The Flaw in Any Scheme for Universal Basic Income


The public sphere has been a realm of echoing noise, lately, but through it all, readers may have picked up from time to time the notion of a universal basic income — that is, some system or other that guarantees every American a baseline level of money that allows them to subsist, if not live comfortably.  Even on the political right, some folks are willing to entertain the idea as a reimagining of the welfare state, but that’s not the angle that leads me to bring the question up, just now.

As David Rotman writes in the MIT Technology Review, some folks are seeing a UBI as a way to address the social change when technology ensures that fewer and fewer people actually have to do anything resembling work:

… among many tech elites and their boosters, the idea of a basic income seems to have morphed from an antipoverty strategy into a radical new way of seeing work and leisure. In this view, the economy is becoming increasingly dominated by machines and software. That leaves many without jobs and, notably, society with no need for their labor. So why not simply pay these people for sitting around? Somehow, in the thinking of many in Silicon Valley, this has become a good thing.

It’s not surprising that tech oligarchs and other comfortable groups of people would favor the idea, because the healthier, more-natural economic path forward would put some risk on them, rather than just on the poor folks losing their jobs.  If you’re out of work and the government gives you money (from somewhere), then you can go on buying devices and software, keeping Silicon Valley humming.

What ought to happen is that prices adjust to reflect the new economic reality.  If your entire industry is displaced, many people won’t be able to afford the latest gadgets, so the industry that makes those gadgets will have to find a way to lower their prices.  Every industry will have to lower its prices to reflect the reduction in demand at current prices.  That sounds terrifying, but remember that the premise is that technology is displacing people and making everything less expensive to produce.

If we use government to prevent deflation, then somewhere along the line, some people are collecting more money than they should.  A frivolous device company, for example, is producing its products more cheaply because of technology, but it doesn’t have to adjust its prices down to reflect the poorer population.  When government intervenes for this purpose, it necessarily means that some industry, product, or occupation is being unjustly constrained, even if it would be impossible to trace it dollar for dollar.

Letting prices adjust is simply letting society reprioritize based on its new reality.  The reality we’ve been refusing to accept is that the economy will adjust one way or another.  As the world changes, we need the maturity not to save the privileges of those we see at the expense of those we don’t.

  • Rhett Hardwick

    As Justin points out, he is simply restating the “Law of Supply and Demand”. It seems glaringly obvious that the UBI plan is highly inflationary. It might be noted that we have a UBI, which presumes participation in the work force. It is called the “Minimum Wage”. There seems to be a constant demand for increases. The UBI proposed removes participation the work force, but I do not see how it eliminates the demand for increases. I cannot imagine anything more inflationary that demanding more for doing nothing.

  • Raymond Carter

    You all are ignoring the main benefit which is the complete dismantling of the welfare bureaucracy and the government funded nonprofit industry.
    This is an idea from Freidman not Marx or the Clintons.
    Tommy Cranston
    Of course, as Freidman himself noted, it won’t work in a society with anchor babies and open borders to the third world-the caveat progressives never mention.

    • Rhett Hardwick

      I grant the advantages that you cite, but am unable to believe that there would not be a superseding bureaucracy to administer the UBI. I also cannot see how we would gain by making an ever larger portion of the population utterly dependent on the government for it’s livelihood. I can also see a well fed mob roaming the streets “looking for something to do”. Far better that we find some way to honorably occupy those ousted by technology.

      • Rhett Hardwick

        Socialist countries, such as Sweden, have found that when you make unemployment too comfortable, employed people notice. They become less productive and show up for work less often.