Universal Basic Income: It’s That Simple*

Universal Basic Income: It’s That Simple*

Universal basic income, or unconditional basic income, is described by The Basic Income Lab at Stanford as a “‘disarmingly simple idea’: give everyone cash, no strings attached, unconditionally and individually.” People and institutions with wide audiences often position universal basic income as a simple panacea to wealth inequality and pending job losses from globalization and automation.

They fail, however, to discuss the complex additional policies needed to ensure its success. So far, public conversations about universal basic income have been unrealistically simplistic. But pushing universal basic income as a simple fix while glossing over the details undermines the credibility of the proposal and precludes opportunity for improvement of a potentially smart policy.

Since most of the public form opinions about social policies through popular media instead of direct consumption of academic studies, it is even more important that those voices with mass reach be rigorous and nuanced in their arguments. For example, Matt Bruenig’s op-ed in The New York Times, “A Simple Fix for Our Massive Inequality Problem,” paints a picture of a simple implementation of a social wealth fund to address income inequality without discussion of how it would actually narrow the income gap. The only popular proposal that (briefly) acknowledges potential challenges of successful implementation is Sam Altman’s recent blog post, “American Equity,” which defines universal basic income as a share of GDP. “There would be difficult consequences for things like immigration policy that will need a lot of discussion,” Altman writes. “We’d also need to figure out rules about transferability and borrowing against this equity. And we’d need to set it up in a way that does not exacerbate short-term thinking or favor unsustainable growth.” But discussion of nuances like these have been largely missing from the discussion.

Unconditional cash transfers, if implemented properly, could go a long way toward breaking cycles of poverty, fulfilling the same role that microfinance now does for women and farmers, and even replacing complex or ineffective government benefit programs. Universal basic income could also protect individuals against the shocks of a changing economy. With computer science being the most popular major at Stanford, students should care about how they will play a role in radically changing the job market for other people. Likely in line with these concerns, in February 2017 Stanford established The Basic Income Lab (BIL) at the McCoy Center for Ethics in Society to study the feasible scope, societal implications and economic impacts of basic income.

The idea is not new. In fact, it has circulated in Western philosophy for centuries, with notable supporters like Thomas Paine and John Stuart Mill. In a 1797 pamphlet, Agrarian Justice, Paine outlines a system of endowed payments “to every person, rich or poor...because it is in lieu of the natural inheritance [of land], which, as a right, belongs to every man, over and above the property he may have created, or inherited from those who did.” Mill, in his Principles of Political Economy, expresses support for a system of proportional distribution of capital, labor, and talent among society, including an unconditional basic income. “In the distribution,” he notes, “a certain minimum is first assigned for the subsistence of every member of the community, whether capable or not of labour.” Indeed, the simplicity of a proposal like basic income is alluring: Paine himself noted in Common Sense that, with regards to government, “the more simple anything is, the less liable it is to be disordered…” Give people cash, and trust them to know how to best spend it.

However, despite long-standing discussion and current relevance, proposals for universal basic income still need, and have not received, nuanced public debate and conversation to improve. Existing proposals face serious problems that proponents have not credibly addressed.

First, just giving people money without other specific controls will not work, and may even further exacerbate income inequality. As the IMF warns in its October 2017 Fiscal Monitor report, “While universal transfers can help fill coverage gaps in administratively constrained environments, they present their own challenges, not least the leakage of benefits to higher-income groups and the need to finance their sizable cost with distortionary taxation.” “Leakage of benefits" can occur for a number of reasons, either directly through giving income to groups that do not need it or indirectly through predatory targeting or price inflation of basic necessities, like rent.

Second, proponents of universal basic income often cite experiments that either could easily be false positives or are criticized for being poorly designed. So far, most basic income experiments run on small sample populations and thus only temporarily increase relative wealth, rather than permanently increasing universal wealth. How can these studies reasonably measure potential long-term impact on inflation, for example? Or the potential transfer of minimum income from the poor to the rich, as warned by the IMF?

Finally, proponents of basic income seem to ignore any disproof of the benefits of their proposal. We could be studying the effects of a permanent increase in Alaska, where every citizen has received an annual check from a collective endowment fund established in 1976 based on natural resource revenue in a Painean model of universal basic income. Here, though, universal basic income doesn’t seem to be working. Proponents have often cited the fact that Alaska’s inflation index trails that of the collective United States as proof that universal basic income does not cause inflation. But what I haven’t seen addressed is why Alaska’s cost of living index is the fourth highest in the United States. Or, since the 1970s, how Alaska’s income inequality has actually increased and its GDP growth lagged behind the rest of the United States. Why is this happening? Does basic income have anything to do with it? If it does, what policies could be put in place to improve implementation? It is hard to find academic research on the impact of basic income in Alaska, and that is a wasted opportunity.

Productive public conversation about universal basic income is crucial for its adoption, because that is what it will take to form the strong arguments and improved research efforts that lead to bipartisan support. Without bipartisan support, universal basic income risks going the way of other overly politicized policies, like universal healthcare, and won’t last the few decades required to warm citizens up to new social benefits. Proponents of universal basic income will find that pushing an oversimplified narrative while ignoring the asterisk of conditions for successful implementation will undermine the very goal that they seek.

*conditions may apply

If you’re interested in this topic, Stanford’s Basic Income Lab is holding its next event, Basic Income and Racial Justice, on January 16, 2018.

Photo by Russell Higgs: CC BY-NC-SA 2.0

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