Something is awry in the relationship between progress and phenomenology. Progress is becoming a technological quest, searching for greater longevity, increased productivity, and wider frontiers. But along the way, we’ve lost critical, complementary focus on what these new, technologically augmented ways of living feel like. We’re designing a world irrespective of the phenomenologies it fosters. Is life, as an experience, growing increasingly worth living? Is it growing richer not only in material terms, but experiential terms?
I call this the The Pessoa Problem. The poet Fernando Pessoa once wrote that life “all comes down to trying to experience tedium in a way that does not hurt.” Now, Pessoa wasn’t a cheery guy, and we shouldn’t read him as representative of today's majority mood. But I do think that his line can be read as a warning. A harbinger of where, without careful recalibration, we may be heading. The Pessoa Problem is both a critique of, and concern for, the trajectory of modern phenomenology.
Good artists are usually ahead of wider cultural phenomena. The Pessoa Problem gestures towards a quiet crisis surging just out of sight. Left unaddressed, it may not crash upon us and wipe us out, but worse. It may leave us as a society of Pessoas1. Alive, but merely enduring. Existing, but vacantly. Instead of ebullience at the marvel of being alive, there would merely be the tedium life entails. This is not progress.
I’ve tried thinking about this problem from numerous directions, all of which wind up feeling partial, and ultimately insufficient. Philosophy of mind, cognitive science, psychology, and literature are all helpful in elaborating the problem, but short on solutions that can reach beyond individual responsibility. Economics, critical theory, systems theory, even ‘progress studies’ offer scalable courses of action, but lack a normative foundation to guide them. But finally, It feels like I’ve found an approach, a tradition, that with some tweaking, can both square us up to the problem, and orient us towards an appropriate response.
What I have in mind is “value theory”. And if you’ve never heard of it, that’s sort of the point. Once a centerpiece of sociopolitical discourse, today, value theory is nowhere to be found, and we’re paying the price.
In its simplest terms, value theory asks what value is, and how we might cultivate more of it. Or, as one group of academics put it, value theory “is about how, [in] a living natural world, human beings and societal institutions co-create satisfying ways of living.” To my mind, value theory is about how not to become a society of Pessoas.
Instead, it can help guide us in producing a form of wealth that shows up in our direct experience of the world. It’s about how we navigate the question of what kinds of humans we wish to become, and what kinds of structures we design to propel us in that direction. Value theory is a matter of becoming, concerning the questions of what we wish to become, what we are becoming, and how institutions structure that process.
The anthropologist David Graeber puts this explicitly, writing of ‘value’ as the social process of drawing possibilities down from the space of what could exist, into the realized world of what does exist. Value, he writes, is the coordinated social embodiment of creative potentiality:
“However elusive, creative potential is everything. One could even argue that it is in a sense the ultimate social reality … social both because they are the result of an ongoing process whereby structures of relation with others come to be internalized into the very fabric of our being, and even more, because this potential cannot realize itself—at least, not in any particularly significant way—except in coordination with others. It is only thus that powers turn into value.”
Value debate has not exactly disappeared. Instead, there was a victor, and the alternatives were banished to the shadows. The problem is that the reigning theory of value – marginal utility theory, though what many people call ‘neoliberalism’ works too, as indicative of an economic paradigm that equates value with price – points us precisely in the Pessoan direction. It is a theory of value (prices) that undermines the actual stuff of value (phenomenology).
The philosopher Martin Hägglund writes that today’s reigning theory of value is “inimical to the actualization of freedom”, that we have created a form of progress that achieves its opposite:
“The very calculation of value under capitalism, then, is inimical to the actualization of freedom. Indeed, the deepest contradiction of capitalism resides in its own measure of value. Capitalism employs the measure of value that is operative in the realm of necessity [means] and treats it as though it were a measure of freedom [ends]. Capitalism is therefore bound to increase the realm of necessity and decreases the realm of freedom."
Hägglund’s own interrogation of value theory led him to advocate for a transition from capitalism to a form of democratic socialism that values 'socially available free time'. For Graeber, value theory provides a starting point “if one is looking for alternatives to what might be called the philosophy of neoliberalism”.
On my view, value theory provides a helpful schema to navigate the paradox of progress undermining phenomenology.
This essay steps in that direction, proposing a theory of value that begins in biology, through cognitive science, and extends all the way into economic policy. It provides both a theory of what creative potentials we ought to bring into the world, and the associated strategy for how.
My thesis, in brief:
Value is the positive flow of vitality into a living system. Over-reliance on markets is undermining the production of value. A strategy of ‘unconditionality’ can help realign progress with the production of real value.
In particular, I’m interested in tracking how value has grown overdetermined by markets, undermining the vitality of all sentient life. But inversely, this suggests a way forward. Through a strategy I will describe as unconditionality, or the sustainable, unconditional provision of a growing baseline of resources to all citizens, we can introduce a cleavage between markets and value. These cracks are directly proportional to a realignment of the production of value with vitality, of progress with phenomenology.
As Leonard Cohen chants, these cracks are “how the light gets in.”
The remainder of this essay is organized as follows.
I) First, I'll define a form of wealth that can map onto ideas in cognitive science, and construct a theory of value with "vitality" at its core.
II) Second, I'll use this new form of value to explore how over-reliance on markets, which drives the reduction of value to price, undermines more expansive value production.
III) Third, I elaborate the strategy I call “unconditionality”, and how it provides a method of re-coupling economic progress with the production of value.
IV) Fourth, I survey important critiques to my argument regarding unconditionality and value, in the hopes of showing where further inquiry might look.
In we go.
The Flow of Value
Economists often define value and wealth in relation to each other. We can use the framework of stocks and flows to make sense of their relationship. Value is a flow, and wealth is a stock.
Stocks represent a fixed quantity at a given point in time. Like the stock of cars in operation in the US in 2021, which was roughly 283.3 million. Flows represent rates of change, measured over intervals of time. For example, the production of cars in the US in 2021 – roughly 1.6 million – was a flow that increased the overall stock of cars. Flows are defined in relation to the stocks they affect.
Value, as I will argue, is a matter of vitality. If value is the positive flow of vitality into a living system, wealth is that system’s stock of vitality.
The Stock of Wealth
So, value and wealth are different measures of the same thing. The question of value is to ask what wealth is.
The stuff of value and wealth is a category that, historically, changes. As the understanding of this stuff changes, so does the character of society. The Ancient Greeks took the stuff to be free time, made possible by slaves and women. The philosopher Hannah Arendt tells us:
“...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.”
For classical economists like Adam Smith or David Ricardo, value was a matter of how much toil and trouble a thing could save us. For Karl Marx, value was the congealed labor power embodied in its fruits. For marginalists, value is the marginal utility provided by an additional good or service, which is a subjective valuation revealed through prices.
Curiously, this progression strikes me as exactly backwards. Our societal definition of value has (d)evolved from free time and the exclusion of necessity-driven action from life, to reducing toil and trouble, to merely anything that generates a price.
Against this trend, let’s reconsider. What is wealth?
You Do Not Trade Wealth (wealth is the purpose of exchange)
Wealth has come to mean an accumulation of resources that can be exchanged for other things. To be wealthy is not to have anything in particular, but optionality and potential. The question of what wealth ought to be exchanged for is private and personal. Wealth remains a means towards privately chosen ends.
This is how we can wind up with a society of some fabulously wealthy individuals, who in fact, in the final analysis, have very little worth having. Very little of value.
In contrast, I want to define wealth as precisely that which all exchange endeavors towards. Wealth is the desired culmination of exchange. It is not a means, but an end (or, more confusingly, wealth is both means and end).
The French social philosopher André Gorz writes that when “the economy ceases to dominate society, human forces and capacities cease to be means for producing wealth – they are wealth itself.” Wealth, he writes, is the activity that develops human capacities:
“The source of wealth is the activity that develops human capacities or, more specifically, the ‘work’ of self-production that ‘individuals’ – each and all, each in their multilateral dealings with all – carry out on themselves. The full development of human capacities and faculties is both the aim of activity and that activity itself – there is no separation between the aim and the ever incomplete pursuit of the aim.”
Gorz calls wealth that is both a means and and end, where there is no separation, “intrinsic wealth”, which is “neither measurable nor exchangeable”. But can we be more specific? What is intrinsic wealth, beyond vague allusions to ‘human capacities’, or as Marx might say, the “absolute working-out of [humankind’s] creative potentialities”?
What is the common end that all means of exchange serve? Can there be a science of intrinsic wealth that does not sacrifice the understanding of wealth as an end, but still provides an analytically useful tool to help guide our policymaking, and ultimately, world-building?
I believe there already is, but it’s being developed out of sight of economists. Beyond what Gorz calls the “hegemonic ambit of economic categories”, an interdisciplinary effort is emerging at the confluence of biology, cognitive science, and philosophy. Loosely, the space is called “enactivism”, a domain of cognitive science. Therein, they’ve developed an understanding of value that roots it in evolutionary processes much larger than the merely human.
Intrinsic wealth, on this view, can be refined into a feature of phenomenology that arises as living systems engage their environments. Here, value is not an original economic category, but an aspect of the evolutionary process of life itself. To understand value, we can look to its roots, in biology.
Finding Value Amidst the Enactivists
The key enactivist point is that living systems do not just perceive what already exists ‘out there in the world’. The mind is not a passive representation constructed on perceptual information merely received from their environments. The mind, including the world it beholds, is a dynamic process that arises as an organism interacts with its environment.
Living systems, as they engage with their environments, give rise to aspects of the world they perceive. As some cognitive scientists write, living systems engage in “transformational and not merely informational interactions: they enact a world.”
What first caught my eye, and suggested value theory may find some roots in cognitive science, was one of the stated direct consequences of living systems enacting their worlds: “the primordial structure of value”.
“The primordial structure of value … manifests in what can now be called the subjective dimension even for the simplest organisms … A world without organisms would be a world without meaning; and it is in life’s incessant need, that a subjective perspective is established.” (source)
Value Is Significance Is Valence
This is where I believe we can begin building our theory of value. In establishing a ‘subjective perspective’, the ‘primordial structure of value’ is ‘manifested’. Let’s delve into this.
On this view, a living system comes with an inbuilt purpose: to exist (see: the free energy principle). This incessant ‘drive to exist’, or 'self production', common to all living systems, generates a mode of being that the philosopher of cognitive science Evan Thompson calls “concern”:
“…self-production generates ‘concern,’ an endogenous interest in or motivation for self-preservation and self-enhancement; such ‘concern’ is a form of existence or mode of being, not a mental state; and it instantiates a locus of subjective value in an otherwise valueless and subjectless world.”
The biologist Andreas Weber writes that to exist in this mode of concern is to be “already embedded in value-creation”:
“As living organisms, we as biological creatures are already embedded in value-creation…Bringing forth a body follows a primary goal – to exist. This puts a universal grid of good and bad over the perceived world. Being an organism means constantly producing existential value. So we need to recognize our bodies and emotional existence as sources of value prior to deliberating about which theory of value may be best.”
Here, ‘existential value’ has something to do with navigating these perceptual grids of good and bad, seeking out the good. But succeeding is a pre-reflective category that registers in the body, and our “emotional existence”.
But Weber’s description is vague. Can we be more rigorous? In Enaction, Di Paolo, Rohde, and De Jaegher describe things in greater detail:
“…organisms cast a web of significance on their world. Regulation of structural coupling with the environment entails a direction that this process is aiming toward: that of the continuity of the self-generated identity or identities that initiate the regulation. This establishes a perspective on the world with its own normativity…Exchanges with the world are thus inherently significant for the agent, and this is the definitional property of a cognitive system: the creation and appreciation of meaning or sense-making, in short.”
To sense-make is to exist in the mode of concern, as Thompson wrote. It’s to navigate these ‘universal grids’ or ‘webs of significance’ that living systems ‘cast’ onto their perceived world, in pursuit of continuing their existence. Given a vast landscape of potential actions, living systems act so as to move themselves in the direction of what Di Paolo & friends call “significance”, or what Weber called “existential value”. Note that value and significance are being used as synonyms.
Evan Thompson gives three pillars of the sense-making process:
(1) “sensibility as openness to the environment (intentionality as openness)
(2) significance as positive or negative valence of environmental conditions relative to the norms of the living being (intentionality as passive synthesis— passivity, receptivity, and affect)
(3) the direction or orientation the living being adopts in response to significance and valence (intentionality as protentional and teleological).”
The second condition caught my eye, because recall that “significance” and “value” are often used synonymously by enactivists. Significance is value. I conferred with Thompson in the Public Square (Twitter), and he loquaciously confirmed that enactivism takes the two as synonyms:
With this in mind, we can rewrite the second pillar of sense-making, showing the enactivist theory of value:
(2) value as positive or negative valence of environmental conditions relative to the norms of the living being.
So, significance is value is valence. What’s valence? Valence refers to the overall subjective feeling, or pleasantness, of a particular experience. Joy, uncontrollable laughter, and the aroma of a freshly-cooked favorite meal all have positive valence. Sadness, fear, or anxiety all have negative valence. When I quoted Weber above, saying “we need to recognize our bodies and emotional existence as sources of value”, valence is the source of value he has in mind. Positive valence is a sort of signal that indicates we’ve ventured towards the good, or that which may help sustain our existence.
For enactivists, value is the valence brought forth, or enacted, by a living system as it engages with its environment. The more positive the valence, the higher the value.
But if we were to stop here, then our theory of value would simply define ‘vitality’ as positive valence. Anything that feels pleasant would have value, and society’s normative direction would be that of increasing pleasantness.
Were this the case, you may justifiably respond that we’ve simply reinvented hedonism with some lipstick on. On the surface, this theory of value could not distinguish between heroin addicts with an infinite supply and truly vibrant, radiant, value-brimming human beings.
So we have one final jump to make: how do we get from positive valence to vitality?
From Valence to Vitality
Again, let me provide the destination at the outset. Vitality is a subcategory of positively-valenced experiences where the experience raises our hedonic set-point, or the positive valence of our baseline state of consciousness through time.
Or: vitality is a set of positively-valenced experiences that kick-off positive feedback loops to sustainably raise average levels of positive valence over time. In this way, vitality maps onto Gorz's idea of 'intrinsic wealth', in that it is both a means towards generating more vitality, while simultaneously the end-goal in itself. But let me explain.
Some types of positively-valenced experiences are simple up-and-downs, like going to my favorite jazz bar with a close friend. We go out, have a great time full of positive valence, and then go home, where valence returns to it’s average level.
Others are up-and-down-and-farther-down, like taking heroin. These provide short-term boosts of positive valence, but the come-down does not merely return us to normal. It pushes our baseline lower. Andrés Gómez Emilsson (director of research at the Qualia Research Institute) writes that whether a strategy is truly in line with a long-term view of hedonism depends on the kinds of feedback loops it instantiates. Common examples of why hedonism is undesirable, from drugs to sugar, are short-sighted because they trigger negative feedback loops that undermine hedonic set-points. It’s just bad hedonism:
“Amphetamines, traditional opioids, barbiturates and empathogens can be ruled out as wise tools for positive hedonic recalibration. They are not comprehensive life enrichers precisely because it is not possible (at least as of 2016) to control the negative feedback mechanism that they kick-start. Simply pushing the button of pleasure and hoping it will all be alright is not an intelligent strategy given our physiological implementation. The onset of this negative feedback often triggers addictive behavior and physiological changes that shape the brain to expect the substance.”
Other types of positively-valenced experience bring us up, but as we come down, we settle at a slightly higher set-point, or valence equilibrium. An example could be a successful psychedelic therapy session, where a deep-seated trauma is surfaced and mended, such that when we return to sobriety, our baseline psychological state is slightly enhanced. Another example could be a worker who transitions from a dehumanizing work environment to an enriching one. Moving from being a powerless cog in an unthinking production regime to a human with voice, power, and the opportunity to meaningfully engage with both the content and process of their work. This provides a lasting boon to average valence levels, kicking off a positive feedback loop.
Vitality is this third category: any positively-valenced experience that generates a feedback loop towards sustainably raised set-points of positive valence. Put differently, vitality is a property that describes those experiences that sustainably make us feel more alive. Vitality is self-perpetuating positive-valence. Vitality is the growth of life2.
We've now covered, however briefly, the first sentence of my hypothesis:
Value is the positive flow of vitality into a living system.
Let's dig into the following two:
Over-reliance on markets is undermining the production of value. A strategy of ‘unconditionality’ can help realign progress with the production of real value.
“…it strikes me that if one is looking for alternatives to what might be called the philosophy of neoliberalism, its most basic assumptions about the human condition, then a theory of value would not be a bad place to start. If we are not, in fact, calculating individuals trying to accumulate the maximum possible quantities of power, pleasure, and material wealth, then what, precisely, are we?” (David Graeber)
So. Every living system confronts a landscape of possibility at every moment. We perpetually face a branching tree of behavioral paths we may take. The ‘creative potentiality’ Graeber mentions. Primordially, value evolved as a sort of perceptual heat map superimposed over the possibility landscape. The map helps us choose what to do, given the possibilities. We go in the direction of value.
But these maps aren’t perfect, and the process is evolutionary trial and error. More often, we go searching for value. That is, we take action, and discover whether that behavioral path struck a wellspring of value, or not. We take a new job, start a new hobby, kickoff a new exercise regiment, in the hopes that they'll make us feel more alive. Life is a generational search party for higher gradients of value within the possibility landscape.
The question of value, then, is a question of how free we are to explore the possibility landscape. The wider the possibilities we face, the more diverse the forms of life we may enact, the greater the odds that we bring forth deeper pools of value.
And this is where today’s theory of value - the marginal utility theory - becomes a problem.
The Marginal Utility Theory of Value
Marginal utility theory claims that value is set by the additional satisfaction (utility) that one extra (marginal) unit of a good or service provides.
Within the universe of equations, you can directly measure, and so manipulate, marginal utility. But in the real world, you can’t. My brain doesn’t give off some utility reading, nor is it a neurochemical whose levels can be monitored. This is because utility doesn’t actually exist, making its measurement a problem.
The economist Paul Samuelson bypassed the problem by suggesting there's no need to measure utility, since rational agents will 'reveal their preferences' through markets. And preferences are ultimately expressions of utility.
So prices are now used as the best indicator of marginal utility. This whole theory is often reduced (usually by critics) to “price equals value”. The theory assumes that consumers and producers will adjust their respective consumption and production levels until prices equal marginal benefits across the economy. Once the costs of production equal its marginal benefits, and the prices of goods and services equal the marginal benefits of consumption, you have an efficient market where prices reflect value.
As one economics textbook puts it:
“Value will be the actual price once all the producers and consumers have had time to adjust their consumption and production to any changes in taste and/or technology. In other words - aside from the time frame - there is no difference between value and price according to this theory.”
So ‘price equals value’ is a relatively fair encapsulation of the theory. This is where a problem arises. Value theory, as we’ve described it, is about the flow of vitality into living systems. Marginal utility theory, however, is about why diamonds are priced so much higher than apples.
Marginal utility theory is a theory of prices that presents itself as a theory of value. And in that conflation, value is undermined.
Price Should Not Equal Value
There are many economic critiques of marginal utility theory. But usually, these critiques do not attack its explanation of price differentials. They critique its conflation of value with price. They point out all the ways that letting a theory of price determine value actually undermines an understanding of value worth pursuing.
So perhaps the better program is to ask how to let marginal utility theory simply be what it is, a theory of price differentials, without having it also determine the normative category of value. Prices be what they may, value may lie elsewhere.
The question to ask is then: what are the conditions that lead a theory of prices to dominate value theory, and can they be untangled?
A hypothesis: prices will dominate value in direct proportion to the centrality of markets in society. The degree to which agents in an economy are compelled to participate in markets is also a measure of the degree to which they are compelled to accept the market’s form of value, which will always be controlled by prices.
This does not suggest that to liberate value from prices we need to abolish markets. Instead, we can reduce the singularity of markets in the social provisioning of resources by empowering alternative methods. The most direct alternative might be managing resources as a commons, defined by the legal scholar Brett Frischmann as a resource “openly accessible to all within a community regardless of the entity’s identity or intended use.” Public goods, too, are unconditionally provisioned goods or services, generally managed by a public entity and funded by government spending.
It’s beyond the scope of this essay to delve into exactly which resources should be provisioned through markets, which should be managed as commons, and which should be provided as public goods. But as a basic delineation, Frischmann points out since markets can only value that which can be priced, and therefore captured by private entities, markets are sub-optimal modes of provisioning resources with the potential for positive externalities:
“…the market mechanism exhibits a bias for outputs that generate observable and appropriable returns at the expense of outputs that generate positive externalities [public benefits that cannot be captured by market players]. This is not surprising because the whole point of relying on property rights and the market is to enable private appropriation and discourage externalities. The problem with relying on the market is that potential positive externalities may remain unrealized if they cannot be easily valued and appropriated by those that produce them, even though society as a whole may be better off if those potential externalities were actually produced.”
In other words, open-access to certain kinds of resources can lead to ‘scale returns’ – “greater social value with greater use of the resource.” Markets prevent these scale returns. Frischmann goes on to argue that any resource that can be categorized as “infrastructure” has a strong basis for commons management.
Returning to our focus, we find that markets, by their very design, can constrain the social value resources might otherwise provide. If price governs all value, the constraint is absolute. But if markets are reduced to merely one mode of provisioning among an empowered ecosystem of alternatives, the scope for value production expands.
Socially Necessary Labor Time
What does it mean, in practice, to reduce the centrality of markets in society? Let’s look at labor markets, which provide a clear example of how over-reliance on markets can function as a constraint on value.
When price governs value, labor markets are a massive source of producing value. Every dollar earned in wages is a unit of value produced by the economy. Since citizens require access to a certain amount of resources to live, and labor markets are the primary method of provisioning these resources, participation in labor markets is widespread. Generally, every society strikes a balance of how much time citizens exchange on labor markets. In our case, roughly 40 hours a week.
From a price-equals-value perspective, this is good. Employed citizens produce value both by earning wages, and by helping businesses generate revenue. The system has little incentive to reduce the necessary labor time citizens must exchange for the resources they need to survive, as doing so would reduce value in terms of price.
But from a value-as-an-evolutionary-search-for-vitality perspective, things appear differently. What is labor time? It’s a constraint on the actions we are free to take, and ultimately, the forms of life we are free to enact. For those 40 hours per week, we can only behave in ways that 1) are physically possible for a given agent, and 2) earn a wage.
By contrast, leisure time (simply understood as non-labor time) is expansive. The second constraint – the imperative to earn a wage – is removed, widening the possibility landscape of the forms of life we are free to enact. In the evolutionary search for value, wider possibilities lead to greater diversity, and greater chances for adaptive selection.
We can formalize this labor market constraint. Karl Marx used the term socially necessary labor time (SNLT) as the measure of a commodity’s value. SNLT was the average amount of time necessary to produce something across all society’s producers at a given moment in time. If across all producers in 1850, it took 10 hours to produce a table, the SNLT of a table, and therefore its value, was 10 units.
But we can expand this measure from the production of commodities, to the production of human life, and in particular, as a measure of the constraint placed upon value.
If across all society in 2022, it takes an average of 40 hours of labor time per week to sustain a dignified life, we can say that the SNLT of life today is 40 units. We can then visualize this measure as a constraint on the possibility landscapes individuals face.
Above, I described how every moment, every week, every year presents a branching tree of behavioral possibilities. Socially necessary labor time defines a boundary of possibility, inside of which any action must not only satisfy the condition of being physically possible for the given agent, but must also be rewarded on the labor market.
Within the temporal boundary of SNLT, all possible actions are forced to satisfy an additional condition, which restricts the overall variety of possibilities, and thus the aggregated forms of life available for me to enact, and thus, my potential scope of value production. Here’s the visual at 40 hours:
Reducing SNLT shrinks the temporal boundary around my possible courses of action, increasing the number of possibilities that need only satisfy the first condition. In doing so, more actions become possible, widening the evolutionary search for value production:
It’s in this spirit that Martin Hägglund proposes “socially available free time”, the inverse of socially necessary labor time, as a measure of freedom:
“The key to the critique of capitalism is therefore the revaluation of value. The foundation of capitalism is the measure of wealth in terms of socially necessary labor time. In contrast, the overcoming of capitalism requires that we measure our wealth in terms of what I call socially available free time…The aim of the revaluation of value is to transform our conception of social wealth in such a way that it reflects our commitment to free time. The degree of our wealth is the degree to which we have the resources to engage the question of what we ought to do with our lives, which depends on the amount of socially available free time. To be wealthy is to be able to engage the question of what to do on Monday morning, rather than being forced to go to work in order to survive.”
In other words, Hägglund's view of freedom can be read as progressively reducing the constraints placed on our decision making. I add that not only is this inherently desirable on the grounds of freedom, but also in terms of widening the evolutionary net our species casts out into the possibility space, in search of forms of life that enact value.
To some degree, capitalist societies have always professed some degree of commitment to this measure of freedom. Progress was once widely seen as the transformation of our lives from labor to leisure. But in every age, from Marx, Henry George, to Martin Hägglund, critics have argued that there is something intrinsic to the structure of capitalism that prevents it, even while ostensibly working towards it.
In our context, we might say that the responsible party is price as the measure of value, which by definition, constrains socially available free time (labor time generates value through wages, free time does not).
Against the idea that simply doubling down on innovation, productivity, and economic growth will deliver us a freedom worth having, economists such as John Maynard Keynes argue that “the system is not self-adjusting”:
“None of this, however, will happen by itself or of its own accord. The system is not self-adjusting, and, without purposive direction, it is incapable of translating our actual poverty into our potential plenty.”
So the question: how to adjust the system? How to employ our great accumulation of means towards ends worthy of human life, dreams, and potentiality? How to transmute the endurance of tedium towards an experience of life more vibrant, more alive? How might we ask the same question of economic design that the architect Christopher Alexander asked of building: “how can we create more life in this world?”
I believe one piece of the answer is a broad commitment to the principle of unconditionality.
Markets are overdetermining the production of value. Humans spend an unnecessary amount of time working unnecessary jobs that slowly gnaw away at our vitality, the stuff that might otherwise impel spirited action. Investment chases after quick dollars, regardless of the ecologies it leaves barren, crises it leaves unaddressed, or social possibilities it leaves unexplored.
The strategy of unconditionality offers one potential alternative by progressively opening a space between markets and value. The larger the space between them we create, the more expansive the adjacent possible grows. The greater the evolutionary probability society gains, as itself an evolutionary system, in enacting greater sources of value.
What Is Unconditionality?
By unconditionality, I mean the unconditional provisioning of access to resources for all members of society, with no preconditions beyond citizenship.
This idea is nothing new, and we already do it plenty. Economics generally calls unconditionally provisioned resources “public goods”. They’re usually described as having two main qualities. Public goods are non-rivalrous (one person’s use of the good does not detract from another’s), and non-excludable (one person cannot exclude another from the good’s benefits). Common examples include national defense, transportation systems, law enforcement, and access to drinking water. Digital technologies are growing the list, adding examples like open source software and data, and even the internet.
Frischmann folds public goods into a broader category he calls infrastructure. Infrastructure is the substrate of resources productive activities draw and take place upon. Crucially, he notes the role infrastructure play in determining the scope of possible behaviors for all agents within a system, expanding or contracting the line that separates the possible from the impossible:
“Infrastructure resources are intermediate capital resources that serve as critical foundations for productive behavior within economic and social systems. Infrastructure resources effectively structure in-system behavior at the micro-level by providing and shaping the available opportunities of many actors. In some cases, infrastructure resources make possible what would otherwise be impossible, and in other cases, infrastructure resources reduce the costs and/or increase the scope of participation for actions that are otherwise possible.” (Infrastructure: The Social Value of Shared Resources).
Unconditional programs may be seen as adding to the stock of infrastructure supporting all citizens. Expanding the examples, we can add programs such as:
Basic income: adding a baseline of income to the infrastructure of modern life by unconditionally provisioning of a baseline of income to all citizens.
Universal healthcare: adding healthcare to the infrastructure stock by unconditionally provisioning access to healthcare for all citizens.
Baby bonds: adding an inheritance to modern infrastructure by unconditionally provisioning a one-time inheritance to all citizens.
Public education: Adding education - you can see the pattern here.
Public internet: the pattern continues.
Natural resource dividends: adding a variable, regular dividend from tax revenues on natural resource use, such as land, carbon, broadband spectrum, and fisheries.
And so on. The point here isn’t to motivate any particular unconditional program, but to see it as a mode of provisioning that can expand the sphere of value production.
Unconditionality serves the production of value through its effect on socially necessary labor time. Visualized simply, the more access to non-market resources one has, the lower the constraint of socially necessary labor (market) time:
What Does Unconditionality Do?
Two features of unconditionality:
We've dwelled on the first feature enough, but let's look at the second.
Unconditionality supports the creation of both illegible value, and value cloaked by illegibility.
Recall that Gorz described a form of ‘intrinsic wealth’ that is neither measurable nor exchangeable. This stands at odds with the conflation of price and value, since what resists measurement and exchange cannot enter into the calculus of GDP. From the perspective of a managerial state, this is no good, since only what gets measured can get managed.
Unconditionality, then, may foster forms of value that a centralized, managerial state tends to avoid. To be more precise: unconditionality allows for the creation of both illegible value, and value cloaked by illegibility.
Illegible value is simply value that resists measurement. The value of a close-knit community, or a cool breeze while strolling through a sunny park, and that brief moment of closing your eyes and feeling radiantly at ease.
Above, Frischmann noted that markets are biased towards investing in outputs “that generate observable and appropriable returns”. When value is seen as the positive inflow of vitality, there exists a huge range of valuable activities that markets simply have no reason – i.e., no observable and appropriable returns – to invest in. Unconditionality then provides a substrate of resources that can support such activities, since the resources require no exchange, and therefore, no unit of equivalency that would demand legibility of the returns.
Value cloaked by illegibility is a potentiality that preexisting maps, methodologies, and measurements cannot easily foresee. The profit motive tends to allocate capital towards value-potentials that can be seen ahead of time, narrowing the scope of investment, and shaving off potential value.
Unconditionality provides resources that, by virtue of demanding nothing in exchange, can explore a wider range of potentialities, and therefore, chart deeper into the territory of surprise, where value roams.
Unconditionality and Vitality, In Practice
This all sounds nice, but how would understanding value as vitality work, in practice? Conceiving of value as price motivates an institutional strategy of pursuing economic growth, or the increase of the production of price (GDP). GDP, as the numerical proxy for value, fits cleanly into the algebraic equations and econometric models that motivate academic consensus and policymaking. GDP also provides a very simple category for public discourse, facilitating communication between experts and the general public.
If we re-conceive value as vitality, what changes? First, since price is no longer held as a suitable proxy for value, we lose the single, numeric proxy that GDP offers. An idea that is gaining support in theory, if not practice, is to fill the void left by GDP with a more multi-dimensional ‘dashboard approach’. Instead of one number, we can look to a dashboard of 3, or 5, that doesn’t reduce everything into a single metric. We already have a number of interesting dashboard approaches, including the OECD’s Better Life Index, the Human Development Index, and Miranda & Snower’s SAGE Framework.
But dashboard approaches still place a proxy on value. Proxies that help us measure what’s important are necessary. But we have this tendency to forget that all proxies are imperfect. The map is not the territory, and whatever the proxy is blind to grows institutionally neglected. This is where we can find a direct connection between the view of value as vitality and an institutional strategy of unconditionality.
As discussed above, unconditionality offers a method of supporting those elements of value production that are illegible to the proxies – however expanded and multi-dimensional – we use. Think of it as an insurance policy for progress. An expanded dashboard of proxies may help cast a wider net over what gets measured, while a complementary policy of unconditional acknowledges both that we cannot measure everything, and yet there is value in supporting precisely that which resists measurement.
Who Pays For Unconditionality?
A quick point: unconditionality is not free. Unconditionally provisioned resources are free at point of access, but are still paid for elsewhere, generally via government spending3. From the perspective of the economic system on the whole, making a resource universally available is, in fact, quite expensive.
What unconditionality affords is the ability to customize where the cost-burden of a resource falls. For example, consider moving from private to universal healthcare. Individuals no longer have to pay monthly premiums, and are guaranteed access to health services. But the costs premiums represented don’t just disappear. Instead, the cost is shifted to government spending, and eventually offset by taxation.
This allows a society to use taxes like beavers building dams. We can steer capital away from destabilizing and unearned accumulations (land rent, value extraction, monopoly power), diverting resources to the public as unconditionally provisioned ‘infrastructure’ that expands the scope of possibility for the average citizen, while generating positive externalities and scale returns.
Society, then, pays for unconditionality, and should do so when the resources provisioned can foster more value than when provisioned via markets.
But this also raises concerns. If unconditionality comes at significant cost, then it carries tradeoffs that should place a limit on its scope. Every dollar spent on unconditional programs is one that could've been spent elsewhere, and no matter how potent it maybe, unconditionality alone is inadequate. It must operate alongside a spectrum of other strategies (especially those aimed towards 'predistributive' improvements). To get a sense of what unconditionality might look like in practice, let's explore these concerns.
Perhaps the most prominent concern is found in another term often used to describe unconditional resources: handouts.
Unconditional resources may allow citizens to scale back their participation in labor markets, but what if this works too well? Society will require active, productive participants to navigate the uncertain future. What if unconditional handouts create a huge demographic of lazy, unproductive citizens who subsist off resources that are taxed away from those who still work? And what if doing so undermines the tax base that funds unconditional programs in the first place?
This line of critique is both important and instructive, so let’s probe a bit.
Unconditionality is not a binary. We don’t either provision unconditional resources or not. Already today, we’re the beneficiaries of a massive substratum of unconditionally provisioned resources and public options. From transportation and communication infrastructure, libraries, rule of law and protection, education, healthcare and childcare benefits (in some countries), to open-source software and digital commons (like Wikipedia).
Society itself is a growing accumulation of unconditional benefits. The political economist Henry George, in writing that “progress goes on as the advances made by one generation are…secured as the common property of the next”, is effectively suggesting that civilization makes progress by offering increasingly generous handouts to all citizens.
The relevant, critical question is thus not whether unconditionality might sink society, but how much? Is there a threshold beyond which too much unconditionality actually undermines the long-term production of value, and if so, where does that threshold fall?
In terms of this essay, we might ask: how low can socially necessary labor time go before it transitions from a gift to a curse, whether by means of undermining production, or requiring such large sums of public funding that taxes reach confiscatory, unjust levels?
Since this is a question of thresholds along a spectrum, let’s contextualize the spectrum. On one end, there is simply society as it is today, with no further commitments made to unconditionality. Here, socially necessary labor time remains around 40 hours per week. On the other end, socially necessary labor time drops to zero, whether by means of a ‘fully automated’ society, innovations that skyrocket productivity, or whatever.
Often, unconditionality is objected to on the grounds that a socially necessary labor time of zero would both undermine productivity and require unjust, unsustainable levels of taxation. Maybe so, but I find the middle-ground both much more compelling, and much more viable. My view does not call for the abolition of markets, labor or otherwise, but placing them on equal footing with alternative modes of provisioning resources.
For example, from 1830 until around 1940 (excluding the Great Depression), socially necessary labor time was already steadily declining. Then, it stopped:
The campaign to reduce the working week was rooted in a strong labor movement. In the late-20th century, the labor movement was stripped of power and reach, alongside a cultural turn against the value of leisure time (and about a million other things that happened around 1971).
If trends had simply kept their pace, socially necessary labor time might’ve continued declining to around 27 hours per week today:
So the first benchmarking question is whether being free to work an average of 27 hours per week – not zero – would undermine productivity, or require unsustainable taxation. I don’t find either concern compelling here (but I'm also struck by the lack of rigorous research on this question). If undermining labor’s bargaining power (alongside a broad package of neoliberal reforms) was sufficient to flatline the trend, we might assume that the inverse – continuing to strengthen labor’s bargaining power, alongside social democratic reforms – could’ve continued the trend (admittedly, this is an impossible assumption, but the virtue of a blog is you can make these anyway, and hope others will develop the idea more rigorously).
Such reforms, whether empowering unions and labor standards, widening the coverage of sectoral bargaining agreements, minimum wages, stronger antitrust, or even public retirement accounts, are not very expensive, and do not threaten confiscatory tax levels.
What about productivity? One data point to look to is France, who reduced their work week from 39 to 35 hours back in 2000. 20 years later, the results in terms of welfare and working hours have been mixed, but small. In terms of employment, not all that much appears to have changed, certainly no mass migration from the workforce. Trends in growth rates and productivity appear unfazed. I struggle to imagine that another 8 hours would spell the demise of society4.
But what if we carry this further. Let’s assume that in the 1970’s, we strengthened labor institutions, more industries came under coverage of sectoral bargaining agreements, and this delivered us to the socially necessary labor time of 27 hours per week, mostly driven by higher wages and benefits.
Now, on top of that, let’s imagine the politically far-fetched. We pass not one generous unconditional program, but a whole suite of them. Let’s imagine that in an alternate 2020, on top of strong labor institutions bargaining with employers, we enjoyed the benefits of public internet and healthcare, universal basic income, annual dividends from a social wealth fund, and a citizen’s inheritance from baby bonds.
If you tally each of these up in their most generous forms, each citizen would receive, on average about $20,000 per year in unconditional cash transfers, plus access to healthcare and internet. But let’s note the important caveat that, since these would all require offsetting taxes, beyond a certain threshold of income, citizens would either be breaking even (paying $20,000 more in taxes while receiving the extra $20,000), or being net funders rather than recipients (since the elevated taxes would eventually outweigh the benefits they provide. The Zuckerberg’s of the world do not get an extra boost).
This being on the farther end of the conceivable spectrum, what might happen? In 2020, roughly 35 million Americans lived on $20,000 or less of earned income, so roughly 10.5% of the population could stop working entirely and receive the same level of income. Whether they would is a different question, which current empirical research does not support5.
Of the remaining 90% of citizens, you have two groups. Those who make more than $20,000 but not enough to be beyond the threshold of those who break even, and those who make enough to pay more in elevated taxes than they receive from the unconditional transfers. Contra neoclassical economics, there isn’t much evidence supporting the idea that raising taxes on the wealthy reduces their labor, so let’s assume negligible reductions in work for that category.
For those between $20k and the break even point, we should expect some reduction in labor hours for some demographics. But how much? If a household earns $100,000 between two working adults, and they now each receive maybe an extra $8,000 (after taxes claw back some of the unconditional transfers), how much might they actually change their labor hours?
To jump ahead, here’s a wager. When the dust settles, and changes are averaged out, maybe socially necessary labor time settles around 20 hours per week:
At the most generous end of the spectrum of what might actually be possible to achieve given today’s level of resources and technology (according to my baseless calculations that must be improved upon) we’re looking at a socially necessary labor time in the neighborhood of 20 hours per week.
So critiquing all unconditionality on the basis of assuming a fully automated society where no one needs to work at all, just doesn’t make sense. We cannot provision enough unconditional resources to allow a significant portion of the population to live unproductive lives of lethargic leisure (neither do I think we should equate dropping out of the labor market with an absolute loss in productivity, given that some of society’s defining innovations were developed in leisure time). This section has not rebutted the critique wholesale, but hopefully, helped narrow its focus.
Instead of imagining extremes, we should explore the middle-ground. What would happen to society if citizens were free to work only 30, or 20 hours per week? To complement theoretical probes, we should explore the question experimentally. We won’t, and shouldn’t, pass the above package of unconditional programs together, overnight. Instead, these things tend to happen one at a time, piece by piece. This allows us to learn and adapt as changes ripple out in all the ways we could never predict.
“Vitality, understood both somatically and mentally, is itself the medium that contains a gradient between more and less. It therefore contains the vertical component that guides ascents within itself, and has no need of additional external or metaphysical attractors…” (Peter Sloterdijk)
At the outset, I could’ve motivated this essay with the charts we all see littered throughout the news. Anxiety and loneliness are on the rise; tribalism is fragmenting us into bickering groups; inequality is soaring to mind-numbing proportions; biodiversity is dying out while the glaciers melt. I could’ve quoted Graeber again: “There is something very wrong with what we have made ourselves…It is as if we have collectively acquiesced to our own enslavement.”
But I think The Pessoa Problem encapsulates the litany of gripes in a way that suggests where this is all going. Where a society that loses touch with the production of real value drives its people. We may find ourselves at the frontier of the evolution of life on earth, with unimaginable technologies and fantastically productive industries. And yet, for all our labor, and of all the potentialities we might’ve pulled down into actuality, it may yet all come “down to trying to experience tedium in a way that does not hurt.”
We don’t want to wait until we all find ourselves in the Pessoan position. The earlier we change course, the more energy we’ll have to mobilize. How miraculous, then, that we find ourselves in a moment where the world as it was appears to have cracked open! As the playwright Tom Stoppard exclaims:
"A door like this has cracked open five or six times since we got up on our hind legs. It's the best possible time to be alive, when almost everything you thought you knew is wrong."
Now is a time of high social plasticity. The Harvard political economist Paul Pierson calls it a juncture, where institutions are forged and set upon paths or trajectories that, afterwards, grow more difficult to alter. During this juncture, this moment of plasticity, this cracked-open door of dizzying possibilities, value theory can be a guide.
And it can begin with the observation that the production of value can no longer be left to markets alone. The invisible hand is a poor purveyor of vitality. We are less in need of the growth of mere economic activity than we are of growth in the basic triad of evolution – variation, selection, and replication. We need more variation, wider selection, and greater capacity to replicate whatever resonates. We don’t know the road to well-being in the 21st century. Growing uncertainty and volatility often cloak value, rendering it illegible to existing methodologies. But by incorporating greater measures of unconditionality, we can still design ourselves a wider scope of evolutionary freedom to go on the hunt.
Unconditionality provides a design approach that seeks to create as vast a radius of exploration as possible. A commitment to unconditionality expands the adjacent possible of all citizens. It harnesses the power of centralized provisioning to support the necessary conditions for a decentralized, evolutionary search for forms of life that enact more vitality, more value.
In a world where socially necessary labor time is reduced to 25 hours of labor per week, would you be free to live in ways that make you feel more alive? Would you be free to explore different roads to value? Now, as with the architect Christopher Alexander, let’s set out to build the world that invites more life.
Let’s build a world so vibrant, so worthy of the impossible odds we defy daily merely by being here, and being aware of our own presence, that even Pessoa, amidst the pain and suffering that will not leave us (wireheading aside), and the tedium that sets in like a weighted blanket, may, in spite of all this, swell with vitality, and come alive with the sense that life itself is a quality we can grow within us. This is the growth that matters. This is the growth that discovers, creates, and cultivates real value. This, the phenomenology of vitality, is the stuff of progress.
Thank you to Kate, Stephanie, and Marcus for excellent feedback on earlier drafts.
An incomplete list of works that were central to this essay.
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:
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.
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
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.
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.
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'
“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.
“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.
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.
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.
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.
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 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.
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?
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.
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 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.
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.
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:
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
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.”
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.
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.
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.
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.
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
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:
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.
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.
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.
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.
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.
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.
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.
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:
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 (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.
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.
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, 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.
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.
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:
Around the same time, wage growth also began leveling off, while productivity continued its climb:
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).
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.
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.
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.
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.
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.
I’d like to thank Evan Kasakove for providing feedback and helping edit this piece.