buffer against inflation. Any increase in the money supply that closes this gap (i.e., UBI money used to pay existing debts) causes no inflation.

But few UBI proposals rely on deficit spending - most use progressive taxes to redistribute money downwards. In this case, the money supply does not increase, but spending patterns and purchasing power do.

The lower on the income distribution one falls, the higher their propensity to spend each additional dollar they receive. So if progressive taxes redistribute money downwards via UBI, we can expect aggregate spending in the economy to increase. So long as supply can scale up to match increased demand, no inflation occurs.

Inflation only occurs when supply hits its maximum, and increasing demand cannot be matched by increasing supply. So the degree to which the economy can increase its supply also provides a buffer that absorbs inflation.

For example, since 1982, every Alaskan citizen has received a partial UBI through taxes levied on oil revenues. Each year, citizens receive anywhere from $1,000 - $2,000. From the introduction of their partial UBI to the present, Alaska has experienced lower inflation than the rest of the nation. This, despite every citizen receiving an extra ~$1,500 annually.

Similar results were found when the Mexican government conducted experiments across a network of villages. Villages where people received direct cash transfers experienced no statistically significant changes in prices.

Results from the Alaska, or rural Mexican villages can only tell us so much about how the entire US economy would react to a UBI. A more representative study looked specifically at how a UBI funded by progressive taxation (specifically, by progressive income taxation, which is a more distortionary UBI than most proposals that use forms of taxation other than excessive income taxes) would affect housing prices in New York City. They find that a $5,000 household UBI (another departure from actual UBI proposals, that distribute benefits per individual) would increase aggregate welfare of the bottom 50% of the wealth distribution. Most notably, they find that this UBI would actually decrease housing prices.

All models should be taken skeptically, as there always exists inherent limitations in our ability to actually model UBI. Not to mention the varying assumptions required to construct models that often differ from the actual UBI proposals these models are used to evaluate. Nevertheless. Each successive experimental context related to UBI and inflation suggests the same finding: there is no obvious causality between unconditional income transfers and price inflation.

The Political Tyranny Critique

Another common concern goes like this: funding a UBI requires progressive taxes that fall mostly on the wealthy. But the wealthy constitute only a minority in society. If the majority of society are net UBI recipients, meaning they receive more in UBI than they pay in increased taxes, what’s to stop them from leveraging their majority and voting to raise the level of UBI, exploiting the rich minority?

This concern can be handled in the same way we handle voting for presidential impeachment, an event too important to leave up to mere majority rule. For the senate to impeach a president, they require a supermajority consensus. This is just a higher threshold of consensus than other measures require. Requiring a supermajority to change UBI levels can help prevent partisan exploitations and tyrannical majorities.

How to Pay for UBI

At the moment, how to pay for UBI is the most important question of the discussion. There’s plenty of theory, there are well-reasoned arguments on all sides. What we need to develop are realistic funding proposals that we can subject to scrutiny.

The relevant question isn’t can we pay for UBI, but should we pay for UBI. Of course we can. We could finance the entire program through deficit spending, just creating the money and handing it out (as banks do daily when approving loans). But that probably isn’t a good idea, because the inflationary consequences of doing so likely outweigh the benefits.

How we pay for UBI determines everything from how economic incentives change, to whether it functions as a floor or ceiling for social policy. A handful of proposals for UBI exist, but they mostly lack the attention to detail that enables a transition from politically impossible to politically viable.

No single tax is sufficient to fund UBI. Raising $3.6 trillion in revenue requires a coalition of progressive taxes. But this also presents an opportunity to meaningfully redesign and update economic incentives for the 21st century.

Here, I’ll gather a list of relevant taxes and strategies, together with revenue projections. There is no agreement on how much a wealth tax, for example, would raise. So I’ll include the range of revenue projections, from conservative skepticism to passionate optimism.

Progressive marginal income tax rates

Projected annual revenue: $18.9 billion - $70 billion.

Example: Adding an eighth tax bracket for incomes above $10 million taxed at 70% is projected to raise anywhere from $18.9 billion, if no other tax changes are made, up to $70 billion if a broader progressive taxation system is in place.

Background: According to research by Emmanuel Saez and Gabriel Zucman, 2018 marked the first time the wealthiest members of society paid a lower effective tax rate than the poorest:

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The conversation on how to implement a more progressive tax system is now booming. One facet of the broader project of progressive taxation is marginal income tax rates. Marginal income tax rates in America on the highest income groups used to exceed 90% (with effective rates closer to 60%), while today, the highest bracket faces a tax rate of 37% (with far lower effective rates). All incomes above $400,000 are treated to this same rate.

Research by Zucman, Saez, and Stantcheva (2014) attempts to derive the optimal top rate of taxation to maximize revenue, in relation to the Laffer curve for income taxes. They find that a rate of 83% on the highest incomes maximises revenue.

But recent progressive proposals to simply add an 8th bracket on incomes above $10 million leave the space between $400,000 and $10 million unchanged. We need more nuance in how we tax incomes.

A first-principles approach might draw from the idea of a monotonically increasing tax rate that does away with brackets altogether. Every additional dollar earned is subjected to a slightly higher tax rate, achieving a truly progressive tax on income that adheres to Adam Smith’s original guideline:

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

But to avoid such predictable responses to higher income tax rates as capital flight and fiscal manipulation (realizing earnings as capital gains rather than personal income to avoid higher tax rates), any progressive income tax must be part of a broader program of tax reform.

Raising and reforming capital gains taxes

Projected revenues: $6 billion - $170 billion.

Examples: Shifting to a carryover tax basis is projected to raise $10.4 billion annually, and taxing capital gains of the top 1% on an accrual basis could yield $170 billion. These projections are for changing methodology, rather than raising rates.

Revenue projections for raising capital gains rates are complex, because outcomes depend on the broader system of taxation. As such, models that predict a $6 billion annual raise in revenue by raising capital gains taxes from 20% to 24.2% are tenuous.

Background: Capital gains are the second most prevalent mode of realizing income, functioning in tandem with labor income taxes. This is why considering capital gains and income taxes alongside each other is so important: at upper levels of the income distribution, gains are often transferable between these two categories.

Wealth tax

Projected revenues: $118 billion - $375 billion.

Example: A 2% tax on wealth above $50 million, cranking up to 3% on wealth above $1 billion, is projected to raise $275 billion, annually.

Background: Many European countries tried wealth taxes, most proved ineffective. Recent economists advocating for a wealth tax acknowledge that we must learn from these failures to design an effective wealth tax.

European wealth taxes failed for a variety of reasons. Foremost among them was the low bar of wealth subjected to the tax. European wealth tax rates kicked in around $1 million, whereas US proposals kick in at either $34 or $50 million. This alone eliminates most liquidity issues that plagued european wealth taxes.

Additionally, it’s quite easy to switch residency within EU countries, moving wealth into those with weaker tax regulations and lower rates. This kind of residency evasion is much less likely in the US, where changing one’s country of residence has a higher bar.

Carbon tax/cap-and-trade dividend

Projected revenues: $100 billion - $210 billion.

Examples: A tax of $25 per metric ton on most greenhouse gas emissions in the US could raise slightly over $100 billion annually, while a tax of $49 per metric ton of carbon dioxide could raise closer to $210 billion annually.

Background: There are two important elements to the debate over carbon tax. First, a successful carbon tax would yield diminishing revenues, moving towards zero. Second, there’s a design question: a carbon tax sets a price on carbon and lets emissions calibrate organically, while a cap-and-trade approach sets an emissions level and lets prices calibrate organically.

Each strategy has particular strengths and weaknesses that may complement each other well in a mixed approach.

Raising and reforming corporate taxes

Projected revenues: $9.6 billion - $200+ billion

Example: Reforming how the corporate tax is levied often offers more potential revenue than raising the rate. Still, the 2017 tax cuts reduced the corporate rate from 35% to 21%, leading to a $135 billion decline in corporate income tax revenue.

The congressional budget office (CBO) estimated the revenues for a mere 1% increase in the corporate tax rate, finding a $9.6 billion annual increase.

Background: 379 of the Fortune 500 companies paid an effective federal tax rate of 11.3% on their 2018 income, 9.7% less than the actual corporate tax rate of 21%. 91 of those corporations - including Amazon, Chevron, IBM - paid $0 in taxes on their 2018 income.

Discussions about the corporate tax rate often focus on the stated tax rate, rather than the effective tax rate paid. These situations are made possible by various deductions, allowances, and loopholes. Corporate taxation reform should begin with a reevaluation of how the tax is applied.

Land value tax

Projected revenues: $100 billion - $750 billion.

Example: LVT projections are scant. Some of the most recent academic work for full-scale national projections dates back to 1985. The author estimated that a full LVT could raise 28% of national income, yielding $658 billion in 1981 (28% of national income in 2018 would yield $5.8 trillion).

More recent and sober estimates range from smaller, targeted LVT rates that yield closer to $100 - $200 billion in annual revenue, up to a 5% LVT that raises $750 billion.

Background: A land value tax (LVT) was Henry George’s big idea. He sought to socialize land (place it all under collective, rather than private, ownership) and replace all government taxation with a tax on land values. While the notion of replacing all taxes today with a land value tax is far-fetched, smaller-scale land-value taxes are theoretically possible. Indeed, small scale LVT’s are used around the world.

LVT’s are attractive in theory, but treacherous in practice. Implementing a LVT at a national scale would present a series of administrative challenges. These are far from insurmountable, but require magnitudes of attention and innovation to transform the conversation from fantasy to reality.

Value added tax

Projected revenues: $600 billion - $1.3 trillion.

Examples: CBO estimates for a 5% VAT tax range from $190 billion to $290 billion annually, depending on details. Committees have expanded these findings to estimate that a 10% VAT tax would raise approximately $600 billion per year. Estimates on broader-base 10% VAT tax expect revenues of $1.3 trillion per year.

Background: A VAT is used in most of the developed world. 166 of 193 countries with UN membership have one in place. While varieties of VAT proposals are gaining momentum, progressive economists caution that the burden of taxation is ultimately regressive.

VAT’s were conceived in the post-war 20th century, when industries that define 21st century economies were relatively small - finance, insurance, education, and healthcare. Today, these high powered industries would either be beyond the reach of the VAT, or able to pass on the cost burden to consumers.

National income tax

Projected revenue: $1.2 trillion.

Example: A national income tax was proposed by Emmanuel Saez & Gabriel Zucman in 2019 as a progressive alternative to the VAT. The tax applies to all income - capital and labor - at a single flat rate with no deductions or exemptions. They estimate a 6% national income tax could raise $1.2 trillion annually.

Background: In their 2019 book, Zucman & Saez propose a new tax innovation to ‘leapfrog’ the VAT:

“The United States can leapfrog the VAT. It can pave the way in the creation of the fiscal institutions of the twenty-first century—as it did during the twentieth century. How? By creating a national income tax.”

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Its virtue, by including both capital and labor with no exemptions, is the comprehensiveness of national income subject to the tax. This makes it possible to raise high revenues with low rates. The reason such a tax has never been implemented is largely because it incentivizes capital flight - wealthy entities basing their assets in other countries to avoid higher rates.

Accordingly, this kind of tax is only realistic in partnership with reformed taxation of multinational companies and tax havens.

Financial transaction tax

Projected revenues: $60 billion - $75 billion.

Example: A 0.34% broad-based FTT could raise a maximum of 0.4% of GDP, or $75 billion.

Background: A FTT, beyond raising revenue, has a significant corrective effect on the unbridled incentives of the finance industry. By discouraging high-frequency, short-term trading, a FTT discourages the short-termism that has plagued the economy since deregulation loosened capital controls in the 1970’s.

Folding redundant welfare programs

Projected revenues: $200 billion - $771 billion.

Example: While total welfare expenditures hover near $771 billion, Wiederspan, Rhodes, & Shaefer (2015) isolate means-tested programs that a UBI or NIT would make redundant. They project savings of $207 billion.

Background: As I’ve mentioned, the progressivity of UBI depends on whether it supplements, or replaces existing social programs. The full spectrum of which welfare programs should supplement UBI and which should fold their revenues into funding merits widespread critical discussion. But with a total welfare budget of $771.4 billion in 2019, a notable portion of funding can be derived from existing welfare expenditures without threatening progressivity.

It should also be noted that even if most welfare programs are left in place, their costs would greatly shrink in response to a UBI that elevates most citizens beyond their eligibility requirements.

Reducing defense department budget

Projected revenues: $59 billion.

Example: Reducing the defense department’s budget by 10%, phased in over a 10-year period, would save $59 billion annually.

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Social security reform

Projected revenues: $200 billion - $500 billion.

Examples: By replacing one of every three dollars of social security received with UBI, recipients could increase their overall receipts while saving $324.2 billion.

Alternatively, rather than reducing payouts for those who’ve already paid in, after passing UBI we could justify reducing the 6.2% tax rate on employees that pays into social security, since SS payouts wouldn’t need to remain as high after being complemented by UBI.

Finally, raising the cap on social security payments up to $250,000 would raise an extra $80 billion, while subjecting earnings greater than $250,000 to a 12.4% payroll tax could raise $122 billion, annually.

...

Total annual revenue range: $2.6 trillion - $5.6 trillion

Putting Taxes Together

I am under no delusions that we could sensibly enact all these reforms and raise $5.6 trillion. These taxes cannot all be implemented at their upper projections, and implementing some would eliminate the possibility of implementing others.

The complexity and nuance at stake in accounting for how taxes interact with one another is why we need an influx of proposals from experts of all stripes. But they can be pieced together into cohesive, broad-spectrum proposals.

One example comes from Zucman & Saez’s 2019 book. They propose a tax plan that combines: a wealth tax, corporate tax, higher marginal income tax rates, higher taxation of capital gains, and a national income tax (6% flat tax on all income, labor and capital, no deductions). They predict this combination would yield $1.8 trillion in annual revenue:

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This leaves on the table: financial transaction taxes, carbon taxes, any redundant welfare programs, social security reform, expected gains from economic growth, and deficit spending, to name a few.

It’s also worth noting that the point of a UBI funded by progressive taxes is to reduce the tax burden on most people. The taxes used in Saez & Zucman’s proposal, for example, only raise taxes on society’s wealthiest sectors. But for full UBI proposals, taxes will inevitably be raised on some portion of the middle class. It’s important to delineate exactly whose taxes will be raised, and where the breakeven point occurs along the income distribution.

I won’t attempt to suggest a better constellation of taxes - I’m not the guy you want doing that. But it’s demonstrably possible to put together a functional proposal, and we need more of them.

Optimizing UBI

The particular form UBI might take is shrouded in ambiguity. In light of our tour through the relevant considerations, I’d like to propose a few elements worth considering if, following wide-spread democratic discourse and critical reflection, we wind up pursuing some form of UBI.

I. Poverty Level UBI

For UBI to achieve decommodification, rather than serve as a subsidy for capitalists, it must provide, at minimum, the physical basis for voluntary trade. Building off the work of Martha Nussbaum, Amartya Sen, and Karl Widerquist, we can equate this level with the poverty line, yielding a 2019 UBI level of $12,490, or $1,041 per month.

II. Split-Tier Payouts

The poverty-level UBI must be guaranteed, which requires reliable and stable sources of funding (modest LVT, national income tax on both labor and capital, financial transaction taxes, reallocating existing revenues, etc).

But what to do with revenues from taxes with more volatile revenues? Wealth and carbon taxes, for example, will change behaviors and lead to fluctuating, and likely decreasing, revenues over time. These are taxes implemented not primarily to raise money, but to alter economic incentives. In this same category of taxes with fluctuating revenues we can include taxes on natural resources (like Alaska’s Permanent Fund), data dividends, and rental revenues on collectively owned assets like broadband spectrum rights, land, or a social wealth fund.

These can all be treated as revenue-neutral taxes, where revenues are equally divided amongst citizens in the form of a social dividend. The social dividend could form an additional, fluctuating layer of benefits atop the guaranteed poverty level that is free to evolve, grow, and shrink alongside capital flows without threatening the basic income.

In fact, an interesting dynamic emerges when there exists a social dividend that can facilitate revenue neutral taxes. Each dollar spent by the government must justify why it is better off going into government expenditures rather than the social dividend pot. All government spending then ‘trades against’ per capita distribution, creating an incentive alignment that optimizes both, while promoting citizen oversight of government spending.

This is what I call a split-tier UBI. The bottom layer must be adequate to provide the physical basis for voluntary trade by meeting the poverty line, while a fluctuating social dividend may layer atop the base to provide a commonly owned stake in certain capital flows.

III. High End Phaseout Rates

One of the most common critiques of UBI goes something like: “Why would we pay Mark Zuckerberg $1,049 a month?!” In practice, his UBI acts as a minor tax credit on his much larger tax payment. He pays far more than he receives.

While UBI advocates use this logic to dismiss the critique, the question can be pressed. If a billionaire doesn’t receive any UBI payment after taxes are accounted for, why pay it at all? Why provide a tax credit on larger tax payments (the reason given is usually to avoid the administrative imposition of means-testing). Taking this logic to its conclusion winds up replacing UBI with NIT: only those who need the money most should receive it.

However, a basic income with high-end phaseout rates is different, falling somewhere between NIT and UBI. Columbia’s Poverty Center released a 2020 report analyzing a basic - but not universal - income program with a phaseout rate that kicks in at $150,000 and phases benefits out by $200,000.

We saw this same logic applied to the $1,200 stimulus checks provided by the US government during the Covid-19 pandemic. Individuals earning up to $75,000 received the full amount. Beyond that, the payment began phasing out, reaching zero for those who earned $99,000 or higher.

Using high-end phaseout rates effectively makes the cost burden more progressive by eliminating the payments that function as tax credits for individuals above the breakeven point.

It remains an open (and highly pertinent!) research question whether these savings would offset the additional costs of means-testing.

Since any guaranteed income proposal must be funded by progressive taxes, there will always be some who receive, and some who pay. The tradeoffs should be explored: what do we lose by violating universality with high-end phaseout rates? Whether the differences would justify abandoning the principle of universality merits significant discussion, but it’s worth considering.

IV. Broader reform

Crucial to the efficacy of UBI is that it’s understood as a floor, rather than ceiling to social policy. Narrative framing is important, but the real decisive factor in this balance is how the UBI is paid for. UBI proposals must be clear about which programs would fold in order to fund it, which would remain alongside, and the broader projects UBI can facilitate.

Alternatives

Some of the strongest critiques of UBI come in the form of alternative proposals that accomplish similar reforms through more modest methods.

Raising the gross budget required for UBI - $3.6 trillion - we could fully fund universal healthcare, a poverty-eradicating negative income tax, and have over $1 trillion leftover. Alternatively, if we implemented reforms like universal healthcare, affordable housing, and mass transit programs that reduce the need for personal vehicles, we could reduce the required individual monthly spending on basic needs by an amount equivalent, if not greater, than a poverty level UBI.

With this all in mind, let’s survey some of the leading proposed alternatives to UBI.

Negative Income Tax

I’ve mentioned NIT throughout the essay, and will return to it in the conclusion. Here, I’ll briefly describe how it works.

NIT is composed of two variables: an income floor, and a phaseout tax rate. The income floor sets the amount an individual with $0 of annual income receives from the program. The phaseout rate determines how much of the NIT is phased out for each dollar of earned income. Together, the phaseout tax rate and the income floor create a third element: the breakeven point. This is the earnings level at which NIT benefits reach $0.

Anyone who earns less than the breakeven point receives a proportion of the difference between their earnings and the breakeven point. That proportion is determined by the phaseout rate.

For example, consider a NIT with an income floor of $13,000, and a phaseout rate of 33%. This sets the breakeven point at $39,393. Anyone who earns below $39,393 receives 33% of the difference between their earned income and the breakeven point.

This means if I earn $0 annually, I receive 33% of $39,393, or $13,000. As my income increases, my NIT benefit slowly phases out, reaching zero when my income surpasses $39,393.

Depending on where the income floor and phaseout tax rate are set, annual cost estimates for NIT range from $179 billion, all the way up to $1.09 trillion. Here’s a list of a proposals, from one of the best recent papers on NIT, with income thresholds at 75%, 100%, and 133% of the poverty line, with phaseout rates that maintain benefits until earnings exceed 150%, 266%, and 403% of the poverty line:

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Recall the differences between UBI and NIT. Since NIT payouts must constantly adjust themselves to fluctuations in income, a system of income reporting and administration is required to maintain the program.

If NIT payments are to be distributed monthly, as UBI proposals are, this requires a monthly system of income reporting, rather than the yearly we’re currently accustomed to. This is why UBI proponents prefer giving everyone the same amount and using progressive taxes to adjust the distribution. It greatly reduces the bureaucracy and opportunities for error and exploitation in the program, while achieving a similar net transfer effect.

Personally, I see this as one of the most potent areas for digital innovation. A monthly NIT would be difficult with the present state of income reporting and governmental capacities. But modernized digital programs could significantly reduce the frictions, perhaps even automating the process entirely.

Universal Basic Services

Universal basic services (UBS) refers to a comprehensive provisioning of public goods and services, including various combinations of healthcare, housing, transportation, internet services, food, and so on.

Crucially, UBS proposals are inconsistent on whether or not UBI is part of the package. A UBS that includes income - and therefore a UBI - as one of the unconditionally provided features is hardly different from most progressive proposals for UBI. This UBS just formalizes the insistence that UBI alone is insufficient, and must be complemented by a broader program of reform.

But some prominent proposals for UBS advocate for services instead of income, providing the physical means for voluntary trade in kind, rather than in cash. These UBS proposals arose out of the UBI movement, sharing their intent while believing direct provision of services is a better use of available funds than direct cash transfers.

But while UBI has a long history of scholarship, theory, and discourse, UBS proposals are scant. For example, the Institute for Global Prosperity (IGP) is perhaps the leading advocacy group for UBS. In 2017, they released a full proposal under the heading of UBS that proposed anything but. They estimated it would cost $53 billion annually to provide housing, food, transport, and basic communications services (cell phone and internet access) to all UK citizens.

2017 UBS proposal
2017 UBS proposal

Of these four elements, two - food and housing - were means-tested (decidedly not universal), and universal transportation amounted to little more than free bus rides. Means-testing is a significant break from the philosophy of most UBI advocacy. Their subsequent 2019 report recoiled, offering no cost estimate and striking both food and housing from the proposal, including childcare and adult social care instead.

Guy Standing, a leading advocate for basic income, concludes his comparison of UBI and UBS by pleading with UBS advocates to “stop juxtaposing the idea of more and better public services with giving people basic income security.” The either/or dichotomy is misleading, because “they address different needs and stem from different rationales.”

Perhaps the greatest difference between UBI and UBS is optionality. With UBS, what services one needs are determined by a centralized group. What constitutes sufficient food, housing, communication, are all determined, and monitored, by the government. This way of thinking is an extension of 20th century social democratic reforms to expand welfare states.

By providing the cash equivalent for basic needs, UBI increases people’s optionality in how best to spend the money, and what on. Doing so also maintains the incentive for innovation in these industries.

If these two approaches are brought together, how can we determine what areas of life should be directly provided, and which should be provided as cash equivalents? Why do progressives prefer universal healthcare to just giving people enough money to buy private health insurance?

Here’s a basic heuristic for making sense of this: in markets with significant market failures (like healthcare, or prisons), direct provision of services may be preferable. In well functioning markets, cash equivalents afford greater optionality and maintain the conditions for innovation.

Universal Job Guarantee

Another increasingly popular alternative to UBI is a federal jobs guarantee (FJG). A FJG would provide a ‘public option’ for employment to all those who want it, paying a livable wage plus benefits.

Cost estimates range from $46 billion, up to $550 billion, to $750 billion, giving an idea of the diversity of proposals that go under the head of a FJG.

To compare, we might contrast a FJG with the previously listed motivations for UBI. The question of detaching livelihood from labor is the single largest point of divergent between these two approaches. A FJG does not decouple, but reinforces, the connection between labor and livelihood.

Proponents do suggest that a FJG could effectively eliminate poverty to all those able and willing to work. This amounts to a conditional elimination of poverty, and so a necessarily partial result. In terms of inequality, a FJG does have indirect effects on working conditions. The federal jobs program could put pressure on the private sector, forcing private jobs to at least match public benefits. Why take a $12.50/hr job in retail when you could get a $15/hr government job with benefits? In this fashion, a FJG could create an implicit minimum wage through competition, rather than federal mandates.

Compared with the status quo, both a FJG and UBI offer a likely improvement. But for all they share, their differences are sharp. Consider the worst-case scenario for each.

With a UBI, one of the public’s greatest concerns is a recipient may move into their parents basement and do nothing but watch television, drink beer, smoke weed, and eat chips all day. The UBI, taxed from the earned income of others, would support this lifestyle.

By contrast, if basic livelihood is afforded through a FJG, imagine the spiritual plight of a worker consigned to meaningless, pointless labor merely in order to satisfy the work requirement for receiving a living wage. If the government is unable to provide quality work for all participants in the program, the outcome is dystopian.

The question of the best means to provide everyone with their basic needs may come down to the question of human nature: do we empower people to decide for themselves how their time is best spent, or utilize labor requirements to make sure no one receives taxed benefits without contributing to society in a way that labor markets deem valuable?

Put differently: who do we ultimately give the power to determine the best use of their lives, people, or the government?

Codetermination

Codetermination, while not a direct alternative to UBI, should be included in these discussions. Much UBI advocacy centers around power. The “power” to say no, and so on. Earlier, we mentioned how UBI gives workers power outside firms, while codetermination decentralizes power within firms. Though a national mandate to place worker representatives on company boards sounds politically far-fetched, Germany has had just such a system in place since 1976.

By giving workers voting rights in company decisions, codetermination places a check on the forces of short-termism plaguing the American corporate landscape since the 1970’s. And at no cost.

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Empirical evaluations of German codetermination are yet to reach consensus, but find generally encouraging results. Across the spectrum of studies, most (but not all) find positive gains in productivity, a decrease in share buybacks, improved working conditions, and less unequal distribution of rents. Less positive findings include slight declines in profitability rates and stock prices.

The German board structure differs from that of the US. Germany has two boards, supervisory and executive, while the US corporate model only has one. Nevertheless, plans exist that adapt the German model to the US structure, notably reducing the required representation from 50% of the German supervisory board to 40% on US boards.

Shorter Working Weeks

At least since Marx, reducing working hours without reducing pay has been the heart of labor-driven reform. “The true realm of freedom,” he writes, “can blossom forth only with this realm of necessity as its basis. The shortening of the working-day is its basic perquisite.” The labor movement made this sentiment a reality through their fights to create the weekend, and 40-hour working weeks.

While average working hours have steadily decreased ever since, the rate began leveling off in the 1980’s:

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Around the same time, wage growth also began leveling off, while productivity continued its climb:

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Add to this the familiar graphs showing how income shares of the top 1%, corporate executive compensation, and stock buybacks have all rapidly increased since around this same time in the 80’s, and the case for shorter work weeks gains momentum.

Shortening the working week without decreasing pay lets workers share in the gains they’ve missed out on the past 50 years. In practice, this might be achieved in at least two ways. One possibility, likely through codetermination, is individual firms voting to decrease the workweek, perhaps by eliminating Fridays. Workers could still receive payment through some form of paid leave for Friday’s lost wages. This was the strategy used by Microsoft Japan when they tested 4-day work weeks, yielding promising results, both morally and economically.

Another, more decisive path is through federal legislation. Congress could amend the Fair Labor Standards act, and the President could sign into law a reduction of the workweek from 40 hours to 32 (by reducing the threshold where overtime pay begins from the former to the latter).

Social Wealth Fund

A social wealth fund is a collectively owned investment portfolio. Every American receives one share of ownership, and so receives a universal basic dividend (UBD). As the portfolio value increases, so does the dividend payment.

The fund can grow by accumulating assets (stocks, bonds, real estate), levying taxes on land, capital, or natural resources (as Alaska’s Permanent Fund does), or monetary seigniorage (where the Federal Reserve creates money to purchase assets).

A proposal was put forward by the People’s Policy Project. In their projection, the UBD is set at 4% of the five-year moving average of the fund’s market value. Assuming a $10 trillion average - in line with the proposals projections - the UBD would yield between $1,000 - $2,000 annually per person, depending on specifics.

As such, social wealth funds, while excellent strategies to democratize investment in the economy’s capital stock, cannot yet provide enough income to meaningfully displace UBI or similar proposals.

Next Steps: Modernized Negative Income Tax

But for all the promise of UBI, there is no denying the political barriers to enacting a program that requires upwards of $3 trillion in funding. Without engaging with the realities of our political climate, this may all amount to nothing more than howling in the wind. Some consider advocating for a direct leap from where we are today into a fully funded UBI a hopeless endeavor, a “nonrealist political philosophy” that’s “disjoined from real politics.”

Accordingly, we may consider a modernized negative income tax as a strategy sharing the sentiments behind UBI, while remaining well within the boundaries of economic and political viability.

By “modernized NIT”, I mean an unconditional NIT paid out to all individuals below an income threshold set above the poverty line, with a low phaseout rate, funded by progressive taxation, using the latest digital technologies to minimize bureaucracy, that complements rather than replaces existing and future social programs, made available at a minimum of monthly installments.

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For example, Wiederspan, Rhodes, & Shaefer (2015) estimate the cost for a NIT with an income floor set 33% above the poverty line, a phaseout tax rate of 33%, and thus a breakeven point at 403% of the poverty line at $635 billion, annually.

Using 2019 numbers, this translates into an income threshold of $16,611, providing benefits until citizens earn above $50,335. Every additional dollar one earns from $0 up to the $50,334th dollar, one loses $0.33 of NIT benefits. Their cost of $635 is given in 2007 dollars. Adjusting to 2020 dollars yields a cost of $791 billion.

A significant portion of the cost could be covered by folding existing means-tested programs that NIT makes redundant. These might include the earned income tax credit ($59 billion), supplemental security income ($58 billion), temporary assistance for needy families ($16.7 billion), and the supplemental nutrition assistance program ($64 billion). Together, reallocating these revenues into funding the modernized NIT covers $198 billion, annually.

On the subject of reforming existing federal expenditures, we might revisit the $540 billion spent (in 2013 dollars) on tax programs (tax credits, deductions, exclusions, exemptions, deferrals, and reduced rates) that overwhelmingly benefit the highest tiers of the wealth distribution. At the least, this could mean eliminating the home mortgage interest deduction and the real estate tax deduction, freeing up at least $89 billion annually.

We could fund the remaining $504 billion by any number of progressive tax combinations. Perhaps the simplest method would be to update the income tax conventionally used to fund NIT, making it more progressive by applying it to capital as well as labor. We could do so by phasing in a version of the national income tax proposed by economists Gabriel Zucman and Emmanuel Saez (2019).

They estimate a 6% flat rate nation income tax applied to both capital and labor income with no deductions would raise $1.2 trillion, annually. We could phase in this income tax, beginning at the breakeven point where NIT benefits subside (in this example, $50,335). Using the 2018 income distribution, this tax would apply to over 60.1% of households and still the majority of income earned in the economy. A top rate of 3-4% would likely be sufficient to fund the entire remainder of the modernized NIT.

Alternatively, a combination of a financial transaction tax, carbon tax, wealth tax, and raising the effective corporate tax rate could comfortably fund the remaining $437 billion, with minor deficit spending available for discrepancies.

Conclusions

Basic income (BI) - whether UBI, modernized NIT, or non-universal basic income with a high-level phaseout rate -  is one of the most important cultural conversations of the early 21st century. Considered alongside something like codetermination, we could structurally redesign socioeconomic dynamics to birth a new system from within the old.

There are things we know about the human condition that are yet to be made part of our social systems. We may not know how much happiness money can buy, but poverty certainly buys misery. Misery and poverty create their own gravitational culture that traps people inside. Through the pull of these invisible forces, poverty begets more poverty.

BI could eviscerate the deflationary, inward-pulling culture of poverty. But as I have argued elsewhere, BI is about more than poverty. It’s about redesigning the socioeconomic forces that guide human development.

Unconditional income is an opportunity to decommodify our lives. The more money we unconditionally receive, the more accessible it becomes to shift ourselves towards the projects, actions, and behaviors - ways of living - that we accumulate money for. These ways of living are qualitatively different, in that they are for themselves, rather than for money.  

As anxieties over income that pervade most of our ways of living recede, our social institutions would reconstitute themselves. How might education evolve if most students weren’t preoccupied with securing a high-paying job? How might work evolve if we were more interested in the products of our labor than the paychecks we receive?

The speculations at hand are intoxicating. But as with all intoxication, the process of integration requires thoughtful diligence. The work of translating basic income from wishful vapors into a real policy option requires evaluative rigor.

Towards that end, I hope I’ve done less to convince you of my own opinions, than provoked you to develop your own.

UBI Reading List

Here’s a selection of some of the more interesting reads I’ve collected about basic income. Both positive and negative perspectives are mixed in.

Essays

Papers

Books

I’d like to thank Evan Kasakove for providing feedback and helping edit this piece.