Friday, September 30, 2016

The Economics Questions of a Basic Income Part 1: Metrics/Goals

    In these next two posts I'm going to make a basic, general statement about what a basic income should be and do, and then see what questions can be asked about that statement using economic logic. By asking some of these questions in an economically sensible way, we can envision the kinds of experiments we would need to be run to be confident that a large scale basic income increases welfare over a long period of time.

    But before we get into economic analysis, there are further questions about our morals and our political economy that we need to answer. Economic analysis doesn't dictate what's right and desirable, it just helps us determine what is possible and how to achieve it. Knowing what we want from an economy is key to us calling a major policy like a basic income a success or a failure.

A basic income should be a regular monetary transfer from the state to every citizen sufficient to ensure that all are above the poverty line.

1. What exactly should we define as the poverty line? The term means "the estimated minimum level of income needed to secure the necessities of life," (thanks Google) or more generally, the resources necessary for long term survival, but there's more questions to be asked from there. What do we consider the necessities of life? Good starting points for discussion are housing, food, and medical care, without which people can die fairly quickly. But clearly there are massive differences in the quality of housing, food, and healthcare that impact human lifespans, and choice matters in some cases as much as opportunity, so what should we set as minimum thresh holds?

2.  Can we get more specific, at least about what we'd like to see in terms of these three pillars? How about the goal of the opportunity to buy a nutritionally sound diet devoid of pollution? Housing that meets a certain set of standards? Healthcare that is of the highest possible (what's possible?) quality?

3.  Are there additional institutional structures that would be beneficial (measured how?) or necessary for the economy to continue functioning? For instance, in-kind transfers are used in charity all the time--rather than having a basic income calculated based on market prices for sufficient housing, would state control and supply of housing be better? Of course the politics of that solution are currently ... not tenable, but what about in a hypothetical situation where robotic labor supply of raw materials and construction pushes down the price of low-income housing to the point that there is barely a private market for it anymore? What about if the state itself owns this robotic capital and takes it upon itself to supply housing? Much less controversial is the idea of state-supplied healthcare, which is already a right throughout rich nations, excluding the US. Add in a thorough automation of much labor within the healthcare industry...
4. Simply keeping people alive is obviously a super low bar for a rich economy trying to handle massive productivity gains. Should the basic income also be sufficient that a recipient can buy things like consumer goods (I hesitate to give product examples because goodness knows if things like smartphones or laptops will exist in 10 years, let alone 30 or 40, but something of that ilk?) If our idea of a functioning basic income economy is such that there's still an incentive for inventors to bring products to market, then the income needs to be such that the average person who's main source of dollars is the BI can buy things. In the hypothetical world of high-tech automation I envisage, some people without very specialized skills might really not be able to perform any kind of labor to trade for a high-tech product.

5. What sort of culture do we want to come out of a society with a basic income? There are pessimistic and optimistic intuitions about how people would respond--some people would sit playing videogames, some people would create art, and to me I see a mix as likely. If after 30 years we had Wall-E, would we consider that a failure? What if we could foresee ourselves on the way there?