UBI Revisited: Efficiency, Affordability, Morality
Maybe economic necessity isn’t the main obstacle to morality and values.
The comments to my previous post on Universal Basic Income have raised interesting issues worth examining closer.
The tech threat to jobs
Some readers are very concerned that artificial intelligence and robotics will displace large numbers of workers, starting with new entrants into the labor market. As I argued in previous posts (here and here), the evidence for now is thin; at the moment this is the problem we fear, not the problem we face.
Things might change quickly — AI is a powerful technology, and will most likely create some labor market disruption as companies figure out how to use it. When it does, we must help those unable to find jobs. I don’t believe large-scale joblessness is around the corner, but we should not underestimate the risk to specific industries or geographies. We’ve seen it happen in manufacturing through the combined impact of globalization and technology, with profound human, social and political consequences. We need to be prepared. But this is an argument for more targeted help, not for giving money to everybody.
Efficiency and affordability
Some readers argue that UBI is more efficient and affordable than I give it credit for. For example, if UBI replaces the existing social safety net it will cost less than my estimate. UBI advocates are divided on whether it should replace existing social benefits or be additive, but let’s take a closer look. In the US, social benefits currently amount to 400 billion dollars.1 That’s less than one-tenth of my $4.3 trillion cost estimate for a poverty-line UBI.
Even if we cut Medicaid as well (about $670 billion), we would still need an additional $3.2 trillion to fund UBI — higher than the total intake from personal income taxes. And that would mean telling a person on the poverty line that if something happens to their health they’re on their own, society has done enough for them already.
A flat cash benefit would be simpler to administer — much like a flat tax. But it means giving up other ways to help the vulnerable. Consider two destitute young women, and one of them has two little children — would we not give her extra assistance? A bright child from a poor background: would we not help her through school? The egalitarian simplicity of UBI steamrolls all these hard questions.
Ethics
In my post I wondered how people will find fulfillment in a society with no jobs. One reader correctly pointed out that people do find fulfillment in activities that are poorly remunerated, or not at all; that society has conditioned us to see work as the main source of purpose and fulfillment, but that will change when work is no longer necessary.
That’s an excellent point, and it triggers a few reflections: In most societies, it seems to me, culture has incentivized behaviors that hold us together and help improve living conditions. Our economies reward entrepreneurship and innovation. But we also value charitable giving, volunteer work, and poorly remunerated dangerous activities like firefighting. For many of us, fulfillment comes from feeling useful to society and valued by our peers. It also comes from hobbies and passions. There is often a competitive element at play.
so far no organized society has collapsed by incentivizing individual performance and success; but several have failed by undermining incentives through egalitarian excesses
Human beings are very different. We live in a world of volunteers, missionaries, nurses and teachers; but also of swindlers, thieves, murderers and terrorists. Policies need to take into account the variety and statistical distribution of these different inclinations. Perhaps as an economist I am biased to regard all individuals as heartless utility-maximizers, which we clearly are not. But assuming we will all strive to improve ourselves and society in the absence of incentives might be equally naive.
Societies have a moral responsibility, an obligation (to quote another comment) to help their most vulnerable members. They also have a moral responsibility to reward individual performance. Both, I believe, are deeply ingrained in human nature. Finding the right balance between the two is a social choice, and a difficult one. Economics can’t give us the answer, but can help us see the trade-offs. The US may fall short on solidarity, compared to Europe; but it vastly outperforms on incomes and living standards. (And I say “may” because once you consider private charitable contributions the comparison is not as clearcut.)
It’s worth noting that so far no organized society has collapsed by incentivizing individual performance and success; but several have failed by undermining incentives through egalitarian excess (Soviet Union, Cuba, etc.).
Closing thoughts
After this second round of reflections, my bottomline is:
Our societies have a moral obligation to help the most vulnerable. This also requires making sure we produce the necessary resources.
We should be pragmatic and prioritize. Today we have limited financial resources and our economies still need all hands on deck to grow and stay solvent. Under these conditions, social assistance must be targeted — there’s no tenable argument for handing out money to those who don’t need it. And we must be careful not to undermine work incentives — whereas UBI signals that the government will take responsibility for supporting you whether you decide to work or not.
We should not underestimate the risk that technology will disrupt the labor market in unforeseen and unprecedented ways. We must stand ready to help those who get displaced, better than in the past.
One day, technology might enable our economies to grow with minimal human input. Let’s start thinking about how to organize our societies when that time comes. This is a chapter in itself, with a number of open questions. Will AI have surpassed us across the board, or will human ingenuity still be able to add value? Will technology have lifted resource constraints, for example on energy?
A hopeful view is that technologically-driven abundance will de-emphasize greed and competition and allow us to focus on “values versus value” as one comment aptly put it. As a dismal economist let me offer a word of caution. Countries already enjoying abundance, those blessed with valuable natural resources, rarely offer enviable models of societies. Think oil-rich Iran and Venezuela versus water-deprived Singapore. At the individual level, think hard-working immigrants versus trust-fund kids. Maybe economic necessity isn’t the main obstacle to morality and values.
As of 2025, including unemployment compensation, Supplemental Security Income, the refundable portion of the earned income and child tax credits, the Supplemental Nutrition Assistance Program, family support, child nutrition, and foster care.
Brilliant!