This is Part 2 in the mini-series discussing the relative merits of the basic income guarantee proposal and the Job Guarantee proposal. The topic of a basic income guarantee seems to evoke a lot of passion and in all the discussions I rarely read anyone going carefully through the macroeconomic implications of bringing in a scheme. I get lots of E-mails accusing me in varying degrees of politeness of being on a moral crusade in my opposition to basic income proposals. I wonder how much of my work over the years such correspondents have read. Not much is my conclusion. Whatever you think of the morality of having a system where some people work while others are supported in one way or another without having to work, even though they could (so I exclude the aged, sick, severely disabled here), the fact remains that a policy proposal won’t get much traction from me if it has a deep inflation bias and adopts neo-liberal explanations for economic outcomes like unemployment. I will also never support a proposal that absolves the national government from taking responsibility for providing enough work via its currency capacities and treats individuals expediently as ‘consumption units’ – to be maintained at minimum material levels. Anyway, we explore a few of those issues in this blog.Bill Mitchell – billy blog
Is there a case for a basic income guarantee – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
22 comments:
Without a BIG, the mentality described by Neil will continue to undermine every JG scheme. They'll conclude that their tax money is being spent to create bullshit jobs. They will arrive at this conclusion regardless if these jobs are shown to be productive or not. They will be offended.
A similar mentality can be observed with attitudes towards welfare recipients. In spite of systemic mass unemployment, many people are convinced that everyone can find a job if they want to. They "see" individuals as making a choice to be idle. Thus it is "unfair" to provide the unemployed a living at taxpayer expense.
The psychological need for reciprocity is not compatible with a post-scarcity economy. If we (as social engineers) don't address the source of our attitudes toward work, these plans will not work out as intended.
I agree with Bill's assessment of the flawed economics underlying some of the support for a BIG. In addition, I don't trust the motivation of those on the right who are advancing various forms of guaranteed income. It could be a ploy to abolish the welfare state.
"The psychological need for reciprocity is not compatible with a post-scarcity economy."
Unfortunately it is innate. So you're talking about performing lobotomies or drugging the population.
The line from Dan Kervick is very true: "citizens in a democracy should never be called on to support with their own labor the lives of those who are able to work, but are simply unwilling to work – those who take without giving"
Ultimately those on basic income who refuse to contribute to the social pool are stealing from others. Not only do they get output others have produced in return for devalued currency, but they also keep any output they produce and self-consume during what would otherwise be a work day. That last bit they didn't pay for.
So for the system to be fair those receiving a basic income need to produce output for others for the required hours - which is just a job and can therefore be organised under a Job Guarantee - or prevented from producing any output they can self-consume during working hours (aka jailing them).
(Or they can pay for their self-consumption, which is just the same as not paying them in the first place).
The key point here is that what you have to do to placate others is determined by a jury of your peers. The acceptable output is decided by them not you. And that's the bit that basic income fans can't stand. The idea that they are obliged to others.
But for every right you enjoy there is an equivalent obligation you must bear. They go together like assets and liabilities.
I tend to agree with Bob.
I think the resentment factor Neil highlights is very real, but it is a problem that also confronts a JG. Policy is contested, and will continue to be contested. That doesn't mean we give up and let the "resenters" hold sway unopposed.
I agree that many BIG supporters use flawed macro arguments (though that is not really an argument against a BIG per se) and I also recognize the likelihood that some on the right see basic income as a way to abolish the welfare state by essentially rolling all programs into a BIG before presumably trying to abolish that as well.
Personally, I think some form of combined program would help to safeguard both elements. The presence of basic income makes it more difficult to reduce a JG to workfare. A JG makes it less likely that basic income merely subsidizes employers.
Needless to say, I will still support a standalone JG if that is what is on the policy table. I agree with the macro arguments such as the JG being a superior nominal price anchor and auto stabilizer (although the more broadly a JG is defined, the less these arguments would seem to apply).
And it is important, in my view, to guarantee the right of a job to anyone who wants one. After all, we know that unemployment at the aggregate level is the result of a policy choice, not individual choice.
I very rarely disagree much at all with Bill, but I have a bit of a problem with the framing implicit in this passage from the opening paragraph:
"Whatever you think of the morality of having a system where some people work while others are supported in one way or another without having to work ..."
I think this ignores that not all work occurs within a job. It also ignores that, quite possibly, some activity occurring as a job should not legitimately qualify as productive activity, including activity currently occurring in the private sector. Whether there is a private demand for something is partly a function of distribution. If that distribution is illegitimate, the market assessment of productive activity may also be illegitimate.
Additionally, some real income produced each period is not due to labor of the current period. It is the result of the sum knowledge, technology and equipment that has been produced in previous periods. It is essentially a "gift" from past generations to the present. Work occurring both within and outside of jobs contributed to this. Our current system of private property rights means that many people are born into a situation where they have no ownership of this "gift". Somebody will (and must) receive it freely. Therefore, everybody should.
Now it might be believed that receipt of the “gift” should be made conditional on a minimum labor-time commitment within a job. That’s a possible approach. But, if so, that would need to apply as a general principle. Everybody, rich or poor, should then be compelled to meet a minimum labor-time commitment. Either everybody or nobody should be compelled to supply labor power to an employer simply in order to receive their apportionment of the “gift”.
In response to the first objection (conflation of job and work), we could say, okay, then the solution is to include legitimate productive activity outside of a job within our definition of what should constitute a valid JG role. In this way we can broaden what qualifies as a job.
We can do that, but the following should then be noted:
(continuing)
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If we make, say, housework and home parenting a JG job, as well as an array of other activities (e.g. currently voluntary community work, freeware development, scholarly research of unemployed academics ... and so on), then the macro superiority of a JG (as nominal price anchor and auto stabilizer) becomes, though still true, a successively less convincing argument the more we broaden the scope of JG roles. (Of course, I am not at all against such a broadening.)
In particular, one MMT argument against basic income has been the risk of excessive labor-force exit if everybody received some income without wage labor. This follows logically from the notion (which I agree with) that (domestic) value of the currency can usefully be defined in terms of an amount of labor time that must be performed to obtain a unit of the currency.
Since, under a basic income, everybody would receive some income without providing any labor services, there is a risk that -- due to excessively rapid labor-force exit -- the value of the currency might plummet. The extent of this danger obviously depends on how large the basic income payment is relative to the level of income most people desire. Just as endogenous taxes *can* drive a currency (even though less effectively than exogenous taxes) because people must obtain an income and any income is to be assessed in the state's unit of account, a basic income will *not* eliminate the supply of labor power to the extent that people want an income higher than the basic income (or simply desire a job).
But what is the relevance of this to the JG as auto stabilizer and nominal price anchor?
The relevance is this. The broader we define the JG, the more likely it becomes that people will opt for JG roles without any intention of ever taking a job in the private sector or conventional public sector. That is, there is a similar risk of excessively rapid labor-force exit and an undermining of the currency.
Consider, for example, a home maker who never intends to take a job but would sign up for a JG role of home maker. Again, I am not saying that this would be bad. I am just saying that to the extent this occurs, the JG would be similar in its macro effects to a BIG. The home maker would be doing the same work whether under a JG or a BIG.
Now, technically, if the BIG is categorized as a tranfer unlike the JG wage, the activity of home making will add to GDP when occurring as part of a JG program but not when occurring under a BIG, even though the same activity occurs in either case. However, this technical difference could be removed simply by defining the BIG as a “payment for unspecified services” or “wage for living” or something along these lines.
Leaving this technicality aside, the macro superiority of a JG over a BIG basically comes down to the relative narrowness of the JG. To the extent we say, "Our activity counts as work but yours does not," a JG will serve as a superior auto stabilizer and nominal price anchor. But this macro superiority may be gained at the expense of a different set of drawbacks.
One potential drawback is that by saying work only counts if it’s part of a job, we are reinforcing rather than loosening the connection between income and waged employment. We are making life more quid pro quo rather than less. More conditional rather than less. That's fine if this is the kind of left some want to build, but personally I don't wish to pursue those ends.
1. Is there a parameter identification problem in the way the design problem is being framed, that is, chiefly based on money. Is poverty actually a question of money or real resources. Most poverty affects children. Giving money to children won't dent the problem.
2. Are income guarantees and employment guarantees properly compared based on money. Income guarantees are chiefly about money. Employment guarantees are about jobs, which emphasizes use of real resources that are available for productive use that will degrade with out use. The JG is not chiefly about money.
Is the discussion getting hung up in money when the actual issues are not monetary or fiscal but economic, that is, about production, distribution and consumption of scarce resources based on availability of real resources and optimizing their allocation and deployment.
This is a systems design problem that requires appropriate analysis is order to propose potential design solutions. Design solutions will be based parametric identification and the identification will be based on ideological differences, resulting in different design solutions.
Criteria need to be applied in comparing and contrasting them. System design involves optimization. This implies tradeoffs. Different ideological approaches will differ in the tradeoffs.
Criteria for a well-designed social system (There may be more, but these come to mind.):
effective (objectives, priorities)
efficient
resilient
practical
productive
cohesive
complete
adaptable
reflexive
sustainable
secure
equitable
economical
affordable
scalable
I'm talking about dragging people, kicking and screaming, into a gift economy. It will require re-framing what a BIG represents, and redefining work. It's a huge hurdle.
Our scarcity mindset is such that in spite of a UN resolution, we don't have a right to work. A JG will offend these stubbornly held sensibilities.
So for the system to be fair those receiving a basic income need to produce output for others for the required hours - which is just a job and can therefore be organised under a Job Guarantee
For the system to be fair, all non-productive jobs would have to be identified. There is no shortage of bullshit jobs in the private sector, yet no one complains. The only criterion that matters is whether an employer is willing to hire and pay someone for it. Then it unquestionably becomes "productive".
Since a JG involves public funding, the issue revolves around consensus rather than whether a given job is productive. That consensus will depend on the people's mindset.
For the system to be fair, distinctions between those who derive income from property in place of wages would have to redressed. Can't have some getting a free pass to be idle just because they are able to live off their inheritance/investments.
The key point here is that what you have to do to placate others is determined by a jury of your peers. The acceptable output is decided by them not you. And that's the bit that basic income fans can't stand. The idea that they are obliged to others.
I don't know about basic income fans, but layabouts will do everything in their power to abuse a JG. The question is to what extent does the public believe that other people are layabouts?
Studies suggesting that most people want to work does not affect public opinion.
Maybe a JG could be made acceptable by imposing local control, or with heavy supervision. Or whatever measures it will take to reassure the public that no one is getting away without putting in "their fair share".
Or perhaps it is impractical to placate a society of "reciprocalists".
Basic income fans are arguing against a mindset that needs to be overcome if we are to reach the future that progress and technological advancement is supposed to bring about. Are we heading towards a world of greater abundance? What happens when our material needs are easily met? If instead we are headed for a decline, these proposals will become moot.
Tom:
For the purposes of this discussion, we seem to be in favour of a JG. In other words, that part of the system design is assumed.
I am just sayin' that a JG is not comparable to a BIG. It's comparing apples to oranges.
One issue is whether some kind of income guarantee would improve public policy and if so, what would the policy look like specifically. this provokes questions as to the problems that the income guarantee would solve and what the tradeoffs would be. Various proposals have been offered.
Another issue is whether some kind of employment guarantee would improve public policy and if so, what would the policy look like specifically. this provokes questions as to the problems that the income guarantee would solve and what the tradeoffs would be. There is a specific proposal on the table, the MMT JG.
These two issue address different problems. Therefore, arguing which is appropriate is nonsensical logically.
"These two issue address different problems. Therefore, arguing which is appropriate is nonsensical logically."
Yeah but Tom at least its a break from all the "what is money?!?!" discussions....
Many problems in economics result from the fact that economic data is expressed in money, so economists act as if it is money that is most important when it is just scorekeeping. It's the production, distribution and consumption of real goods that counts in every economy. Monetary production economies distributing real goods and services through market exchange based on price rationing of scarce goods so many economists presume that everything boils down to money stocks and flows when the issues are really goods and services, real people and a fragile environment, as well as the fact that economies are embedded in much broader and deeper social systems, and ultimately the global system or world system as Emmanuel Wallerstein calls it.
It is important to realize what money is an isn't in order to avoid ambiguity and confusion, as well as conflation of financial and actual. It is a type of financial asset that is the originators liability rather than a real asset involving real goods. That is to say, money is not a commodity as many economists assume.
Money is just a means of rationing scarcity in a market economy based on price. Money doesn't produce, distribute or consume anything as a factor or agent. Money is not the only way to do this. It has been chosen because the advantages appear to exceed the disadvantages. But they don't completely resolve the disadvantages in the social system as whole.
The purpose of an economy is to provision society. Money may or may not play a role in this. If it does, it affects the system, for sure. A monetary production economy behaves differently than a barter economy, But the structure, functioning and purpose of the economy is the same in terms of circular flow. Money is a mean of modulating that flow in a system that values individualism over socialism. It's basically ideological.
IMHO, the correct angle is to view the issues in terms of a social system. There are various ways of doing this ideologically, e.g., some more individualistic and others more socialistic.
MMT has it right, IMHO. It's not about the money but the real resources and their use, privately, for public purpose domestically, and also in international trade and finance in the global system.
I'm not aware that we're doing a comparison. The discussion here and at Billy blog is about including a BIG in addition to a JG. One question is whether the two are complementary.
"The purpose of an economy is to provision society."
Right Tom but the people who are good at that are the most material oriented and imo as they are material oriented, they want to be paid well for doing it...
So if you have BIG 'surfers' (which btw I dont like this metaphor as the 'surfers' could actually be practicing all week to compete in big amateur contests on the weekend that everybody would go out to watch etc... so it wouldnt be like they were "doing nothing" etc they would be participating in amateur sports which isnt 'nothing'...) but anyway the material people would want to make more munnie than the BIG surfer dudes and you guys would be faced with your whole "class" and "inequality" dilemmas again and for you guys it would be back to square one...
So you guys have to think about how you would handle seeing this 'inequality' and different 'classes' of people... even under BIG....
Matt, I've had some thoughts in the past on stuff perhaps related to what you are alluding to. For example:
http://heteconomist.com/the-diverse-economy-part-capitalist-part-socialist-part-communist/
BTW, sorry to link to my own blog. The post is not strictly related to the topic of this thread. Also, you commented at the time, so maybe you have already seen it. :)
What I am saying is that I see superficial analysis of the issues based on a chiefly economic approach to a much broad systemic challenge or better, challenges.
IN my view the employment guarantee boils down to a human rights issue, which is already recognized in the United Nations Universal Declaration of Human Rights, adopted in Dec 1948 as General Assembly resolution 217(III) A.
Article 23.
(1) Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.
(2) Everyone, without any discrimination, has the right to equal pay for equal work.
(3) Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.
(4) Everyone has the right to form and to join trade unions for the protection of his interests.
There is also an economic argument for those who don't see employment as a right. Efficiency requires employing available resources. Not to do so when it is possible is wasteful. Wasted opportunity cannot be recaptured. This can also be called the argument against stupidity.
Bill, Pavlina and others have analyzed the disadvantages and costs of chronic unemployment not only economically but also socially.
Income guarantees don't address these issues since income guarantees have another purpose, which is to income independent of work.
Employment guarantees are based on the ability to work. Employment guarantees don't directly address the needs of those who are unable to work. That is left for other programs,, which might include an income guarantee. However, there are good reasons to believe that an income guarantee alone would not be sufficient since the issues are wider than income. In the US this is addressed by social security disability, and social security and medicare, and medicaid, for example. Income guarantees would not eliminate the need for supplementary welfare programs.
However, I think it is a political mistake to address problems piecemeal in that not piecemeal solution is likely to be actually work and the program will eventually be judged has having failed by those opposed to it ideologically.
These are not economic issues as much as public policy issues and public policy requires a framework aka a vision. Right now the framework is neoliberalism. The issues cannot be adequately addressed in that framework and progressive need to present a competing vision and different parameters. The Universal Declaration of Human Rights is not a bad place to start. It covers a lot of the bases as a vision. The details need to be elaborated through public policy adopted in law by different nations.
Otherwise, it's just pissing into the wind.
BTW, sorry to link to my own blog.
Linking to your work is most helpful, Peter. Thanks.
Peter that is probably where I came across this line of thinking... I can see both like Tom says I think the two programs are addressing two different 'problems'...
Its probably not 'problems' that might not be the best word there, but rather arranging our economic systems to be more in consonance with the way the different types of people are...
Seems like we still dont have Bill on board on this he seems to be very JG oriented... perhaps a bias operating there towards 'a job' or 'labor'...
I keep coming back to what Tom intro'd me to with this eastern knowledge he received where we are divided into 4 cohorts of laborers, warriors, intelligensia, and acquirers....
If you are a 'laborer' and would be denied access to your ability to 'labor' it is probably "hell" on earth for that person...
So Bill imo is probably advocating for that cohort very vehemently... he is biased towards laborers... he wants to make sure that cohort gets what they most need...
You are probably intelligensia (Arts) imo and the BIG would suit that cohort best probably...
Tom probably has it here with the thought that the two programs of JG and BIG are addressing the needs of two different cohorts of us.... probably best not to conflate them or play them off against each other...
btw Bill is actually driven to playing the monetarist "inflation!" card in his latest so that may give you an idea how motivated he really is here... may be no stronger advocate for the 'laborer' cohort on planet earth imo...
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peterc: If we make, say, housework and home parenting a JG job, as well as an array of other activities (e.g. currently voluntary community work, freeware development, scholarly research of unemployed academics ... and so on), then the macro superiority of a JG (as nominal price anchor and auto stabilizer) becomes, though still true, a successively less convincing argument the more we broaden the scope of JG roles. (Of course, I am not at all against such a broadening.)
The broader we define the JG, the more likely it becomes that people will opt for JG roles without any intention of ever taking a job in the private sector or conventional public sector. That is, there is a similar risk of excessively rapid labor-force exit and an undermining of the currency.
Quite wrong. This is stuck in the self-contradictory frame that only "private sector" or "conventional public sector" jobs are "real jobs." (Explicitly stated even JG workers are excluded from the "labor force" in the second sentence, just as the nutty Lebergott numbers did.)
Do we live in a world of private squalor & public splendor or the reverse? What on earth is wrong with everybody working on JG jobs or people deciding to spend their whole lives on the JG? Absolutely nothing - and there is no macro or otherwise problem. More likely is the reverse- the bigger this sector becomes, the bigger the benefit for the moneygrubbers not on the JG. Thinking it causes labor-force exit, which is NOT the main inflationary problem of Basic Income, or undermines the currency suggests further study of MMT & the JG. Basically, this is just assuming the omnipresent brainwashing that the JG, public work, any work not for a capitalist - is "make-work".
The basic difference between crazy broadening (including some on the list above) is that work for yourself is not what any JG job, any job for money involves. A real job involves negotiations and relationships between two (legal) persons, as Neil says. So cleaning your own house doesn't cut it. Looking after (your) children does. Again, the "welfare" programs of basically any society ever recognize such distinctions. In the US this aspect of the JG would just incorporate and improve TANF or the old AFDC. Most stuff about "broadening the scope of jobs" is nonsense. It assumes that "job" has been or is always considered in an extremely narrow way. That just ain't true. For most people, in most eras, in most places "job" has been considered the way that the superfluous definition-"broadeners" who are reinventing the wheel do. If we replace "the broader we define" with "the more stupidly we define" your arguments have some merit.
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One potential drawback is that by saying work only counts if it’s part of a job, we are reinforcing rather than loosening the connection between income and waged employment. We are making life more quid pro quo rather than less. More conditional rather than less. That's fine if this is the kind of left some want to build, but personally I don't wish to pursue those ends.
What, slavery is better? Reinforcing the connection is A GOOD THING. Reinforce it more forever. "The kind of left" that wants to weaken it should not be called "left" or progressive at all, but the opposite. There is either reciprocity for doing things for someone else or no reciprocity. No reciprocity, enforced by the state, by money, means slavery in pretty words.
Additionally, some real income produced each period is not due to labor of the current period. It is the result of the sum knowledge, technology and equipment that has been produced in previous periods. It is essentially a "gift" from past generations to the present. Work occurring both within and outside of jobs contributed to this. Our current system of private property rights means that many people are born into a situation where they have no ownership of this "gift". Somebody will (and must) receive it freely. Therefore, everybody should.
Now it might be believed that receipt of the “gift” should be made conditional on a minimum labor-time commitment within a job. That’s a possible approach. But, if so, that would need to apply as a general principle. Everybody, rich or poor, should then be compelled to meet a minimum labor-time commitment. Either everybody or nobody should be compelled to supply labor power to an employer simply in order to receive their apportionment of the “gift”.
Although it doesn't mention it, this clearly seems to conflate monetary basic income with "receipt of the gift from past generations". Very wrong. "Universal Monetary basic income" is an incredibly stupid, essentially evil and self-defeating idea. "The gift from past generations" - real income from capital should be made free or very low price. It is an old observation of Hilferding that the things which can be safely provided by cash grants - are precisely those which there is no reason to charge money for at all. Charging for them is either pointless or dangerously destructive. Widen the scope of non-monetary basic income - which everybody, not just capitalists, receives some of, just by living in the modern world. I think, and I think the great majority favors non-monetary basic income including a bit more than "the gift from past generations", to include national health care (which even Hayek favored) and things like ensuring food, shelter and clothing, at low prices for all or free for some. (Commenter Unknown's list) Again, this reinventing the wheel. "Basic Income" should be targetted welfare spending, or non-monetary (gift from past + basic necessities).
The BIG pushers garner support for their idiocy by playing to humanity. Their proposal is an inferior way to accomplish these universal goals and all variants have minuses worse than the pluses. Finally, it is incredibly ill-defined, the good and bad points of various more definite proposals are inconsistently mixed and matched. They "bait and switch" wildly. TO see how ill-defined it is: Van Parijs considers "Basic Income" so widely that a cash grant to everyone, which is taxed away for people below an income threshhold, so is literal "welfare for the rich" counts!
As I have said before, the discussion of "resentment" and "reciprocity" is misguided. Both are perfectly rational, natural, good things, not obstacles to be overcome. The real obstacle is seeing nonexistent obstacles, thinking that "hoi polloi" have some ignorances or mental obstacles that they don't.
Calgacus, you wrote:
"Thinking it causes labor-force exit, which is NOT the main inflationary problem of Basic Income, or undermines the currency suggests further study of MMT & the JG."
The argument addressed was from this paper http://www.cfeps.org/pubs/wp-pdf/WP42-Tcherneva-Wray.pdf :
"As we explained in the subsection on price stability, the value of the dollar is determined on the margin by what must be done to obtain it. If money ‘grew on trees,’ its value would be determined by the amount of labor required to harvest money from trees. In an ELR program, the value of the dollar is determined on the margin by the number of minutes required to earn a dollar working in the ELR job—six minutes in our example above. Assuming that BIG provides an equivalent payment of $20,000 per year to all citizens ($10 per hour for a normal 2000 hour working year), the value of the dollar on the margin would be the amount of labor involved in retrieving and opening the envelope containing the annual check from the treasury, divided by 20,000. Obviously, the purchasing power of the dollar in terms of labor units would be infinitesimally small under a universal BIG scheme. Again, as we said above, this is the logical conclusion of the inflationary process that would be set-off by implementation of such a BIG program—it might not happen overnight."
You wrote:
'Although it doesn't mention it, this clearly seems to conflate monetary basic income with "receipt of the gift from past generations"'
No. I specified that the "gift" was in terms of real income. It is (and logically must be) received as a "gift" no matter who benefits from it and no matter how monetary or real income is distributed. (The gift also includes nature.)
You also wrote:
"What on earth is wrong with everybody working on JG jobs or people deciding to spend their whole lives on the JG?"
I don't think there would be anything wrong with that. I tried to make that clear in my comment. The point is that if a cohort never intends to move from JG to private sector/conventional public sector employment, then the auto-stabilizing and nominal price anchoring effects of a JG are reduced *to an extent*. If no matter what happens in the broader economy, some people stay in the JG by choice (which is fine), to this extent the JG spending does not contract as the broader economy expands.
Regarding what should qualify as a JG role, your discussion does not contradict what I wrote, which was that the more narrowly you define the roles, the more the macro superiority of a JG will show itself. The broader we define the roles, the more likely it is that some people will choose to remain permanently in the JG, which, though perfectly fine, will somewhat reduce the auto-stabilizing and nominal price anchoring effects of the JG.
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