Putting together multimedia posts, as James Kennedy strives to do to respond to my recent post on the idea of a universal basic income (UBI), can be tricky and time consuming. For instance, he comes up with a metaphor to refute my argument — saying that a UBI is like a superball being hit by a bowling ball — but links to a neat video about the physics of dropping multiple balls stacked on each other. The principles at play are not the same, and indeed, I’d suggest the physics of stacked balls is a better metaphor for my side of the UBI argument.
First, though, I’ll point out a technicality. My post was explicitly not about using a UBI as a welfare mechanism for a small population of very poor people, but rather about using it as a way to reconfigure our economy when technology makes large numbers of human jobs superfluous. In that case, Kennedy’s argument about size and elasticity does not apply.
I sidestepped the UBI-as-welfare angle because it’s not an area that I’ve explored to my own satisfaction. As I suggested, and as Kennedy emphasizes, people with whom I generally agree have toyed with the idea, so I’m not willing to dismiss it out of hand. That said, I will, for the sake of discussion, note that my initial expectation is that a UBI would make matters substantially worse for reasons not unlike the physics described in the stacked-ball video.
In that video, Physics Girl stacks three balls on each other — a golf ball on a super ball on a basketball — and drops them; the golf ball rockets 28 feet into the air. Note that the balls are stacked in order of decreasing size and decreasing elasticity. What’s happening is that the larger, bouncier balls compress when they hit the ground and then flex like trampolines, transferring their energy to the golf ball.
Right now, we’ve got a pretty stiff approach to welfare, delivered mainly in specific products and services, and it’s processed through a slow bureaucracy. In addition to the simple wastefulness of doing anything through government, this creates complications and has an effect on the economy (decreasing the incentive to work, for example), but we have to consider pluses and minuses in our specific context. Cash, on the other hand, is a very elastic medium, and using it for welfare would rocket the economic and individual problems much higher.
Money is fungible, of course, so if we all pay for somebody’s food, that person can spend his or her other money on things of which we do not approve, but at least he or she gets the food. If we simply hand out cash, then the person can skip the food and go right to paying for… say… hard drugs. Being compassionate, what does our society do then? Finally cut the people off, and declare their destitution beyond our responsibility?
If we fund just food, the person still has to come up with money for things he or she wants. That could mean incentive to work.
Of course, giving people things they don’t want above other things, but that have value, we probably increase the tendency toward fraud (to convert the food into cash), and then there’s that bureaucracy. But this is a subject for calculation, not a theoretical principle.
Likewise, we’d have to somehow factor in the tendency of programs to expand. The implicitly limited demand for healthy food, the high cost of providing the benefits and services, and the danger of fraud-related embarrassments probably have some restraining force on the political incentive to expand welfare programs for votes. If it’s a matter of quick and easy transfer of cash, I suspect politicians will be much quicker to use it as a vote-buying revenue source.
People on the left and right have assumed that if we make our welfare system more efficient — more elastic, if you will — the savings or energy will be transferred into positive outcomes. The poor would get more help, while the taxpayers and economy receive savings and consumers. I’m not so sure that’s how it would work out.