He Works Hard (But Not Always For The Money)

University of London economist Guy Standing has championed universal basic income since the 80’s. In Basic Income:  A Guide For the Open-Minded (2017), he tackles the argument that UBI is flawed because recipients don’t work for it.

“A remarkable number of commentators and social scientists lose their common sense when it comes to talking or writing about work. While every age throughout history has drawn arbitrary distinctions between what counts as work and what does not, ours may be the most perverse.

“Only in the twentieth century did most work that was not paid labour become non-work. Labour statistics persist in this travesty. ‘Work’ is counted only if it is for pay, in the marketplace.”

For example, he says, it’s the same work to walk the dog whether you do it yourself  or pay someone else to do it, but the former doesn’t count. If it did, it would add up to a lot:

“In the U,K. — and it is similar in other countries — the unremunerated economy (caring for children and the elderly, housework, voluntary work in the community, and so on) is estimated to be worth well over half the size of the money economy.”

Juha Järvinen, one of 2,000 Finns selected for a two-year UBI test does work that counts and work that doesn’t; either way, he works hard:

“In a speck of a village deep in the Finnish countryside, a man gets money for free. Each month, almost €560 [about $640] is dropped into his bank account, with no strings attached.

“He’s a human lab rat in an experiment that could help to shape the future of the west.

“Until this year … he was trapped in a “humiliating” system that gave him barely enough to feed himself … The Finnish [workfare system] was always on his case about job applications and training.

“[He was in the same position as] an unemployed Finn called Christian [who] was caught carving and selling wooden guitar plectrums [picks]. It was more pastime than business, earning him a little more than €2,000 in a year. But the sum was not what angered the authorities, it was the thought that each plectrum had taken up time that could have been spent on official hoop-jumping.

“Ideas flow out of Järvinen as easily as water from a tap, yet he could exercise none of his initiative for fear of arousing bureaucratic scrutiny.

“So what accounted for his change? Certainly not the UBI money. In Finland, €560 is less than a fifth of average private-sector income. “You have to be a magician to survive on such money,” Järvinen says. Over and over, he baldly describes himself as ‘poor.’

“Ask Järvinen what difference money for nothing has made to his life, and you are marched over to his workshop. Inside is film-making equipment, a blackboard on which is scrawled plans for an artists’ version of Airbnb, and an entire little room where he makes shaman drums that sell for up to €900. All this while helping to bring up six children.

“All those free euros have driven him to work harder than ever.”

Compare his situation to that of Florian Dou, one of France’s “yellow vest” protesters, who has no UBI safety net:

“At the bare bottom of Florian Dou’s shopping cart at the discount supermarket, there was a packet of $6 sausages and not much else… “My salary and my wife’s have been gone for 10 days,” he lamented.

“How to survive those days between when the money runs out and when his paycheck arrives for his work as a warehouse handler has become a monthly challenge. The same is true for so many others in Guéret, a grim provincial town in south-central France.

“In places like these, a quiet fear gnaws at households: What happens when the money runs out around the 20th? What do I put in the refrigerator with nothing left in the account and the electricity bill to pay? Which meal should I skip today? How do I tell my wife again there is no going out this weekend?”

That last comment — “going out this weekend” — is a moralistic hot button among UBI foes. Again from Guy Standing:

“More generally, there is a moralistic presumption that poor people, especially those receiving benefits, should not be spending money on anything but the bare essentials, denying themselves even the smallest ‘luxury’ that might make their lives less miserable. As Marx pointed out in 1844, ‘every luxury of the worker seems to be reprehensible, and everything that goes beyond the most abstract need seems a luxury.’”

Standing also exposes a related presumption:

“It is often claimed that giving cash to those in need is misguided because people will spend it on alcohol, cigarettes, and other ‘bads’ rather than on their children and essentials such as food, clothes, and heating.

“Obviously, this is a thoroughly paternalistic line of attack. Where to draw a line between ‘good’ and ‘bad’? Why should a rich person have the freedom to buy and consume whatever the state bureaucracy deems a ‘bad,” but not a poor person?”

Good vs.bad, work that counts vs. work that doesn’t, necessities vs. luxuries…  the UBI debate is littered with polarities and prejudices. Suppose the cultural pendulum swings all the way to a state of “total work” — what would that be like? We’ll find out next time.

A New Social Contract

fortnite

“Men are born free, yet everywhere are in chains.”

Jean-Jacques Rousseau,
The Social Contract & Discourses

What do Fortnite, New Year’s Day, and the USA have in common?

They all exist because we believe they do.

Political theorists call this kind of communal belief a “social contract.” According to Rousseau, that’s the mechanism by which we trade individual liberty for community restraint. Similarly, Thomas Hobbes said this in Leviathan:

“As long as men live without a common power to keep them all in awe, they are in the condition known as war, and it is a war of every man against every man.

“When a man thinks that peace and self-defense require it, he should be willing (when others are too) to lay down his right to everything, and should be contented with as much liberty against other men as he would allow against himself.”

In Fortnite terms, life is a battle royale:  everybody against everybody else, with only one left standing. As Hobbes famously said, that makes life “solitary, poor, nasty, brutish, and short.” As a recent version put it, “For roughly 99% of the world’s history, 99% of humanity was poor, hungry, dirty, afraid, stupid, sick, and ugly.”[1] A social contract suggests we can do better.

Can we really create something out of nothing, by mere belief? Yes, of course — we do it all the time. My daughter can’t figure out why New Year’s Day is a holiday. “It’s just a day!” she says, unmoved by my explanation that it’s a holiday because everyone thinks it is. Same with Fortnite — as 125 million enthusiasts know, it’s not just an online game, it’s a worldwide reality. And same with the United States — the Colonies’ deal with England grew long on chains and short on freedom until the Founders declared a new sovereign nation into existence:

“We hold these truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness.”

The new nation was conceived in liberty, but there would be limits. Once the Revolutionary War settled the issue of sovereign independence[2], the Founders articulated a new freedom/chains balance:

“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

That social contract + 250 years of history = the USA. We are a nation borne of imagination and belief, continually re-defined and updated through interpretations and amendments to the terms of our social contract.

Our economic system works the same way. Adam Smith’s capitalism survived the trip to the new world, produced astonishing quality of life improvements in the 19th and 20th Centuries, and then was recast into the neoliberal framework that powered the world’s recovery from WWII. That version of our economic social contract thrived for three decades, but began to falter in the face of several unforeseen developments:

  • the democratization of knowledge in the information age;
  • accelerated automation, mass production, and eventually robotics;
  • software that at first only did what it was told but later morphed into machine intelligence; and
  • globalization, which shrank the world, homogenized culture, opened international trade, and recast national borders.

Neoliberalism couldn’t keep up. Tensions rose until the year 2016 became a worldwide referendum on the social contracts of democracy and neoliberalism. New social contracts would have required a new freedom/chains balance. 2016’s response was, “Not on my watch.”

That’s the context into which universal basic income would now be introduced. For that to happen, the American Dream of independence and upward mobility fueled by working for a living must give way to a belief that basic sustenance — job or no job — is a human right so fundamental that it’s one of those “self-evident” truths. As we’ve seen, that radical belief is slowly changing the North Carolina Cherokee Reservation’s culture of poverty, and has caught the fancy of a growing list of techno-plutocrats. As Mark Zuckerberg said, “Now it’s our time to define a new social contract for our generation.” Law professor James Kwak makes the same point[3]:

“We have the physical, financial, and human capital necessary for everyone in our country to enjoy a comfortable standard of living, and within a few generations the same should be true of the entire planet, And yet our social organization remains the same as it was in the Great Depression:  some people work very hard and make more money than they will ever need, while many others are unable to find work and live in poverty.

“Million if not billions of people today hunger to live in a world that is more fair, more forgiving, and more humane than the one they were born into. Creating a new vision of society worthy of that collective yearning … is the first step toward building a better future for our children.”

To be continued.

[1] Rutger Bregman, Utopia for Realists (2016),

[2] In Hobbes’ terms, social contracts end the battle royale. Ironically, they often also create war as ideals of one contract conflict with another’s.

[3] James Kwak, Economism (2017).

 

Basic Income On The Res [2]

cherokee reservation

For nearly two decades, Duke Medical School professor Jane Costello has been studying the impact of casino money distributions on the health and well-being of the North Carolina Cherokee tribe. For long, balanced articles about her work, see “What Happens When the Poor Receive a Stipend?The New York Times (2014) and “Free Money: The Surprising Effects Of A Basic Income Supplied By GovernmentWired Magazine (2017).

The NY Times article lists several encouraging results, for example:

“The number of Cherokee living below the poverty line declined by half.

“The frequency of behavioral problems declined by 40 percent, nearly reaching the risk of children who had never been poor.

“Crimes committed by Cherokee youth declined.

“On-time high school graduation rates improved.

“The earlier the supplements arrived in a child’s life, the better that child’s mental health in early adulthood.

“The money seemed to improve parenting quality.”

Prof. Costello also noted neurological benefits, particularly brain development in the ”hippocampus and amygdala, brain regions important for memory and emotional well-being.”

Randall Akee, an economist at UCLA and a collaborator with Prof. Costello, speculated about the impact of these findings on the cost of welfare benefits:

“A cash infusion in childhood seemed to lower the risk of problems in adulthood. That suggests that poverty makes people unwell, and that meaningful intervention is relatively simple.

“Bearing that in mind, [Prof. Akee] argues that the supplements actually save money in the long run. He calculates that 5 to 10 years after age 19, the savings incurred by the Cherokee income supplements surpass the initial costs — the payments to parents while the children were minors. That’s a conservative estimate, he says, based on reduced criminality, a reduced need for psychiatric care and savings gained from not repeating grades.”

The Wired article tracks the experiences of “Skooter” McCoy, who left the Cherokee Reservation to play small college football the year the casino money distributions began, and of his son Spencer McCoy, who was born that same year. Skooter returned to the Reservation to coach football at the local high school and is now general manager of the Cherokee Boys Club, a nonprofit that provides day care, foster care, and other tribal services.

“The casino money made it possible for him to support his young family, but the money his children will receive is potentially life-altering on a different scale.

“‘If you’ve lived in a small rural community and never saw anybody leave, never saw anyone with a white-collar job or leading any organization, you always kind of keep your mindset right here,’ he says, forming a little circle with his hands in front of his face. ‘Our kids today? The kids at the high school?’ He throws his arms out wide. ‘They believe the sky’s the limit. It’s really changed the entire mindset of the community these past 20 years.’”

The Cherokees’ experience began with the same provisions for a one-time distribution at age 18 of the  money set aside for minors that we saw last time in the Seneca tribe’s program, but the Cherokees later amended their law to call for payments in three stages — still not ideal, but a move toward sensibility. Skooter calls the coming of age payments “big money,” and has seen his share of abuse, but his son Spencer appears to be taking a different path:

“When Spencer first got his ‘big money,’ he says, ‘I’d get online and I was looking for trucks and stuff, but I thought at the end of the day, it wasn’t really worth it.’ Aside from a used bass boat he bought to take out fishing, Spencer has stashed most of the money away in hopes of using it to start his own business one day.”

After reviewing Prof. Costello’s work, the Wired article examines the use of UBI as a response to technological unemployment, concluding as follows:

“The true impact of the money on the tribe may not really be known until Spencer’s generation, the first born after the casino opened, is grown up. For the techies backing basic income as a remedy to the slow-moving national crisis that is economic inequality, that may prove a tedious wait.

“Still, if anything is to be learned from the Cherokee experiment, it’s this: To imagine that a basic income, or something like it, would suddenly satisfy the disillusioned, out-of-work Rust Belt worker is as wrongheaded as imagining it would do no good at all, or drive people to stop working.

“There is a third possibility: that an infusion of cash into struggling households would lift up the youth in those households in all the subtle but still meaningful ways Costello has observed over the years, until finally, when they come of age, they are better prepared for the brave new world of work, whether the robots are coming or not.”

We’ll look more at “the robots are coming” and Silicon Valley’s response to technological unemployment next time. Meanwhile, for related information, see this summary re: U.S. government benefits to Indian tribes, and see this article re: another current version of UBI — the Alaska oil money trust fund.

Basic Income On The Res

life-on-an-indian-reservation-752x501

Thomas Sowell has a platinum resume:  Marine Corps war vet, bachelor’s Harvard, master’s Columbia, Ph.D. U of Chicago, professor at Cornell and UCLA, Urban Institute and the Hoover Institute at Stanford, books, articles….  You get the point:  when he talks economic and social policy, people listen.

seneca casino

The people at The Institute for Family Studies (IFS) were listening when they published a blog post earlier this year entitled “What We Can Learn From Native Americans About a Universal Basic Income.” The article describes the Seneca tribe’s practice of distributing casino money to its members, and focuses on the particularly disastrous provisions pertaining to the money for minors:

“Half the money for children under 18 is given to their parents, and the other half is put into a trust. When a Seneca youth turns 18 and can show that he or she has graduated from high school or earned a GED, he or she receives a lump sum of $30,000. Those who don’t get a high-school degree have to wait until they’re 21 to receive the money.

“Government officials and other members of the nation tell me that the best thing most young adults do with this money is to buy a new truck. These are kids who have never had very much before; so when someone hands them a huge check, they clearly don’t know what to do. Store owners report that young people will come in to buy candy, handing $50 or $100 without expecting any change. These young people seem to have no concept of saving or investing.“

I used to practice estate planning, and need to point out that the Seneca approach to minor beneficiaries unfortunately borrows the worst kind of legislation drafting laziness from intestacy law, uniform gifts to minors acts, and similar laws involving minors and money. Their experience therefore has nothing to do with UBI specifically. Of course dropping a wad of cash on an unprepared 18 or 21 year-old is a dumb idea. Of course the kids “have no concept of saving or investing.” (Like the rest of us do.) Moving on, the article cites more disasters:

The money “is almost never saved for education.

“Despite a vast apparatus to help Seneca members set up businesses, almost no one starts one.

“Unless people are employed by the tribe (either through the casino or in tribal government), they are largely unemployed.

“Theft is also a problem. One official told me that they have had reports of elder abuse where children and grandchildren were stealing payments from older members of the tribe.

“The results of all this can be seen in the poverty rates for the Senecas, which have continued to rise. Their territory is divided into two reservations. As of 2011, the Allegany reservation poverty rate was 33.3 percent and the Cattaraugus reservation poverty rate was 64.9 percent, the highest in Cattaraugus County. During the first decade that the casino was operating, the poverty rate in Cattaraugus County, which includes part of the Seneca Territory, increased from 12.8 in 2000 to 18.7 in 2011.”

Finally, the article ends by citing Thomas Sowell:

“Writing about the concept of a Universal Basic Income last year, Thomas Sowell summed up the situation: ‘The track record of divorcing personal rewards from personal contributions hardly justifies more of the same, even when it is in a more sophisticated form. Sophisticated social disaster is still disaster—and we already have too much of that.’”

The Sowell article cited by the IFS blogger was “Is Personal Responsibility Obsolete?” (Investor’s Business Daily, June 6, 2016). It begins this way:

“Among the many disturbing signs of our times are conservatives and libertarians of high intelligence and high principles who are advocating government programs that relieve people of the necessity of working to provide their own livelihoods.

“Generations ago, both religious people and socialists were agreed on the proposition that ‘he who does not work, neither shall he eat.’ Both would come to the aid of those unable to work. But the idea that people who simply choose not to work should be supported by money taken from those who are working was rejected across the ideological spectrum.”

And so we see the standard anti-UBI fightin’ words:

“divorcing personal reward from personal contributions”

“government programs that relieve people of the necessity of working to provide their own livelihoods”

“people who simply choose not to work”

“money taken from those who are working”

I confess, I can’t help but wonder what people who say those things think they would do with UBI money. Again moving along….

Other tribes also distribute casino money. The following is from What Happens When the Poor Receive a Stipend?”, published by The New York Times as part of a 2017 series on economic inequality called “The Great Divide.”

“Scientists interested in the link between poverty and mental health, however, often face a more fundamental problem: a relative dearth of experiments that test and compare potential interventions.

“So when, in 1996, the Eastern Band of Cherokee Indians in North Carolina’s Great Smoky Mountains opened a casino, Jane Costello, an epidemiologist at Duke University Medical School, saw an opportunity. The tribe elected to distribute a proportion of the profits equally among its 8,000 members. Professor Costello wondered whether the extra money would change psychiatric outcomes among poor Cherokee families.”

Same idea, different tribe. How’d they do? We’ll find out next time.

There’s No Such Thing as a Free Lunch — True or False?

free lunch - mIlton friedman

free lunch - steven hawking

We can assume that the pros and cons of a universal basic income (UBI) have been thoroughly researched and reasonably analyzed, and that each side holds its position with utmost conviction.

We can also assume that none of that reasonableness and conviction will convert anyone from one side to the other, or win over the uncommitted. Reason doesn’t move us:  we use it to justify what we already decided, based on what we believe. SeeWhy Facts Don’t Change Our Minds,” The New Yorker (February 2017) and “This Article Won’t Change Your Mind,” The Atlantic (March 2017).

History doesn’t guide us either — see Why We Refuse to Learn From History, from Big Think and Why Don’t We Learn From History, from military historian Sir Basil Henry Liddell Hart. The latter is full of conventional wisdom:

“The most instructive, indeed the only method of learning to bear with dignity the vicissitude of fortune, is to recall the catastrophes of others.

“History is the best help, being a record of how things usually go wrong.

“There are two roads to the reformation for mankind— one through misfortunes of their own, the other through the misfortunes of others; the former is the most unmistakable, the latter the less painful.

“I would add that the only hope for humanity, now, is that my particular field of study, warfare, will become purely a subject of antiquarian interest. For with the advent of atomic weapons we have come either to the last page of war, at any rate on the major international scale we have known in the past, or to the last page of history.

Good advice maybe, but we’ve heard it before and besides, most of us would rather make our own mistakes.

If reasoned analysis and historical perspective don’t inform our responses to radically new ideas like UBI, then what does? Many things, but cultural belief is high on the list. Policy is rooted in culture, culture is rooted in shared beliefs, and beliefs are rooted in history. Cultural beliefs shape individual bias, and the whole belief system becomes sacred in the culture’s mythology. Try to subvert cultural beliefs, and the response is outrage and entrenchment.

All of which means that each of us probably had a quick true or false answer to the question in this week’s blog post title, and were ready to defend it with something that sounded reasonable. Our answer likely signals our knee jerk response to the idea of UBI. The “free lunch”– or, more accurately, “free money” — issue appears to be the UBI Great Divide:  get to that point, and you’re either pro or con, and there’s no neutral option. (See this for more about where the “no free lunch” phrase came from.[1])

The Great Divide is what tanked President Nixon’s UBI legislation. The plan, which would have paid a family of four $1,600/year (equivalent to $10,428 today) was set to launch in the midst of an outpouring of political self-congratulation and media endorsement, only to be scuttled by a memo from a White House staffer that described the failure of a British UBI experiment 150 years earlier. UBI apparently was in fact a free lunch, with no redeeming social purpose; thus its fate was sealed.

As it turns out, whether the experiment  failed or not was lost in a 19th Century fog of cultural belief which enabled opponents of the experiment to pounce on a bogus report about its impact to justify passing the Poor Law Amendment Act of 1834 — which is what they wanted to do anyway. The new Poor Law was that era’s version of workfare, and was generated by the worst kind of scarcity mentality applied to the worst kind of scarcity. Besides creating the backdrop to Charles Dickens’ writing, the new Poor Law’s philosophical roots still support today’s welfare system:

“The new Poor Law introduced perhaps the most heinous form of ‘public assistance’ that the world has ever witnessed. Believing the workhouses to be the only effective remedy against sloth and depravity, the Royal Commission forced the poor into senseless slave labor, from breaking stones to walking on treadmills….”

From “The Bizarre Tale Of President Nixon’s Basic Income Plan.”

If UBI is a free lunch, then it’s an affront to a culture that values self-sufficiency. If it isn’t, then it requires a vastly different cultural value system to support it. The former believes that doing something — “making a living” at a job — is how you earn your daily bread. The latter believes you’re entitled do sustenance if you are something:  i.e., a citizen or member of the nation, state, city, or other institution or community providing the UBI. The former is about activity, the latter is about identity. This Wired article captures the distinction:

“The idea [of UBI] is not exactly new—Thomas Paine proposed a form of basic income back in 1797—but in this country, aside from Social Security and Medicare, most government payouts are based on individual need rather than simply citizenship.”

UBI is about “simply citizenship.” It requires a cultural belief that everybody in the group shares its prosperity.  Cultural identity alone ensures basic sustenance — it’s a right, and that right makes Poor Laws and workfare obsolete.

The notion of cultural identity invites comparison between UBI and the “casino money” some Native American tribes pay their members. How’s that working? We’ll look at that next time.

[1] Yes, Milton Friedman did in fact say it, although he wasn’t the only one. And in a surprising twist, he has been criticized for advocating his own version of UBI.

Old Dog, Old Trick, New Showtime

old dog new trick

Blockchain consultant and futurist Michael Spencer called it a conspiracy by the 0.01 percenters to enslave the rest of us for good.[1] A growing number of those 0.01 percenters have already supported it, but they’re not alone:  this poll conducted shortly after the 2016 election showed that half of Americans supported it as well. A parade of think tanks (here’s one) and other professional skeptics (more than I can cite with hyperlinks in a single sentence) have given it a thorough vetting and mostly concluded something along the lines of “yeah well okay maybe it’s worth a try.”

What is “it”? This idea:  give the poor what they lack — money. Ensure everyone a livable income while getting rid of the expensive and draconian welfare system. And just to be fair, go ahead and give everyone else money, too, even the billionaires.

The idea mostly goes by the name “universal basic income” (UBI). It’s rooted in the futuristic fear that technology will eventually put humans out of work. That’s not an old fear:  UBI is “far from a new idea,” says Martin Ford, another Silicon Valley entrepreneur and a popular TED talker, in his New York Times Bestselling Rise of the Robots: Technology and the Threat of a Jobless Future.

“In the context of the contemporary American political landscape… a guaranteed income is likely to be disparaged as ‘socialism’ and a massive expansion of the welfare state. The idea’s historical origins, however, suggest something quite different. While a basic income has been embraced by economists and intellectuals on both sides of the political spectrum, the idea has been advocated especially forcefully by conservatives and libertarians.

“Friedrich Hayek, who has become an iconic figure among today’s conservatives, was a strong proponent of the idea. In his three-volume work. Law, Legislation and  Liberty, published between 1973 and 1979, Hayek suggested that a guaranteed income would be a legitimate government policy designed to provide against adversity, and that the need for this type of safety net is the direct result of the transition to a more open and mobile society where many individuals can no longer rely on traditional support systems:

‘There is, however, yet another class of common risks with regard to which the need for government action has until recently not been generally admitted…. The problem here is chiefly the fate of those who for various reasons cannot make their living in the market… that is, all people suffering from adverse conditions which may affect anyone and against which most individuals cannot alone make adequate protection but in which a society that has reached a certain level of wealth can afford to provide for all.’”

LBJ foresaw the possibility of massive technological unemployment back in the 60’s, and appointed an “Ad Hoc Committee on the Triple Revolution” to study the topic. The Committee included co-Nobel Prize winners Friedrich Hayek and Swedish economist and sociologist Gunnar Myrdal.[2] Rise of the Robots describes the Committee’s findings:

‘Cybernation’ (or automation) would soon result in an economy where ‘potentially unlimited output can be achieved by systems of machines which will require little cooperation from human beings.’ The result would be massive unemployment, soaring inequality, and, ultimately, falling demand for goods and services as consumers increasingly lacked the purchasing power necessary to continue driving economic growth.

“The Ad Hoc Committee went on to propose a radical solution:  the eventual implementation of a guaranteed minimum income made possible by the ‘economy of abundance’ such widespread automation would create, and which would ‘take the place of the patchwork of welfare measures’ that were then in place to address poverty.

“The Triple Revolution report was released to the media and sent to President Johnson, the secretary of labor, and congressional leaders in March 1964. An accompanying cover letter warned ominously that if something akin to the report’s proposed solutions was not implemented, ‘the nation will be thrown into unprecedented economic and social disorder.’ A front-page story with extensive quotations from the report appeared in the next day’s New York Times, and numerous other newspapers and magazines ran stories and editorials (most of which were critical), in some cases even printing the entire text of the report.

“The Triple Revolution marked what was perhaps the crest of a wave of worry about the impact of automation that had arisen following World War II. The specter of mass joblessness as machines displaced workers had incited fear many times in the past — going all the way back to Britain’s Luddite uprising in 1812 — but in the 1950s the ‘60s, the concern was especially acute and was articulated by some of the United States’ most prominent and intellectually capable individuals.

“Four months after the Johnson administration received the Triple Revolution report, the president signed a bill creating the National Commission on Technology, Automation, and Economic Progress. In his remarks at the bills signing ceremony, Johnson said that ‘automation can be the ally of our prosperity if we will just look ahead, if we will understand what is to come, and if we will set our course wisely after  proper planning for the future.’ The newly formed Commission then … quickly faded into obscurity.”

A few years later, Richard Nixon introduced UBI legislation that he called “The most significant piece of social legislation in our nation’s history.” That legislation also faded into obscurity– more on that another time.

UBI is an old idea responding to an old fear:  how do we make a living if we can’t work for it? A half century after LBJ and Nixon, that fear is all too real, and lots of people think it might be time for the historical UBI solution to make its appearance.

But not everyone is jumping on the UBI bandwagon. The very thought that jobs might not be the source of our sustenance is the rallying cry of UBI’s most strident opponents.

More on UBI next time.

[1] Spencer followed with a similarly scathing assessment in this article.

[2] Myrdal’s study of race relations was influential in Brown v. Board of Education. He was also an architect of the Swedish social democratic welfare state. Hayek and Myrdal were jointly awarded the Nobel Prize in Economics in 1974.

The Landlord’s Game

monopoly

“Buy land – they aren’t making it anymore.”

Mark Twain

You know how Monopoly games never end? A group of academicians wanted to know why. Here’s an article about them, and here’s their write-up. Their conclusion? Statistically, a game of Monopoly played casually (without strategy) could in fact go on forever.

I once played a game that actually ended. I had a strategy:  buy everything you land on, build houses and hotels as fast as possible, and always mortgage everything to the hilt to finance acquisition and expansion. I got down to my last five dollars before I bankrupted everybody else. It only took a couple hours. Okay, so the other players were my kids. Some example I am. Whatever economic lessons we might have gained from the experience, they certainly weren’t what the game’s creator had in mind.

While Andrew Carnegie and friends were getting rich building American infrastructure, industry, and institutions, American society was experiencing a clash between the new rich and those still living in poverty. In 1879, economist Henry George proposed a resolution in his book Progress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: The Remedy.

“Travelling around America in the 1870s, George had witnessed persistent destitution amid growing wealth, and he believed it was largely the inequity of land ownership that bound these two forces – poverty and progress – together. So instead of following Twain by encouraging his fellow citizens to buy land, he called on the state to tax it. On what grounds? Because much of land’s value comes not from what is built on the plot but from nature’s gift of water or minerals that might lie beneath its surface, or from the communally created value of its surroundings: nearby roads and railways; a thriving economy, a safe neighborhood; good local schools and hospitals. And he argued that the tax receipts should be invested on behalf of all.”

From “Monopoly Was Invented To Demonstrate The Evils Of Capitalism,by new economist Kate Raworth.[1]

George’s book eventually reached the hands of Elizabeth Magie, the daughter of newspaperman James Magie and a social change rabble-rouser in her own right. Influenced by her father’s politics and Henry George’s vision, she created The Landlord’s Game in 1904 and gave it two sets of rules, intending for it to be an economic learning experience. Again quoting from Ms. Raworth’s article:

“Under the ‘Prosperity’ set of rules, every player gained each time someone acquired a new property (designed to reflect George’s policy of taxing the value of land), and the game was won (by all!) when the player who had started out with the least money had doubled it. Under the ‘Monopolist’ set of rules, in contrast, players got ahead by acquiring properties and collecting rent from all those who were unfortunate enough to land there – and whoever managed to bankrupt the rest emerged as the sole winner (sound a little familiar?).

“The purpose of the dual sets of rules, said Magie, was for players to experience a ‘practical demonstration of the present system of land grabbing with all its usual outcomes and consequences’ and hence to understand how different approaches to property ownership can lead to vastly different social outcomes.

“The game was soon a hit among Left-wing intellectuals, on college campuses including the Wharton School, Harvard and Columbia, and also among Quaker communities, some of which modified the rules and redrew the board with street names from Atlantic City. Among the players of this Quaker adaptation was an unemployed man called Charles Darrow, who later sold such a modified version to the games company Parker Brothers as his own.

“Once the game’s true origins came to light, Parker Brothers bought up Magie’s patent, but then re-launched the board game simply as Monopoly, and provided the eager public with just one set of rules: those that celebrate the triumph of one over all. Worse, they marketed it along with the claim that the game’s inventor was Darrow, who they said had dreamed it up in the 1930s, sold it to Parker Brothers, and become a millionaire. It was a rags-to-riches fabrication that ironically exemplified Monopoly’s implicit values: chase wealth and crush your opponents if you want to come out on top.”

“Chase wealth and crush your opponents” — that was my winning Monopoly strategy. It requires a shift away from the labor economy — selling things workers make or services they provide — to the rentier economy — owning assets you can charge other people to access and use. The scarcer the assets, the more you can charge. Scarcity can be natural, as is the case with land, or it can be artificial, the result of the kind of “regressive regulation” we looked at last time, that limits access to capital markets, protects intellectual property, bars entry to the professions, and concentrates high-end land development through zoning and land use restrictions.

Artificial scarcity can also be the result of cultural belief systems –such as those that underlie the kind of stuff that shows up in your LinkedIn and Facebook feeds:  “7 Ways to Get Rich in Rental Real Estate” or “How to Create a Passive Income From Book Sales and Webinars.” In fact, it seems our brains are so habitually immersed in Monopoly thinking that proposals such as Henry George’s land ownership  tax — or its current equivalents such as superstar economist Thomas Piketty’s wealth tax, Harvard law and ethics professor Lawrence Lessig’s notions of a creative commons, or the widely-studied and broadly-endorsed “universal basic income” — are generally tossed off as hopelessly idealistic and out of touch.

More to come.

[1] Kate Raworth holds positions at both Oxford and Cambridge. We previously looked at her book Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist  (2017).