Tuesday, July 24, 2018

Bill Mitchell — UBI advocates ignore the dynamic efficiencies of full employment

I have written about the concept of dynamic efficiency before. The most recent blog post on this theme was – The ‘truth sandwich’ and the impacts of neoliberalism (June 19, 2018) – which examined how social mobility across generations has been declining as a result of the decades of entrenched unemployment driven by neoliberal austerity biases. I also outlined the proposition in this blog post – US labour market reality debunks mainstream view about structural impediments (January 15, 2018). The point of all this is that establishing high pressure labour markets brings about more than just workers who want to work having jobs. It brings other major benefits that workers can enjoy and forces firms and governments to manage their affairs differently from when there is entrenched unemployment. The UBI proponents never really understand that point as they continue to surrender to the proposition that mass unemployment is inevitable and all the governments should do is keep people alive with some guaranteed income. All these dynamic efficiency gains are then not realised and capital has the run of the field....
Getting into the nitty gritty.

Framing the debate in terms of UBI or JG, presuming that the choice is binary, involves confusing categories. They are different programs addressing different issues, and they are not mutually exclusive as a binary division of single bounded set "workers," having only two subsets that exclude each other.

This is largely due to failure to appreciate fully the JG position, and as a result mounting attacks on a straw man. Since this position has been set forth amply in the literature, such behavior is unprofessional.

Bill Mitchell – billy blog
UBI advocates ignore the dynamic efficiencies of full employment
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

See also
Jeremy Corbyn’s speech this morning raises a big question in economics that won’t get the attention it deserves: is there a trade-off between static and dynamic efficiency?
Stumbling and Mumbling
Corbyn's neglected question
Chris Dillow | Investors Chronicle

See also

The issue of UBI and JG is not only economic but runs the gamut of the social, political and economic spectrum, influencing all aspects of society.
In the new millennium, the proliferation of financial assets, with unstable economic growth, has given way to widespread to precarious jobs, income gaps and weaker welfare programs. The same policies that have obliterated social services and kept labour cheap have supported the expansion of short-termism and new global business models in the context of deregulated capitalism.
Besides, the onset of the 21st century represents a new political age overwhelmed by the violation of democratic ideals of political equality and social peace. Indeed, democracy has been allowing for election to office but not to power (Madi, 2015). And, as a consequence, policy makers might give priority to their sponsors instead of the needs of citizens – decent work and income equality.
In truth, the current trends in global capital accumulation and production have shaped a scenario where unemployment, job instability and fragile conditions of social protection increased (Stiglitz, 2011). First, labour-saving technologies have reduced the demand for many middle-class, blue-collar jobs. Second, globalization has created a global marketplace, confronting expensive unskilled workers with cheap unskilled workers overseas and favouring outsourcing practices. Third, social changes have also played a role in the labor market changes, such as the decline of unions. Four, political decisions are influenced by the top 1% who favor policies that increase income inequality.
All these trends do reveal issues of current power, politics and economics in a social context where democratic institutions are being threatened....
Very short review of Robert Kuttner, Can Democracy Survive Global Capitalism?, WW Norton, 2018

WEA Pedagogy Blog

11 comments:

Calgacus said...

Framing the debate in terms of UBI or JG, presuming that the choice is binary, involves confusing categories. They are different programs addressing different issues, and they are not mutually exclusive as a binary division of single bounded set "workers," having only two subsets that exclude each other.

If the UBI is something that deserves the name - a macroeconomically significant universal monetary income, then the only issue it addresses is that there aren't enough billionaires and homeless people. Because that's what a UBI does - makes more billionaires and more homeless. A banana republic economy is the best conceivable outcome of the UBI. It would wreck any society's economy in short order.

It's not a matter of framing, it is a matter of the UBI being a worthless idea, an idea like witchcraft or human sacrifice that humanity was infected with for millennia, but has gone beyond. Insane, stupid or evil? Tough to say which applies the most. A JG is a human right - as I quoted Lerner here a while back, unemployment is slavery. Not having a UBI is a human right too, because UBI = slavery. A UBI is pro-slavery socialism like George Fitzhugh's.

What the UBI is about is enslaving people to serve the whims of assholes who think they are better than everyone else, who deserve to be waited on while doing nothing in return. Isn't that what progressives are supposed to be fighting against? But God is kind - a UBI can't really exist in a world without Hilbert hotels and supertasks. Don't see many black supporters - maybe they know deep down that their ancestors used to provide a UBI for those who thought they owned them.

Unless you are a billionaire who slavers from the mouth at the UBI's promise of slavery reborn, you have to be both innumerate and conceptually illiterate to support it. In Matt's terms, you fail both the Science degree and the Arts Degree. Though of course the Science degree and the Arts Degree are really the same thing. Maybe the world does need a spin with the UBI, for it does illustrate the forgotten identity of philosophical concepts and modern science.

André said...

"Framing the debate in terms of UBI or JG, presuming that the choice is binary, involves confusing categories."

But, in the view of many (including me), it is indeed binary.

UBI should be a good policy for people who cannot work (disabled people). Other than that, it should not be considered good policy.

For those able to work, JG should be considered the adequate unemployment policy, and UBI should be ruled out. Maybe there are other good unemployment policies, but UBI is not one of them.

What do you have in mind, Tom? Maybe I'm missing something here

Tom Hickey said...

The problem with the framing of the UBI is the "universal."

This is obviously unnecessary to meet the design problem, which is a providing a universal safety net so that no one slips through the cracks and the society establishes and maintains a foundation that is dynamically efficient.

The universal aspect is not a matter of substance but rather of strategy. If everyone receives it, the thinking goes, then, magically, it becomes viable politically.

That is magical thinking when the issues are explored.

The design problem is to ensure a vibrant middle class of modest means, with no poverty in the society, and and absolutely no destitution like homelessness. It is also aimed at dynamical efficacy , e.g,, by addressing social dysfunction and increasing the value of human resources instead of needlessly depleting them at a cost to both present and future.

Knowing this, China has set this as one of the chief goals of the current five year plan, for example. In short, moving forward. Meanwhile, the West is slipping backward, which is, well, backward. This is a consequence of backward thinking.

This objective could be accomplished in part with cash transferred on a means-tested basis, and in part with a transfer of goods and services, like universal education and health care, all funded by overt money financing.

This is a pseudo problem when analyzed intelligently. There may be various ways to do these things that are open to debate, but the basic principle is evident. The first is the universal right to work guaranteed by the government, and the second is the universal right to the necessities of life also guaranteed by the government. These are fundamental human rights.

MMT establishes that the constraint is availability of real resources rather than affordability. as is commonly assumed – wrongly.

André said...

"The first is the universal right to work guaranteed by the government, and the second is the universal right to the necessities of life also guaranteed by the government."

Well, the second should be a consequence of the first, except for some rare cases (disabled people, people facing some vulnerability or some temporary issue, etc).

A right-wing chartalist (if that even exist) could even argue that there shouldn't be a government providing education or health - people would provide themselves with that sort of thing if they had the opportunity to work.

A left-wing chartalist (which I believe is the definition of a MMTer, but I may be wrong) would argue that a JG and a government providing fundamental needs (like education, health, infrastructure, etc) is the way to guarantee the needs for everyone.

Giving free money to people (UBI) is not a good policy for any...

Matt Franko said...

“Though of course the Science degree and the Arts Degree are really the same thing.“

No they are not.. AND .... only an Art Degree person would claim such a thing...

Konrad said...

“UBI makes more billionaires and more homeless.”

Good job shilling for neoliberals.

Social Security makes more billionaires and more homeless, right? So if we make Social Security universal (i.e. if we have a UBI) we would be swamped with homeless people and billionaires. Right?

Unknown said...

There needs to be a consideration of the climate crisis in this ongoing debate. The carbon emissions from real full employment would likely be very high, no? Sure, the JG could employ people in green jobs, but would that really be enough to cause a net reduction in carbon emissions?

Unknown said...

Well said, Konrad. A reduction in the Social Security eligibility age to, say, 30 would be an easy way to implement UBI.

Tom Hickey said...

SS in the US provides a good example actually.

FDR knew the government is self-funding but instituted the paid-in "insurance" as a tax for strategic purposes. He said that if it were paid-insurance, Congress would have political difficulty repealing it in the future.

In addition to being unnecessary operationally, the FICA tax is seriously regressive, and (some) MMT economists recommend eliminating it.

The position of owners is to tax work rather than ownership and income derived from ownership. FICA is a good example of that.

Tom Hickey said...

Most new jobs in the US are service, and the carbon footprint of service workers is generally less that production workers (extraction, manufacturing, agriculture).

But since the US has an abysmal public transport system, all worker have a significant carbon footprint owing to petro-burning transportation and even electric vehicles have a large carbon footprint since electricity is not the primary source, much of which is carbon-based.

Calgacus said...

Me:“UBI makes more billionaires and more homeless.”

Konrad:Good job shilling for neoliberals.
Social Security makes more billionaires and more homeless, right? So if we make Social Security universal (i.e. if we have a UBI) we would be swamped with homeless people and billionaires. Right?


Tyler Healey:Well said, Konrad. A reduction in the Social Security eligibility age to, say, 30 would be an easy way to implement UBI.

Social Security is not UBI; it is nothing like a UBI, which stands for Universal. Basic Income. The key is "universal" - which means a UBI spends far more than any society could support - or it is NOT a UBI. Words, even acronyms, have meanings.

Social Security does and did not make more billionaires and homeless. Social Security is about the young providing for the old, as the old had provided for them. It eliminated a lot of homeless and reduced the power of "economic royalist" billionaires.

I am not shilling for neoliberals, but opposing their ideas. The UBI is a neoliberal idea, with support from many neoliberals and billionaires. It is based on neoliberal "economics" and is a good demonstration of why neoliberal economics, even more than "immoral" - is at heart just plain crackpot ideas.

But Tyler Healey brings up a good point, a good frame to think about things. Modern societies could lower their retirement ages - what is old is a matter of judgment. 30 sounds a bit low. Anything near that would require reducing a lot of other worthless and destructive Federal spending - most of the military, rationalizing our health care system etc.

But a UBI equates to a reduction of the (SS) retirement age to Zero. In other words, a society with a UBI is relying on the labor of unborn fetuses to support it. I think that is a bit too low, don't you?