Against Time Inequality: A Framework for Progress

August 2, 2020
Oshan Jarow
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Most scarcities can be stretched. One could read this as the great promise of economics: to systematically stretch our scarcities into such thin films until we can hardly feel them. A scarcity stretched is a constraint loosened. A possibility opened. But this makes those inelastic scarcities that deny our attempts to manufacture their abundance all the more precious. And what presents a more immovable scarcity than time?

Where there is scarcity, there is inequality. Time inequality - a disparity of time ownership - is a deeply, existentially corrosive variety of inequality plaguing U.S. citizens - and more broadly, citizens of hyper-capitalist societies - today. And yet, we don’t have well-developed understandings of what ‘time inequality’, or ‘time ownership’ actually mean. Shrouded in ambiguity, they fester. Raising the resolution of these concepts, as if adjusting the blurred lens of American political economy, will help us see more clearly the most important inequality we’ve forgotten.

Time ownership is a new phrase draped over an old idea. In Ancient Greece, they called it freedom. In the early days of industrial capitalism, leisure time. During the 100 years between 1830 and 1930, leisure time for all was seen as the highest dividend, the greatest promise of economic progress.

But as I detail below, we’ve ditched this view. The growing, shifting economy of the mid-20th century supplanted the intrinsic value of leisure with the extrinsic value of labor. Amidst the flurry of post-war consumption, our priorities flipped. This reversal of values did away with democratic distribution of leisure time as a guiding ideal for economics. The stage was set for time inequality, a lop-sided distribution of the capacity for leisure, to erupt.

Today, cascading crises are immobilizing and unraveling the America we so unenthusiastically knew, like that gruff uncle one avoids at family parties. Through the debris, the contours of an opportunity are emerging. An opportunity to ask ourselves, as the novelist Marilynne Robinson put it: what kind of country do we want? What is the economy for?

The severity of time inequality today makes a strong case for deep change. Time ownership can offer a guiding ideal for a revitalized political economy. It would empower individuals and communities at every socioeconomic stratum. It would enliven democracy, education, and mental health. It would ignite entrepreneurship and innovation. It would return a concrete meaning to the limp rhetoric of freedom and progress.

But new paradigms don’t take unless they’re anchored by new policies. New ideas need roots. Below, I do present a policy platform - more of a provocation than declaration - to anchor the idea of time ownership. But to begin, let’s clarify the impulse behind this rough sketch for a new economic paradigm: time inequality.

Time Ownership: Or, Freedom

To define time inequality, we begin by defining the substance of comparison: time ownership. In the same way that it wouldn’t make sense to talk about wealth inequality without a prior understanding of what wealth is, we can’t talk about time inequality until we understand what time ownership is.

A fitting, if ironic, metaphor for time ownership is a public corporation. Corporations are owned by multiple shareholders. The more shares one owns, the more voting power they hold over the corporation’s decision making. Time ownership is similar. The more time ownership we have, the greater the decision making power we wield over what we do with our time.

Also like a public corporation, ‘ownership’ doesn’t mean someone owns 100% of the shares, but a controlling interest. This requires only a majority, or 51%. Barring a triumph of fully automated luxury communism, total ownership of one’s time seems a fantasy.

For example, our bodies are inalienable shareholders of our time. They demand things of us - sleep, nutrition, hydration. There has always existed a distinction, perhaps blurred, between things necessity compels us to do and things we choose to do when necessity is satisfied and we regain a controlling interest over our time.

Settling into agricultural societies sharpened the distinction between freedom and necessity. The philosopher Hannah Arendt writes that ancient slavery did not exist to provide cheap labor that boosts profits. Rather, the exploitation of slaves was used to eliminate necessity-driven labor from the everyday lives of slave owners. Slavery was “the attempt to exclude labor from the conditions of man’s life.”

Labor is work done in service of necessity. Karl Marx called it “man’s metabolism with nature.” Time ownership is the “true freedom” he theorized lay beyond the realm of necessity.

Through the centuries, the flux of society functioned as a lens that transmutes our needs into historically-contingent forms of labor. The needs hardly change. But the form of labor employed to meet them does. The need for food evolved from the labor of hunting animals and tilling the fields to the labor of securing grocery money. Through all its forms, freedom often seemed to lie beyond the demands of labor.

Time ownership is thus a matter of degrees. It’s the balance between freedom and compulsion in everyday life. We might think of it as the ratio of extrinsic to intrinsically motivated time-use for any given person. The more of our time that’s intrinsically motivated, the less bound our possibilities are by necessity. The more time ownership we have.  

Time Inequality: Or, Compulsion

Now, we’re equipped to ask: what is time inequality? It’s the inequality of time ownership between citizens. Today, the majority of Americans suffer as the compulsion of extrinsic demands overdetermines the substance of their lives. Meanwhile, a wealthy minority is capturing an increasing share of the economy’s wealth, wealth being the key ingredient for time ownership.

The consequences of low time ownership, while living in a society that everywhere flaunts the lifestyles of those with large degrees of time ownership, are psychologically corrosive. Like pouring acid into your soul.

On the surface, we see time inequality in lifespans. Wealthy US citizens live an average 10 - 15 years longer than their lower-income counterparts. But lifespan is too blurred a lens to see the interior consequences of time inequality.

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The withering away of intrinsic motivation is less legible to an outside eye than living an extra 10 years, but at least equally consequential. One’s life is hollowed out like a swarm of termites gnawing on the inside of an oak tree until nothing remains but a rickety shell of bark (and if you find this hyperbolic, consider the rise in working class suicides).

Or, to mutate the metaphor, consider a mosquito. It lands on your arm and plunges six stylets into your skin. Two of them are equipped with tiny teeth to saw through the surface. The mosquito is, literally, intent on sucking dry the interior content of you being.

In Ancient Greece, it was common knowledge that a life dominated by extrinsically determined labor has the same effect. Aristotle went so far as to argue that calling both slaves and free people “men” was like erasing the distinction between grapes and raisins. Lives dominated by labor eclipsed slaves’ capacity to become truly human.

Arendt reports that Ancient Greeks understood wealth as the best defense against the sawing teeth of necessity, the best way to safeguard and nurture our inmost human capacities:

“...the wealth of a person therefore was frequently counted in terms of the number of laborers, that is, slaves, he owned. To own property meant here to be master over one’s own necessities of life and therefore potentially to be a free person, free to transcend his own life and enter the world all have in common.”

The substance of wealth is the technology of freedom. Slavery was the technology of freedom in Ancient Greece. Today, it’s passive income from asset ownership. Large investment portfolios, or the ownership of real estate provide the same freedoms that slaves did in Ancient Greece. While we’ve broadened the category of wealth, we’ve mostly failed to democratize it.

To make this all more concrete, let’s consider a few examples.

Three Examples of the Time Ownership Spectrum

1.

First, there’s Jada. Her generously wealthy family establishes a $130k trust fund in her name at birth. Growing at the market average of 9% per year, by the time she turns 22 and gains access to the fund, it’s worth $865k.

After receiving advice from her father’s financially-savvy colleagues, she invests the money in an index fund. Her investment will yield $78k in the first year, more in subsequent years. She plans to keep the first $75k of each annual dividend, and reinvest the rest to grow the fund.

In short, for the rest of her life, barring economic depression, Jada will receive enough money to live comfortably without having to exchange any time in return. Marx’s ‘realm of necessity’ exerts no influence over what she chooses to do with her time. If she gets a job, it won’t be because she needs it. She’ll be free to quit at any time without endangering her basic livelihood.

2.

Second, consider Marcus. His father is a janitor. His mother works nights at the roadside diner. He works part-time to put himself through community college. He graduates with a degree in education and $20k in student loans (with a 6% interest rate licking its fat lips at his certain inability to pay them off quickly on a teacher’s salary).

Upon graduating, Marcus is only free to do that which earns enough to meet his living expenses, plus debt payments. Along with a bulk of American workers, he must exchange a significant quantity of his waking hours for a paycheck, doing work he wouldn’t otherwise do. Unlike Jada, the realm of necessity dictates his daily life.

These two crude examples are enough to show the major divide. Most Americans, despite working long hours at stupefying jobs, are unable to build the kind of wealth that liberates them from extrinsic domination. And since already having wealth is the best way to get more, the wealthy wind up with so much that they secure time ownership for generations to come.

But there are more ways to freedom than the size of one’s bank account. It’s an illusion perpetrated by the neoliberal economic paradigm shift of the 1970’s that the only road to freedom is amassing private wealth.

Absent from both of these examples is the public realm. The much maligned government. The past 50 years of economic thinking dismantled the idea that governments can, never mind should, play a role in stewarding portions of the national wealth for the benefit of all.

The reversal of this backwards thinking is already underway. A political economy for time ownership requires a partnership between public and private institutions. These can allocate wealth in ways more conducive to democracy, stability, and freedom than private individuals and deregulated markets can achieve on their own.

3.

So consider a third example. In an alternate universe, the U.S. responded to the 1970’s stagflation crisis by building institutions designed to create shared prosperity.

The first few years of universal healthcare were bumpy, as all large transitions are. But it quickly settled into a point of national pride. Federally recognized poverty was eliminated through a negative income tax - a variant of basic income that raises the economy’s income floor. Workers were given voting rights on their company boards through a codetermination mandate, reducing the rate of stock buybacks and executive pay, while improving stability, productive investment, and labor conditions.

Every citizen received a high-yield savings account via postal banking at birth. An annual wealth tax was used to provide each account with an initial $20,000 investment, accessible after the age of 18, growing all the while. This provided every American with an inheritance, a true ‘progress dividend’ that raised levels of entrepreneurship and innovation, while reducing debt burdens.

Reconsider Marcus’ life in this world. Through the basic income, he receives enough to cover most of his tuition and living expenses. He no longer needs to work his way through school, freeing him to focus on his studies and relationships. He leaves school without student debt, or can dip into his inheritance to pay off whatever little remains.

His first job in a New York City school doesn’t pay him enough, and he disagrees with their standardized educational curriculum. He quits, knowing losing his job doesn’t mean losing healthcare or access to enough money for groceries.

Maybe he’ll consider getting together with a few college friends and starting a research organization devoted to new educational pedagogies. They can pool money from their inheritance for startup capital.

Most importantly, Marcus experiences a significantly higher degree of time ownership than previously. Not because he earned more private wealth. But because he’s part of a society built to democratize wealth - giving everyone access to the baseline amounts of wealth that make a tangible difference on what kinds of lives we are free to lead. His freedoms were larger. His compulsions, looser.

Wealth Hyper-Inequality

Of course, we don’t live in that world. Following the crisis of the 70’s, we took a different direction. In both theory and practice, we bulldozed the public sector. The deregulated and newly globalized markets that emerged from the 1970’s began shoveling wealth to the top 1% (mostly the top 0.1%, actually).

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In 2017, the three wealthiest U.S. citizens owned more wealth than the bottom 50% of the population combined. This inequality did not take off until the 80’s:

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From the perspective of time ownership, this is exactly backwards. Wealth, more so than higher wages, affords time ownership. Ownership grants access to resources without requiring exchange. Wages, on the other hand, demand time in exchange for resources. Exchange, by definition, transfers ownership of your time to someone else. So a democratic commitment to time ownership would entail a wealth distribution that grows more egalitarian, rather than more lopsided.

Empowering the private sector and flattening the public sector left only one approach to more egalitarian distributions of time ownership: get more and more Americans privately wealthy. The past 50 years have achieved the opposite, concentrating wealth in fewer and fewer hands.

For most Americans during this period, increased reliance upon credit and heaps of private debt have actually decreased their degree of time ownership. Debt looms over our lives and further constrains them. It shrinks our spectrum of viable possibilities. But without the credit that creates debt, how could people afford their medical bills? College tuition? How could the slightly-below-average-income American afford to live?

The past 50 years of ‘progress’ have not delivered ordinary Americans more decision making power over their own lives. Instead, grocery aisles fill with fifteen different kinds of mayonnaise and sports drinks. We all carry new gadgets that have the potential to revolutionize the world, but are instead (mostly) pedaling the same tired consumerism.

1. In his absolutely brilliant, if slightly dense, book: Critique of Economic Reason.

The “shell of bondage”, French philosopher Andre Gorz writes1, “has become at the same time increasingly constraining and increasingly comfortable.” It’s as if we live in a shrinking room, but with every inch the walls close in, a new amenity appears to distract us from the fact that our lives are caving in.

How did we get here? 21st century time inequality - which hollows out the average American life by subjecting it to unrelenting extrinsic necessity - is a choice.

It’s a choice molded by the changing of the American mind during the 20th century. Devaluing leisure time opened the path for time inequality to grow like a hungry weed. The vision of all Americans coming into greater ownership of their time fluttered away like a dried leaf from a cold tree.

To revive a politics of time ownership in the 21st century, we should first revisit and understand why we abandoned it in the past.

The Decline of Leisure

The decline of leisure is a fascinating, perplexing story about how American culture changed its mind. The U.S. Dept. of the Interior sums up the saga in their 1974 report:

“Leisure, thought by many to be the epitome of paradise, may well become the most perplexing problem of the future.”

How did leisure evolve from the ‘epitome’ of paradise where we were free to more deeply realize our own humanity, to a ‘problem’ that threatened to plunge us into boredom, crime, and decay?

Life in the beginnings of industrial capitalism would strike us as unbearable today. People worked 70+ hours per week in conditions that would make Apple’s Chinese sweatshops, where in 2010, 15 workers decided suicide is preferable to their working lives and hurled themselves from windows, look comfortable.

By 1830, a growing labor movement successfully connected abstract ideas like “freedom” and “progress” to policies for steadily decreasing the working week. For the next 100 years, the reduction of the working week reigned as the concrete manifestation of progress under capitalism. The lifetime of American citizens - all citizens, not only those who ‘made it’ - would require less and less extrinsically motivated labor time. Leisure would define the everyday life of American citizens.

I call this the expanding leisure hypothesis. By the early 20th century, it was nearly taken for granted that innovations would continue improving productivity. Higher productivity would mean shorter and shorter workweeks would be required to sustain the economy.

Cultural luminaries like Benjamin Franklin, John Adams, Bertrand Russell, John Maynard Keynes, even the creators of the futuristic sitcom The Jetsons, believed economic progress would inevitably lead to shorter working weeks. Everyone would enjoy more time for leisure, play, and cultivating the ‘art of living’.

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And so it went. From 1830 - 1930, this story played out. Average working weeks declined from 75 (1800), to 65 (1870), to 50 (1929), down to 37 (1938). The future imagined by The Jetsons felt within reach: by 2060, George Jetson’s 9-hour workweek would earn sufficient income to provide his entire family with a comfortable life. Keynes and Russell believed closer to 2030, 15-hour workweeks would be the norm.

Concerns that leisure would cause sociological decay, rather than facilitate the art of living, always existed. But they were dwarfed by widespread belief in the virtues of more leisure time for all.

FDR’s administration began tipping this balance in the 1930’s. The New Deal sought to enshrine a new vision: full-time, full employment at 40 hours/week. The labor movement’s call for shorter working weeks softened, replaced by a stronger cry for higher wages.

By the 1960’s, the expanding leisure hypothesis toppled. In 1964, the science fiction writer Isaac Asimov was asked to imagine the world of 2014. He concluded with a great fear: the disease of boredom. It would spread and intensify as automation progressed. “Enforced leisure” would wreak “serious mental, emotional, and sociological consequences.”

Now, the fear of leisure rose to prominence, no longer dwarfed by the virtues of leisure. The Pulitzer Prize-winning political scientist Sebastian de Grazia warned: “There is reason to fear…that free time, forced free time, will bring on the restless tick of boredom, idleness, immorality, and increased personal violence.”

By the 1980’s the inversion was complete. Like a marathon runner pivoting 180 degrees mid-race and bolting the exact opposite direction she’d traveled, average working hours began increasing. ‘Progress’ was no longer conceived as shifting the balance of our time from labor to leisure. Freedom from work became freedom through work.

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Derek Thompson describes this new religiosity of work as workism. Work, rather than leisure, became the means of “identity production”:

"The economists of the early 20th century did not foresee that work might evolve from a means of material production to a means of identity production."

Today, flying in the face of historical patterns, the most well off in society are working more hours than the least. “For the first time in human history, the rich work longer hours than the proletariat”, writes David Brooks. Ancient Greek aristocrats would slap their knees and laugh you away if you told them this would ever be the case.

2. I discussed this mystery at length with Ben during our podcast conversation together.

An historian by the name of Benjamin Hunnicutt devoted much of his professional life to studying what he calls “the great mystery of leisure”2. He came to a blunt conclusion: amnesia.

“I have come at last to the simple conclusion that one of the most important reasons for the end of shorter hours, the recent decline of leisure, and the substitution of the rhetoric of perpetual need for the traditional language of “abundance” is something like a nationwide amnesia.

We have forgotten what used to be the other, better half of the American dream. In our rushing about for more, we have lost sight of the better part of freedom - of what Walt Whitman, with so many others throughout American history, called Higher Progress.”

— BENJAMIN HUNICUTT

But as Hunnicutt’s work documents, this amnesia was orchestrated. It resulted from a web of cultural forces that sought to redefine the American Dream. Specifically, the redefined American Dream held a new, lesser estimation of its people’s capacities. Where previous generations believed that citizens were up to the task of using leisure time wisely, the new view was summarized in JFK’s comment that, following automation, “we’re going to find the work week reduced...we are going to find people wondering what to do.”

The assumption that people simply wouldn’t know what to do with more time ownership erased the prior view that leisure would widen citizens’ scope of freedom and empower them to develop their intrinsic motivations.

As the Dutch historian Rutger Bregman’s new history of human nature suggests, the assumptions baked into a system influence human development in line with those assumptions, regardless of their veracity. You get the kinds of humans you design for. This even has a name: The Pygmalion effect. If you assume humans are ill-equipped for leisure time, you will create systems that make it so. And, as the work of psychologist Peter Gray suggests, that’s exactly what happened.

From 1955 to the present day, the decline of unstructured play-time for children - itself largely the product of economic pressures - changed the course of human development. The decline of play caused, among other problems, a deterioration of our “intrinsic competencies.” Our capacities to self-govern and intrinsically motivate our own behaviors declined. We got what we assumed.

This means a political economy for time ownership is more than an economic commitment, but a framework for human development (as I’ve written elsewhere, the two can hardly be separated nowadays). Designing for time ownership, the rebirth of leisure, is to create systems that nurture the intrinsic capacities of human beings.

As Hunnicutt concludes his study, “Free people choosing more freedom is the best hope for the future.”

New Paradigms of Ownership

In many ways, a political economy for time ownership is a resuscitation of the connection between economic and higher progress. But the economy of the 21st century hardly resembles that of the 20th. Digitization, globalization, and financialization have all mutated the economic environment. To return to the old ideal of leisure, we require a new set of policies to get us there.

“But the point is this: if the onset of ownership had the power to birth a civilization, new models of ownership should have the power to fundamentally change it.”

20th century progressives believed that shorter working hours - achieved from above by reducing the overtime threshold, and below by individual firms choosing work-share programs to reduce shift lengths - higher wages, and better working conditions would pave the leisurely road to progress. Notice: the basic structure and distribution of ownership, the engine of wealth, remains unchanged.

This isn’t all that strange, considering wealth inequality wasn’t on economic radars at the time. But decades of cascading wealth inequality created pools of power that higher wages and lower overtime thresholds cannot touch.

Wealth, power, and decision making capacity are tightly interwoven. For time ownership to be more than hush-money, it needs to come along with heightened decision making power. One of the fears of universal basic income skeptics is that it will pacify the disenfranchised, thereby protecting existing power dynamics.

Wages and redistribution can only trace the surface of entrenched power. New models of ownership restructure at the ground floor, changing the generative dynamics of wealth in the first place. Many anthropologists and historians suggest that civilization as we know it was born with the onset of ownership. Rousseau famously believed that we might’ve saved our species - and others - a lot of trouble by ridiculing the idea that one might enclose a piece of land and call it their own.

But the point is this: if the onset of ownership had the power to birth a civilization, new models of ownership should have the power to fundamentally change it. Ownership is a lever plunged into the heart of our social structure. To pull the lever is to move civilization from its base. This is why a politics of time ownership must dig beneath wages. We don’t want more comfortable cages. We want to break them.

But what might new models of ownership look like in practice? Do they require wholesale communist revolution? Or just higher taxes on property? Ownership is a broad category open to a variety of new ideas. Before suggesting a policy platform designed around time ownership, I’ll survey two recent proposals that aim to rewrite the deep economic layers of our lives. They do not require violent revolution. They are imaginative, yet grounded in the eminently possible.

Familiarity with these proposals advances the idea that change is within reach. We gain a wide view of possible approaches to redesigned economic substrates of ownership. In turn, let’s examine Thomas Piketty’s vision for participatory socialism, and Nils Gilman & Yakov Feygin’s The Mutualist Economy: A New Deal for Ownership.

Piketty’s Participatory Socialism

Thomas Piketty’s 2014 book, Capital in the 21st Century, took the spotlight that movements like Occupy Wall Street placed on wealth inequality and gave it a voice in the highest level of economic analysis.

Together with his more recent work, Capital and Ideology, Piketty’s project is largely diagnostic. He traces the roots of our present inequalities into the deep annals of history, revealing the present as a deeply contingent expression of historical patterns.

This is powerful, since many have adopted Mark Fisher’s idea of capitalist realism to describe how the present now feels immovable, drained of the real possibility for change like an emptied bathtub. The present feels less like an always-changing expression of alterable patterns, more like a glacier frozen in place. Piketty’s historical analysis is meant to reveal the glacially unchanging present as, in fact, made of water.

Apply the right conditions, and the present is revealed as a soluble substance always poised to melt into fluidity.

Tucked beyond the 1,000th page of Capital and Ideology, Piketty sketches a vision of what these conditions might be. He gathers them under the name participatory socialism.

Participatory socialism, he writes, is “a new universalist egalitarian perspective based on social ownership, education, and shared knowledge and power.” In concrete terms, his vision rests on the twin pillars of steeply progressive taxation, and economic democracy:

  1. Steeply progressive taxes on income and wealth to stimulate economy-wide circulation of capital, and replace “permanent private ownership” with “temporary private ownership”.
  2. Sharing power, ownership, and decision making in firms by granting workers voting rights in company decisions, and capping how much voting influence money can buy, ensuring control cannot be captured by a single wealthy entity.

Piketty proposes an annual wealth tax (which he calls a “property tax”, not to be confused with the existing U.S. property tax) coupled with an inheritance tax. The rates climb all the way to 90% on those who own 10,000 times the national average wealth ($973 million in 2018).

His income tax includes all income, labor (wages) and capital (dividends, interest, corporate profits). Again, a top rate of 90% applies to incomes 10,000 times the average national income. Today, this translates to a marginal income tax rate of 90% on all incomes in excess of $755 million. In terms of purchasing power, this rate is softer than what the U.S. had in place for most of the mid 20th century, when top marginal tax rates reached 94% on incomes above $200,000 (just below $2 million in today’s dollars).

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Alongside progressive taxes and temporary ownership, Piketty envisions the ‘social ownership of firms’ achieved through codetermination and legislating a ceiling on the voting power of large shareholders in major corporations.

Codetermination mandates that a certain percentage of the company board must be held by worker-elected representatives. This grants workers a direct voice in corporate decision making. In Germany, at least ⅓ of company boards with 500-2,000 employees must be made of worker-elected representatives. The percentage rises to just under 1/2 for companies beyond 2,000 employees.

As for the ceiling on shareholder power, Piketty suggests that for investments beyond 10% of a large firm’s capital, the correspondingly acquired voting power should proportionally decrease. A similar proposal for nonprofit media organizations proposed that investments beyond 10% of the organization’s capital would receive voting rights corresponding to only 1/3 of the amount invested.

Together, codetermination and shareholder ceilings widen the interests with power at the decision making table, and reduce the liability of corporate decision making to capture by singularly wealthy investors.

A Day in the Life of a Participatory Socialist

Relevant to the politics of time ownership are two elements of what Piketty suggests we do with the revenues from progressive taxation: basic income, and universal inheritance.

He envisions a basic income set at 60% of average after-tax income. So taking the average (median) U.S. income in 2018 of $62,000, the basic income would be set at $37,200. Someone with no other income would receive the full amount. As earnings increase, the basic income phases out. Technically speaking, this is a negative income tax.

The universal inheritance, funded by the wealth tax, would grant every citizen around $100,000 upon turning a given age (Piketty suggests 25).

These policies help establish the universal baseline of access to resources that raise the time ownership of all citizens. However, put crudely, Piketty’s plan amounts to “taxing capitalism out of existence”, as Paul Mason put it.

Top marginal taxes on income beyond 90% are well within historical norms, but the same rate applied to the highest echelons of wealth is unprecedented. The power dynamics required to pass such high degrees of taxation across the board - wages, capital gains, investments, corporate profits - are almost perfectly inverse to the actually existing landscape of power.

For a more accessible vision of an economy defined by inclusive institutions of public wealth, we turn to Nils Gilman and Yakov Feygin’s paper, The Mutualist Economy: A New Deal for Ownership.

The Mutualist Economy

The spirit of the New Deal for Ownership has a surprising predecessor: George W. Bush. The Bush administration popularized the idea of building an “ownership society”. The sentiment was straightforward: citizens should have maximal control over their lives.

But using the example of Marcus as a microcosm for both the low and lower-middle classes, the neoliberal regime of privatization, deregulation, and tax cuts produced a scale of inequality that actively reduces the control ordinary Americans have over their lives. Our lives are shaped, our possibilities slimmed by increasing piles of student, medical, and credit card debts. Just like Marcus, most of us are only free to do that which earns enough to keep bills, interest rates, and debt collectors at bay.

Bush’s idea was to incentivize home ownership and pensions as gateways for more Americans to benefit from capital gains. But pension funds provide a trickle of returns relative to the investments made by wealthier classes, and homeownership is a failing bridge between the wealth gap.

The New Deal for Ownership is an inverted approach to Bush’s ownership society: rather than privatized institutions of deregulated capital accumulation, build public and democratically owned institutions of wealth dispersion. Gilman & Feygin propose a series of policies that treat all citizens as partial owners of our national capital stock, viewing the economy as an interdependent system of collective value production, to which we are all entitled a share.

In the true spirit of ownership, each citizen should receive direct dividends from the national wealth. These dividends take the form of four policy proposals.

Social Wealth Fund

A social wealth fund (SWF) is a collectively owned investment portfolio. Every citizen owns an equal share, so that all citizens receive dividends as the investment grows. An example is Alaska’s Permanent Fund (APF). The state of Alaska taxes all oil sales 25%, investing the tax revenue in a publicly managed portfolio of which each citizen owns an equal share. Since its inception in 1982, citizens have received between $1,000 - $2,000 per year.

SWF revenues can be distributed to people directly, like the APF, or used to fund government investment in public services, as in the cases of Norway and Singapore. Norway’s SWF - The Norwegian Oil Fund - funds the country’s universal pension. Singapore’s SWF (they have two, actually) covers nearly 30% of the country's government expenditures.

Joint Ownership of Government Funded Patents

Government investment often plays a key role in the early stages of risky R&D. The iPhone, Google’s search algorithm, even the internet were all seeded by taxpayer investments. But once these innovations are enshrined in patents, what began as fruitful public-private collaborations transfer ownership over to the private sector.

The proposal for joint ownership of government funded patents suggests that taxpayers should receive a cut of the returns on their investments. By owning shares of patents that arise from public-private collaboration, the government can either distribute IP dividends on a per capita basis, or use the revenue to fund public services.

Baby Bonds

Similar to Piketty’s universal capital endowment - though far more politically viable - is the idea of baby bonds. Every citizen would receive a high-yield savings account at birth. The account would be managed publicly, by the Treasury, or the Post Office. Bonds would be added to the account at birth, accruing value until a specified age when the funds are made available to the citizen, serving as a minor inheritance.

Guaranteed Retirement Accounts

401(k) pensions perform meagerly relative to the more complex financial instruments available to the wealthy. Using 401(k)’s as a way to tie the middle class into the stock market is like giving a child a tennis ball to keep busy while you return to the real game of tennis.

Instead, a GRA would be a universal pension fund managed by the Treasury or Federal Reserve. Since it would be administered as a large pool, it could make more meaningful investments that fetch greater returns than individual 401(k)’s do. This would bring pension returns closer to the higher returns enjoyed by wealthier investors.

Mutualist Political Economy

All these elements combined - a sovereign wealth fund, government owning shares of publicly funded patents, high-yield savings accounts with capital endowments, and guaranteed retirement accounts - are designed to bring about a “new social contract”. A new paradigm of shared ownership of the returns on capital that are usually enjoyed only by the wealthy.

The Political Economy of Time Ownership

Each preceding proposal reconsiders the construct of ownership, but neither is explicitly designed with time ownership in mind. Drawing on elements from both Participatory Socialism and The Mutualist Economy, here I propose a rough sketch of a policy platform that could belong to a political economy built explicitly around time ownership.

Recall today’s wealth distribution:

Since the strategy of bulldozing public institutions and regulations so that every American can become privately wealthy isn’t working, we need a different approach. A political economy of time ownership can employ public-private cooperation to provide every citizen with access to a sufficient baseline of unconditional (owned, not exchanged) resources to keep their lives from extrinsic domination.

This means using redistribution to jumpstart pre-distribution. Increasing equality of opportunity through redistribution can kickstart more egalitarian pre-distributions of wealth. Doing so requires taking some tools to wealth inequality and creating public institutions that create a baseline of wealth for all:

In turn, this more egalitarian baseline will spread opportunities for wealth creation to more people who’re otherwise shut out, such as the difference made in Marcus’ life between the second and third examples.

The policy platform to create this baseline could include: progressive income and wealth taxation, basic income, universal healthcare, baby bonds, a social dividend system that allows for per capita distribution on profits from collectively owned assets, and codetermination.

Wealth Taxes

The current wealth distribution is like a giant, top-heavy anchor holding pre-existing power structures in place. It’s unhealthy for the economy, unhealthy for human development, and is stained by the injustice of racism, imperialism, and exploitation.

Using wealth taxation to empower the marginalized is to reckon with the mixed bag that is the history of capitalism. It is also, as the economists Gabriel Zucman and Emmanuel Saez show, highly feasible in the American context. Zucman proposes a wealth tax rate of 2% beginning on fortunes in excess of $50 million. The rate rises to 3% above $1 billion.  

The wealthy tend to invest a majority of their wealth in the stock market, historically yielding 8 - 10% returns. A wealth tax rate of 2-3% will not reduce their overall accumulation of wealth, but simply reduce the rate at which their wealth continues increasing.

Wealth Allocation.jpg

Wealth taxes alone are grossly insufficient to bring our tax system into the 21st century, let alone to fund a revitalized political economy of time ownership for all. A broader tax discourse should reconsider taxing multinational corporations, progressive taxes on all income and capital gains, and broad-base taxes like a value-added tax or a national income tax to fund robust and inclusive social programs.

Basic Income and Universal Healthcare

One of the biggest thorns in America’s pained relationship with taxation is legibility. How clearly visible are the benefits our taxes go towards? Say I purchase a $20k car. It’s directly apparent to me what my $20k gets me. I drive the car every day. But if I pay $20k in taxes, it’s less clear what I’m getting for my money.

The legibility issue is one reason why welfare states that rely more on universal (everyone receives benefits) than targeted programs (only a certain group receives benefits) have higher rates of overall redistribution and broader support for taxation.

Universal programs are expensive. But they’re also highly legible. Two universal programs in particular can play a crucial role in affording more time ownership to all: universal healthcare, and basic income*.

* A brief technical note: by “basic income”, I mean any policy that establishes an unconditional income floor in the economy. Two leading proposals are a universal basic income (UBI) given to all, or a negative income tax (NIT) that phases out benefits as individual income rises. A UBI advocate might argue that NIT isn’t unconditional/universal, but in truth, neither are most UBI proposals. The taxes necessary to fund UBI create the same phaseout effect as NIT. Elon Musk would not really receive UBI. He would pay more in increased taxes than he receives, so it’s slightly misleading to call the program universal. The difference between UBI and NIT is not universality, but legibility. There are benefits a UBI offers over an NIT, but they come with significantly larger gross costs, which in turn require significantly more tax revenue. The choice between them is largely a political and psychological question.

Basic income and universal healthcare would immediately provide a (short) ladder out of the deep, psychologically corrosive well of extrinsic domination for all those at the lowest end of the wealth distribution. They grant direct entitlement to vital resources that we would otherwise need to labor (exchange time) for.

By lessening citizens’ dependency on employers for base levels of income and access to healthcare, every citizen is further empowered to choose whether to enter into a relationship of exchange, or remain in autonomous ownership of their time (of course, one doesn’t yet have a real choice in the matter, if receiving only $13,000 from a basic income and healthcare. Most will still need to work).

But these policies alone are insufficient. They’re necessary to swiftly lift those with least ownership of their time. But they don’t reach deep enough into the economy’s underlying architecture that produces such wealth inequalities in the first place.

Baby Bonds

Rather than adopting Piketty’s 90% tax rates on vast fortunes to provide a universal inheritance to every citizen, the mutualist proposal for baby bonds can achieve similar outcomes with far lower tax rates. By allowing the account to benefit from capital gains, every American receives a direct share in the growing economy.

The high-yield savings (or perhaps risk-averse investment) account given to every American upon birth could be funded by the previously mentioned 2-3% wealth tax. The tax is estimated to raise between $118 - $376 billion per year. Let’s assume a middling scenario of $250 billion. ~3.7 million American babies were born in 2018. Dividing the tax revenue equally, that’s enough to endow the account of every newborn American with $67,000.

On their 21st birthday, assuming an annual growth rate of 6% (less than the stock market’s 20-year average, and well below the 12% rates savers enjoyed in the 1980’s), a baby endowed with $67k would find themselves with access to $227,770. This is worth repeating: every American from the implementation of this policy forward would have access to a bank account in excess of $200k on their 21st (or whenever) birthday.

The economist Darrick Hamilton offers a more conservative - and therefore politically feasible - proposal. He suggests making the initial investment adaptive to wealth. The less wealthy the newborn’s family, the higher the initial investment in the baby bond account. Instituting a spectrum that would run from $500 for the wealthiest up to $60,000 for the least wealthy would cost approximately $100 billion. The account would grow at a rate sufficient to counterbalance inflation.

Beyond facilitating time ownership and new life possibilities for all, the explosion of innovation would likely pay back the cost of the program, in either formulation.

Social Dividends

“Social dividends” refer to a broad range of possibilities, each following a similar logic: recognizing that some assets should be collectively owned by all American citizens, entitling them to direct dividend payments from the profits those assets generate.

For example, the thinking behind Alaska’s Permanent Fund was that Alaskan oil should be treated as a natural resource endowed to all Alaskan’s, rather than to whatever oil company digs it up first. Establishing collective ownership of the oil means that all Alaskan’s are entitled to a percentage of the profits generated by oil sales. Accordingly, the state invests all oil tax revenues into a SWF that pays a dividend to all Alaskans.

Another example is the proposal for a carbon fee-and-dividend, a strategy already in place in British Columbia and Switzerland. The idea is to levy a carbon tax, collect all the revenue, and distribute it back out equally to all citizens.

A third example is the burgeoning idea of ‘data dividends’. Presently, digital platforms freely capture our data. They either sell that data, or feed it into profitable machine learning algorithms. Levying a tax on the sale and resale of consumer data, or taxing “data dependent” companies in proportion to their dependency, asserts that we own our data, and must be compensated for its use. If our data is being used to generate profits, citizens deserve a small share of the profits.

All of these social dividends - payouts from social wealth funds, carbon dividends, or data dividends - can be rolled into a single ’social dividend’ given to citizens on a monthly or yearly basis. Just like tax returns, citizens can see how much each subsidiary dividend contributed to the single lump-payment.

Elsewhere, I’ve suggested a ’split-tier’ system between basic income and social dividends. Social dividends can layer atop people’s basic income benefits, forming a two-tier payout structure. The stable layer of basic income guarantees no one’s income will fall below a certain level, while the social dividends can freely fluctuate as their asset values change. Recipients thus receive a direct incentive to contribute to national wealth, as a growing economy means higher social dividends, even if one is above the basic income threshold.

These dividends are entitlements, not exchanges. As such, the more assets that feed into them, the more unconditional resources every citizen receives, furthering their time ownership.

Codetermination

Basic income and universal healthcare are largely redistributive measures that would raise the bottom end of the wealth distribution. Social dividends and baby bonds would democratize ownership and raise the economy-wide baseline of time ownership by granting every American a partial slice of ownership in our national wealth. But untying the knots of power that create and perpetuate wealth inequality in the first place requires deeper reform.

Collectivizing ownership over a portion of national wealth does redistribute a certain degree of power. By giving citizens an unconditional basis of resources, they’re more capable to demand better labor contracts, or avoid them all together by becoming entrepreneurs. But within organizations, the unaddressed question of power is: who gets to make decisions? What interests are represented in the votes that determine what companies do with their profits?

Unchecked concentration of decision making power that excludes labor, environmental, and broader societal interests led to a meteoric rise in stock buybacks and executive pay in the past 40 years. Too often, these same company executives and major stockholders that stuff their pockets when profits boom are those that rely on taxpayer dollars to bail them out when recession strikes. Codetermination is a national mandate that would give worker-elected representatives direct voting power in company decisions.

Germany’s ongoing 50-year experience with codetermination provides encouraging results. Stable growth and innovation, no decline in productivity, a tighter ratio of worker to executive pay, lower macroeconomic inequality, far fewer stock buybacks, and improved working conditions. While Germany’s board structure differs from that in the U.S., adapted proposals already exist.

All Together

This list is by no means exhaustive. I don’t mean to declare the policy agenda for a political economy of time ownership, but to provoke a wider democratic deliberation on its behalf. What’s missing?

A Society For Time Ownership

The German politician Peter Glotz used the phrase “a new politics of time” to draw a connection between reducing the working week and a political commitment to emancipation:

"A new politics of time...would be the most important objective in the programme of a political movement which would not be ashamed to claim emancipation as its goaI.”

“Emancipation” is a darling word of the left, but its pragmatic meaning is often unclear. Emancipation from what? And how, exactly? The foregoing policies for collective and unconditional wealth ownership are anchored in a concrete interpretation: emancipation from extrinsically dominated lives, achieved by leveraging our national wealth to reduce the amount of time citizens are forced to exchange in order to meet their needs.

Decreasing extrinsic imperatives raises intrinsic optionality. Citizen’s gain the capacity to let intrinsic motivation guide more of their time. But time ownership isn’t a political philosophy that hopes to extricate individuals from society. We are social, cooperative, and exploratory by nature. Rather, higher intrinsic optionality could reweave the web of society from increasingly voluntary relations. Time ownership enables citizens to explore lives of their own choosing, rather than those laid out for us by circumstance.

It’s in this spirit that André Gorz envisions reducing the extrinsic demands set upon citizens would enliven and improve our capacities to self-organize. A more “generative society and democracy” would ensue:

“...a policy of a staged reduction in working hours, accompanied by a guaranteed income, cannot fail to enliven thinking, debate, experimentation, initiative and the self-organization of the workers on all the different levels of the economy and therefore to be more generative of society and democracy than any social-statist formula. This is the essential point: that control over the economy should be exercised by a revitalized society...The progressive diminution of work for economic ends will have made it possible for autonomous activities to become preponderant in that society.”

The political economy of time ownership sketched in this essay offers a 21st century road to that same ideal: an enlivened society of self-organizing workers, where “work” becomes an increasingly intrinsic and autonomous affair. Progress would be understood as conferring ordinary citizens with growing shares of ownership over their time.

What Glotz wrote in 1987 is all the more true today: "The historic opportunity we have before us has never before existed in human history.” Time ownership, defined as the advance of intrinsic motivation over the composition of daily life, has never been achievable at scale. Where it existed in history, it was by virtue of slavery and violence. Aristocracies enjoyed luxurious lives made possible by slaves and peasant labor.

Hannah Arendt writes of how Ancient Greek philosophers took for granted that violence and enslaving others were the best ways to escape the realm of necessity. To transcend necessity:

“...force and violence are justified…because they are the only means to master necessity - for instance, by ruling over slaves - and to become free. Because all human beings are subject to necessity, they are entitled to violence toward others; violence is the prepolitical act of liberating oneself from the necessity of life for the freedom of the world. This freedom is the essential condition of what the Geeks called felicity, eudaimonia, which was an objective status depending first of all upon wealth and health."

In 2019, U.S. household wealth reached $106 trillion. The objective criteria for freedom no longer require violence and slavery. We can politicize the act of liberation and lift every citizen towards time ownership.

Amidst the United States’ 21st century wealth, the psychologically corrosive, politically bankrupt unfreedom of extrinsically dominated lives is a design problem we’re capable of solving.

The immovable scarcity of time is a constraint that we may never transcend. We can manufacture abundance in all but what matters most. But in a world exploding with change, the familiarity of unchanging constraints can be grounding, like deep anchors in a dark and thrashing storm. Indeed, what matters most to humankind has hardly changed throughout history. Only our capacities evolve.

The nature of how we spend our time may always remain a fundamentally economic question. But this bestows political economy with an abiding purpose for our growing capacities: time ownership for all.

You Might Also Like

Universal Basic Income & the Capitalist Production of Consciousness // my essay about economic systems, consciousness, and human development.

A Negative Income Tax for the 21st Century // my full policy proposal for a basic income.

Ben Hunnicutt: Leisure, the (Forgotten) Basis of American Progress // my podcast conversation with the historian Ben Hunnicutt, whose work inspired the Decline of Leisure Section

Get in Touch!

If you’ve read this far, you might have some thoughts. This essay is exploratory - the ideas are loosely held waypoints along an open-ended, ongoing inquiry. Don’t hesitate to reach out with responses, collaborations, (constructive) criticisms, suggestions, etc.

You can contact me via email, or on Twitter.

In addition to essays, I explore these themes through a few different projects:

  • I host the Musing Mind podcast, where I get to speak with guests who bring contemplative philosophy and economic theory into dialogue with each other.
  • I write Mind Matters, a newsletter exploring the connective tissue between economics, culture, & consciousness:

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Against Time Inequality: A Framework for Progress

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.