Attack of the Techno-Libertarians!
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invasionAfter my response to Steve Randy Waldman on the Universal Basic Income proposal, I got into a Twitter scrum with one Morgan Warstler (MW) and Bro. Waldman. I was under the impression that MW was promoting the UBI and promised to respond to his arguments. Turns out he is not promoting a UBI at all. He’s got a different scheme to replace the social safety net. I’m afraid I can’t endorse it.

MW wants to subsidize wages and require work. Jobs bubble up by virtue of a huge Federal wage subsidy and an online labor exchange. Employers can pay as little as a dollar an hour. The Gov tops up the wage offers to minimum wage levels (along with abolishing the minimum wage). You are required to accept one of the jobs on offer. You don’t work, you don’t get any money. It’s workfare-by-software.

Fortune 1,000 companies are barred from participation in the program, so someone dismissed from such a firm gets routed to a smaller company. At the same time, employers must be located within some short range of employees. I don’t see what would stop small employers from flooding into the program, though the geographical requirement would drastically limit job offers, especially in very low-income areas.

Morgan makes a number of puzzling claims. One is that prices would go down in low-income/low-wage areas, I suppose because the wage subsidy pushes down employer costs and the prices they charge. Though we have assumed there will be employers and we are ignoring the extent to which people consume goods and services originating elsewhere. And we neglect the impact of higher incomes in an area not pushing prices higher. He also thinks competition would force employers kept out of the program to pay higher wages. Again this assumes that jobs are generated in sufficient volume to force such a move. And for some reason he thinks everyone could do a job they positively love, like delivering singing birthday cards. (I initially wrote ‘singing telegrams,’ but you might not know what those are. Were.)

This won’t cost anything, we are told, because it would replace unemployment insurance. So we are back to a failure to grasp the basic functions of social insurance and in this case, fiscal policy. So let’s back up. What problem is the scheme supposed to solve? Poverty, or low employment?

If it’s low employment, you could read the scheme as an elliptical substitute for public employment and fiscal activism (deficit spending). The Gov can create oodles of productive jobs much more easily than a wage subsidy to decentralized, and in this case fictitious employers. There is no lack of public work to be done. Do you want to pay taxes so that a jobless person can go to work tending somebody’s flower beds, or rebuilding America? (Cue the trumpets.) The Gov created lots of work in the 1930s, without benefit of the Internet or PCs. Too slow? Jobs can be created in real time by strengthening automatic fiscal stabilizers, such as the progressive income tax and unemployment insurance. These boost aggregate demand when the economy goes south. MW would replace unemployment insurance with his scheme.

If the problem is poverty, the implication of the scheme is that the problem of the poor is that they won’t work. Before I deal with that ancient prejudice, let me remind you of the social insurance argument underlying unemployment benefits.

Unemployment insurance allows workers to collectively prepay to insure against the risk of job loss. Part of the employer’s labor cost is dedicated to a fund that provides for some wage replacement in the event of layoff. Workers in effect pay for their benefits by receiving less labor compensation. It’s that contributory thing again, to protect against FDR’s “disturbing factors of life.” To be sure, the connection between contribution and return is rough, but there is a connection. It’s not welfare. There is no reason to fix unemployment insurance. It is not broken. It could be improved, but it is not broken.

Unemployment insurance provides an incentive for workers to seek jobs in the first place (since the risks of impoverishment during layoff are reduced), and to keep searching if they have lost their job (to get benefits, you have to look for work). Unemployment insurance is not welfare. The problem with unemployment benefits is not that workers are refusing to work; it’s that they lost a damn job.

To address poverty, MW wants the beneficiaries of his program to work for their benefits. Of course, this is what state governments are doing now with Temporary Assistance for Needy Families (not social insurance). How’s that going? In a nutshell, for this approach to be valid, two things have to be true: the poor will work if jobs are available, and jobs will be available. Neither are true.

Jobs are not available in sufficient number to employ the poor and unemployed. If the Gov poured more money into job creation, as noted above, this problem could be addressed. But MW’s scheme is not the only way to do that, and I would say far from the best. Second, many among the poor are either children, disabled, or elderly. They are not expected to work. Among the able-bodied of working age, for many, labor market attachment is precisely their problem, even if jobs are available.

Given the chance, MW would fold in other programs providing means-tested benefits. This is a little careless, even if it’s in the realm of fantasy. As I’ve pointed out in other posts, churning existing benefits into some new system creates huge numbers of losing parties. Ordinarily that is not a disabling criticism, since any big change is going to shake things up. In this case, however, there is no well-defined rationale for the pattern of redistribution from existing beneficiaries to new ones. This follows especially if we are rerouting funds dedicated to those not expected to work into some kind of wage subsidy scheme.

As I cruise into my dotage, I am increasingly aware of age differences with others. Part of the me vs. UBI vs. MW vs. etc. I suspect is an age thing. Younger folks are looking for new things, of course you are. Away with the old and moldy! But one needs to be aware of value in what might be lost.

Social insurance is the greatest achievement of the modern liberal state. It is the most important institution protecting hundreds of millions from penury. If you haven’t looked into it, you really should. I would further argue that when most enjoy protection from the “great disturbing factors of life,” they are more indulgent of public altruism. Poverty and inequality are alleviated. That is the real historical experience of modern social-democracy.oldmanyellsatcloud_thumb


Comments

Attack of the Techno-Libertarians! — 32 Comments

  1. Max, I’m glad you took a shot!

    “What problem is the scheme supposed to solve? Poverty, or low employment?”

    For the record, I solve for Poverty by putting everyone to Work.

    Now for your beating.

    SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES….

    Do I need to say it again?

    Forget goods, we’ll discuss later. I’m talking SERVICES.

    What is the future of the Low Skill economy?

    SERVICES in SERVICE SECTOR.

    What does that mean?

    Cosmetology, lawn work, rehab handy work, food prep, fitness, cleaning, day care, continuing education, driving / delivery, creative services (everything from graphics to your band to blogging), and teleservices (all kinds of work from home stuff – from customer service and sales to virtual personal assistants.

    What’s common about SERVICES it’s all stuff that the people who live next door to – WANT AND NEED DONE FOR THEM.

    And dude, to be right, you HAVE to show me a single poor person who doesn’t want someone to:

    1. drive them
    2. bring them things
    3. cut their hair and do their nails
    4. mow their lawn
    5. paint their bathroom
    6. cook them noodles or a rack of ribs
    7. I can go on forever, BECAUSE HUMANS HAVE INFINITE WANTS.

    You have to start with INFINITE DEMAND at a PRICE OF FREE.

    So, let’s think thru you complete whiff on logic here:

    1. you don’t comprehend the CURRENT work the low skill people do today – it is SERVICES.

    2. you don’t understand what makes $280 worth more – lower prices. How do you not get this?!?

    3. you don’t understand what poor people want to buy – hint: the same shit as all the other people their age, and most poor are YOUNG.

    So let’s start there…

    Please assume the above facts, and then rethink your complaint with GICYB.

    THEN, I’d like to show you how comparative advantage of low cost labor, and solve for the equality gap between blacks and whites… think Slave Reparations.

    AND I want to make you understand what it means to think of policy in terms of software.

    I’m 43, I’m not a whipper snapper, and I’m plenty old to tell and old man, he’s going to learn some new tricks.

  2. ALL CAPS!

    To help protect and expand social insurance we need a high-pressure, full employment economy with growing incomes. We had this from WWII until the 1980s.

    See Baker’s post today:

    http://www.cepr.net/index.php/blogs/beat-the-press/median-household-income-began-to-stagnate-in-1980-not-2000

    This can be done via demand manangement (monetary, fiscal, trade) although it helps to have a labor movement which keeps incomes and demand up. With wages stagnating and childrens’ incomes not outpacing their parents, people look for scapegoats. If incomes are growing and people feel prosperous it will be easier to have a generous safety net.

  3. From the Warstler link:

    “The cold brutal fact is many Americans aren’t worth what social justice crusaders are forced to pretend. They have to stop pretending.”

    Basic conservative/Republican line. This was prevalent in the 1930s, and yet we got the prosperous post-war golden years when the middle class was created by government action and unions, not some weird private-public scheme. Turns out many Americans were worth it and could create the most advanced economy until our vaunted “job creators” and “entrepeneurs” hollowed it out.

  4. Peter K.

    You misunderstand PRICE LEVEL in regards to SAFETY NET.

    IF you want to have the strongest possible safety net, you have to let go of Minimum Wage. They are not complements. Open. Your. Mind.

    Minimum Wage (at $5, $10, $15, whatever) puts some workers out of labor market, and that means HIGHER PRICES FOR POOR PEOPLE LIVING ON WELFARE.

    Let me give you concrete example:

    Since 2008, there are now about 500K single family homes under management by giant ETF style funds.

    None of them are slums.

    None of them can be had for rents less than $950 even in smaller markets. Even in markets where there is 25-30% unemployment.

    WHY? Why can’t a home be taken care of by a company for less than $950?

    Because the properties are managed using labor at Minimum Wage + taxes + cost of regulations, so think $10-12 per hour.

    But WHAT IF, we take that 30% unemployed, give them their welfare, and put them to work starting at $40 per week?

    Now the cost of labor for painting or laying carpet in poor areas is $5 per hour, cleaning on a turn is $4 per hour…

    SUDDENLY, we can have NICE SINGLE FAMILY HOMES in what used to be slums, for $600 per month.

    Think about what this does for a poor community…

    Think about what a black entrepreneur can do competing with white contractors, when he has access to this cheap labor, because he LIVES and runs his business in the neighborhood where the labor is…

    I realize you like minimum wage and you like safety net, and I realize what I’m saying is a hard thing to change your mind on, but you KNOW what I’m saying makes sense.

    It is not a trick. It’s just a fact of economics.

  5. Hello Morgan. Your plan is a machine for producing services that are not worth what they cost (the “employer’s” wage plus the public subsidy) by ordinary market criteria, and I’m no market enthusiast. In this case there is little doubt the government could produce more useful output for the same money. I also think you underestimate the skills and productivity of the poor and unemployed.

    Your facts about the disemployment effect of the minimum wage are not facts. The go-to place for all things minimum wage is epi.org.

  6. ‘In this case there is little doubt the government could produce more useful output for the same money.’

    I’d love to see the proof of that assertion. However, from the WSJ I learn that robots can now be purchased for as little as $20,000;

    http://online.wsj.com/articles/robots-work-their-way-into-small-factories-1410979100?mod=WSJ_hpp_sections_smallbusiness

    ‘At Panek Precision Inc., a Northbrook, Ill., machine shop, 21 shiny new robots hum as they place metal parts into cutting machines and remove the parts after they are done. It’s a tedious and oily task once handled by machine operators who earn about $16.50 an hour.

    ‘One new robot doubled the output from a machine that was previously operated by a worker “because robots work overnight and don’t take lunch breaks and they just keep going,” says Gregg Panek, the company’s president. In some cases, the robots, which are single articulated arms, can even hold a part while it’s getting cut since there is no danger of injury.’

    Can robots that flip burgers be far away?

  7. In the first position, labor bargains without ANY safety net.

    As such it bargains for higher pay.

    Well fed labor, receiving welfare condition on doing ANYTHING someone else will pay for bargains for less.

    My plan honors the first postion.

    Your argument ENCOUAGES us to dismantle the safety net, because it isn’t buying us cheaper labor.

    Let me explain something t you max. Welfare is not a wage subsidy, it is a human subsidy, and what do subsidies do?

    It make those things cheaper to buy.

    If you WANT the haves to willingly increase the safety net, promise them access to cheap labor.

  8. I’ve tangled with Morgan Warstler before. Essentially the weak point of his scheme is in terms of Liberty. Poor unemployed essentially become slave labour. They have virtually no protections from exploitation.

  9. The weak part of my argument is slave labor?

    1. How can anyone with 50 different job offers available to them next week, be a slave? Do you not understand how many people will offer $40 a week jobs? Anyone who can babysit will easily clear $320 a week. ($120 per week from parent + $180 of GI). Anyone who can paint will make closer to $360.

    2. THINK ABOUT THAT. Now suddenly, the POOR (those slaves you are “protecting”) can have their entire interior of their home painted for $200 + cost of paint.

    3. ANd black entrepreneurs can now compete with a true comparative advantage! Cheap labor.

    Yes, I’m creating slave labor.

    Go home reason, you are crazy.

  10. C’mon Max, look it is clear from my first response you made a number of basic logic mistakes:

    “Unemployment insurance allows workers to collectively prepay to insure against the risk of job loss.”

    So people no longer are paying UI, they are paying taxes, and the UI system is now GICYB.

    “The Gov can create oodles of productive jobs much more easily than a wage subsidy to decentralized, and in this case fictitious employers.”

    Yeah. Weatherization was Obama’s only public example of a “shovel ready job” – how’d that turn out?

    Poor people have WANTS Max, they WANT the same thing you and I want – they want SERVICES performed by others for them.

    Why would you WASTE $5B+ weatherizing basically zero homes, things the poor DO NOT WANT, and not use the $5B to help them get the things they do want CHEAP?

    “Second, many among the poor are either children, disabled, or elderly. They are not expected to work. Among the able-bodied of working age, for many, labor market attachment is precisely their problem, even if jobs are available.”

    What thinking person doesn’t IMMEDIATELY understand that the the able-bodied poor COULD BE DOING THINGS for the disabled poor AT THE TOUCH OF A BUTTON.

    Look man, the gig economy is here. Uber, Airbnb, taskrabbit, postmates, ALL OF IT is here to stay.

    Max, just HONESTLY ANSWER ONE QUESTION:

    If tomorrow we had 30M able bodied welfare recipients each go to work for one of 30M children disabled or elderly, just show up at their home and do whatever was asked of them for a week.

    Can you admit that consumption poverty, the quality of life of those 30M non-able bodied poor just increased significantly?

    If you can’t admit this, please tell me why, if a 22 year kid showed up at your house and said “Max, what can I do for you?” you’d say “nothing, I don’t need any help, go play your video games!”

    Because I’m credulous Max, and that’s the very nicest way I can put it.

    You seem like a guy willing to be honest and clear, this ins’t a hypothetical, this is EXACTLY what GICYB software will do, give you a button to press that for $40+ buys you that week whenever you want it.

    AND Max? If you don’t want anything, and none of the poor want anything, remember that 22 yr old gets his $280 GI anyway, he only has to work if you press the button Max.

    How is he or you harmed in any way Max?

    How is he harmed?

  11. How is it decided whether they employed or not according to your definition? Think about it. What happens if they decide to chuck a job because it stinks?

  12. (It also occured to me that this scheme could be subject to fraud. What is to stop Fred employing his brother Joe – and vice versa and paying them $1 a nominal hour, to do precisely nothing? – or something defined as carrying fishing gear to the pond and waiting around and carrying it back.)

  13. There is nothing about your scheme that ensures any individual will have 50 job offers, or even 1.

  14. 1. If they don’t have job offer, they get $280 anyway – no harm!

    2. If they do have a job offer, it’s almost certainly bc some other poor person has something they would like done cheap – so tremendous benefit!

    3. Of course there will be 50 job offers, you just don’t have the mindset of someone who needs things done for them. That’s a very odd mindset.

  15. Again READ the plan, I am not an idiot, plenty of heavy-weight Economists have put their best into looking for holes in my plan, and there simply aren’t that many.

    Hint: Ebay and Craigslist have far lower incidence of fraud than our welfare system does.

    And IF there is fraud, I’m generally ok with just minimizing it, we don’t need a big bureaucracy to do what software and buyers and sellers can do one their own.

    READ the plan.

  16. I read the proposal.

    It seems to me like a Randy Wray Jobs Guarantee modified by e-commerce privatization. I’ve seen worse proposals put forward by people who should know better. At least it doesn’t propose to pay the basic income in Bitcoins.

    If you’re serious about your proposal, Morgan, I would suggest you have about 20 years of research ahead of you answering all possible objections. You can start by looking at the extant critiques of Wray’s Jobs Guarantee, of e-commerce sharing such as Uber and Air B&B and of privatization/deregulation.

    Don’t leave out “Utopian” schemes of the past such as Major Douglas’s Social Credit and Owenite “Labour Money” in 19th century Britain.

    After you have done your research, Morgan, and have perfected and debugged your proposal and know more about work and money than 99% of the economists who get media coverage, expect to be ignored. If you are not willing to do the comprehensive research and not resigned to being ignored after you have done it, then you don’t believe in your own idea so why should anyone else?

  17. Obama’s stimulus went far beyond weatherization, and for the money spent worked just fine. It should have been bigger, and lasted longer, but that’s a different matter. To reduce it to weatherization is really uninformed. Try reading Michael Grunwald’s book.

    Those unable to work need money first, for food, clothing and shelter, not services.

    The unemployed need real jobs, not jobs clipping toenails. Jobs that are durable, with benefits and opportunities for growth. And there is still the question of those who can’t work.

    The ‘gig economy’ has pluses and minuses. One effect — taxicab drivers — is decidedly negative.

    There are far better alternatives.

  18. Michael we are WAY PAST food, clothing, shelter…

    And that’s good thing!

    Sorry buddy, but the durable jobs things – is done.

    If you pine for it, if you refuse to take out a fresh sheet of paper, you will screw the poor even more tomorrow, than you do today.

    MY SYSTEM will take poor kids when they are 14, and make ALL of them life long hustlers, all of them tuned to market demands, what their neighbors and friends WANT to buy, and they will learn early to deliver it.

  19. And again, Obama admitted himself, FIscal stimulus is a big oops on jobs – there aren’t any shovel ready jobs in govt.

    Monetary policy (NGDPLT) is the only effective way to fight off a crisis.

    In my software, however, JOBS HAPPEN and POVERTY ENDS OVERNIGHT.

  20. BigMac,

    It’s not a proposal, it’s coming. It’s just the future. It’s “what” technology wants. I’m saying this as an expert technologist…. virtually ANY startup founder who has been able to raise decent capital from decent investors, if you asked them to use technology to recreate Welfare…. 80%+ of them would come up with GICYB on their own.

    So let me explain a bit of the future of political science, using GICYB as an example:

    It’s just open source software, released into Github, and any campaigning politician around the globe, any think tank, any govt, and grab a copy, set some dials (YES, you can do UBI with it too) and publish it to a server and INVITE the whole world, their district, their country, to put an app on their phone and USE THE THING, see what it is like to list a job, to, to fund your account, to offer a job, to set up your employee profile, attach your your debit account for payment, to look thru jobs and market yourself, and for both sides to provide FEEDBACK.

    And it will find purchase… it will get used.

    And when it gets used, the poor in a neighborhood WILL BE BETTER OFF.

    You see right now Paul Ryan is banging gong for welfare block grants…

    THIS IS WHAT STATES LIKE TEXAS DEPLOY.

    Forget Wray, I’ve read all this stuff for years and years, Sumner, Farmer, Kimball all endorse my plan.

    Here it comes.

  21. And note BigMac, this is my day job. This is what my venture company does. Appifiying govt. in Texas.

    GICYB isn’t a profit center for us, it needs to be free.

    And it needs to be be configurable for any kind of welfare system… it needs to let the poor go to work for one another, EVEN IF they aren’t required to.

    Minimum wage is the devil when you have a population trying to live on with a welfare check.

  22. Pingback: interfluidity » Links: UBI and hard money

  23. Yes, Morgan, I can envision you now, floating down the river, lying on your back on an air mattress, naked, with a boner, shouting: “Raise the drawbridge!”

  24. Pingback: Links 9/27/14 | Mike the Mad Biologist

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