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.

Willful Blindness

see no evil

We heard last time from Mats Alvesson and André Spicer and their book The Stupidity Paradox about “functional stupidity” — what happens when we stop thinking for ourselves and go along with the dumbing-down of our workplaces.

Prof. Spicer gave a TEDx Talk based on the book, beginning with a story from first-year torts:  Grimshaw v. Ford Motor Company. You may recall that Ford’s upper management went ahead with the Pinto as originally designed, despite the infamous “Pinto Memo” finding that $11.00 worth of alterations per vehicle would have made it a whole lot safer. The result was the largest product liability damage award ever against a car manufacturer (as of that time). Clearly a case of “functional stupidity.”

Functional stupidity is the result of what psychologists call “cognitive bias”:  engaging with experience only after we’ve filtered it first to conform to our habitual perceptions, assumptions, and prejudices. Journalist, filmmaker, and CEO Margaret Hefferman wrote the book on the subject:  Willful Blindness: Why We Ignore the Obvious at our Peril (2011). Here’s her TED talk, and here’s a BrainPickings article about her book and about cognitive bias in general. Ms. Heffernan is a marvelous storyteller — she recounts story after jaw-dropping story from all arenas of life.

Cognitive bias is especially ironic in the legal profession, since the law itself doesn’t let you get away with it:  the rule of “willful blindness” makes you culpable if you intentionally decide not to know about wrongdoing or deliberately fail to make a reasonable inquiry into it. “See no evil” isn’t going to fly.

How can we shake off our cognitive biases? As a friend of mine says, “The trouble with blind spots is you can’t see them.” Not only can’t we see them, we don’t want to either — and it doesn’t work to make them someone else’s problem. I ran several Google searches looking for articles about lack of independent thinking in the workplaces. Tweak my search as I might, it kept turning up advice like this one from Harvard Business Review, which trots out this worn out bit of conventional management advice:  “It’s the employees’ fault, so here’s how a manager can fix them.” I really expected more from the HBR.

Instead of getting occupied with the speck in someone else eye when we’ve got a log in ours, we might follow the example of Ray Dalio, founder and chairman of hedge fund heavyweight Bridgewater Associates, who created a firm culture around “radical truth and radical transparency.” This is from the company’s website:

“Our unique success is the direct result of our unique way of being. We want an idea meritocracy in which meaningful work and meaningful relationships are pursued through radical truth and radical transparency. We require people to be extremely open, air disagreements, test each other’s logic, and view discovering mistakes and weaknesses as a good thing that leads to improvement and innovation. It is by continually striving together for the highest levels of truth and excellence that we create meaningful work and meaningful relationships.”

That last line is worth repeating:

“It is by continually striving together for the highest levels of truth and excellence
that we create meaningful work and meaningful relationships.”

Mr. Dalio’s firm culture is as cognitive-bias-busting as they come. If you’re intrigued, you might treat yourself to his talk. Click here or on the image below and scroll down a couple turns.

Ray Dalio Bridgewater TED talk

Whether or not you’re inclined to embrace Bridgewater’s radical firm culture, learning to see past our biases and get a fresh look might be a good addition to a New Year’s Resolutions list. Just an idea….

We’ll continue our search for a new perspective on economics and the workplace in 2018.