The political problem with UBI (or why "Taxation is theft" is both right and wrong depending...)

2017 January 25
by Daniel Lakeland

Traditionally, it's been the case that a lot of human labor has been required to produce stuff. Want a coat? Someone has to design the coat, cut the cloth, dye the cloth, wind the bobbins, and sew all the individual pieces together, pack it in a shipping box, ship it to the store, stock it on the shelf, operate the check-out register... Even if you assembly-line it all for efficiency, it probably takes between 20 mins and a couple of hours to produce one coat depending on the design. And whether it's coats or sausage, tires or mattresses, bread or cut roses, if you wanted to buy something, you had to pay for all the people who gave up their time to make that thing a reality.

In that world, a sudden government transfer to you was sure as sugar the same thing as forcing someone else to give up hours of their life to give you something they made in those hours, without compensation. Hence, the totally un-nuanced slogan "Taxation is Theft".

And if there is one thing we can't replace, it's hours in your life. We can grow more trees, mine more gold, collect more energy from the sun, but we can't give you a time machine to go back in time and re-do an 8 hour work shift as a snorkeling vacation in the Bahamas with your kids instead.

In a world where multi-purpose ultra-robots produce all the everyday "stuff" at an energy cost of a few meters square of sunlight for an hour each day, a government transfer does NOT in any way imply forcing someone else to give up pieces of their lives for your benefit. In this case, at least in terms of hours of your life given up "Taxation is Theft" is flat out wrong! (and I'll get to the issue of natural resources and raw materials in a different post).

In an intermediate world, where some people work and others don't, the degree to which a government transfer implies forcing someone else to work without pay is more difficult to quantify. Sure, if the government prints money and hands it to you, and you buy a thing, and that thing has some "embodied time" then some people worked to make it. Were they forced to "give that time up for free?". Well, assuming the tax consequences of working are known in advance, and the existence of the government transfer is known to everyone, evidently they still valued the take-home wages they got from the work more than the time they gave up or they wouldn't be doing that job. The taxes are baked in to the decision.

What becomes problematic then, is when the structure or quantity of government transfers and taxation change, and these changes invalidate the plans that people made and they receive less than they expected from all the investment they put in. For example if you went and got a Med School degree and then just as you were taking your first job they socialized all of the health-care system and set a low wage for you and said "you'll have to put up with that or stop practicing medicine" and you either need to give up all that training and go do something you're less qualified for, or put up with the consequences of planning to be a high paid doctor and winding up being a socialized government employee.

The big problem with something like "getting rid of social security" is that in the last 20 or 40 or 60 years of people's life they made decisions under the assumption that they would get social security, and so they accepted lower wages than they otherwise would have, on the theory that at least when they're X years old they'll get some relatively understood payments during their retirement etc.

This all suggests that really, we shouldn't see a fixed UBI as "taking things from people" (Taxation is Theft!) but instead "enabling our economy to function even when people's labor is not really required". And even if people's labor is still required, provided that we are very consistent and predictable about the rules for the UBI, prices in the market for labor will adjust to meet those expectations, and people will be getting what they bargained for when they take a job.


2 Responses leave one →
  1. Daniel Lakeland
    January 25, 2017

    Incidentally, this notion of "baking in" the assumptions of taxation and transfer is why the right way to make major changes to the way government programs work is to "buy out" the population. For example, you want to eliminate Social Security in favor of the UBI for everyone? Well, issue government bonds to people that promise the same or similar payments to the ones SS was offering... and let people trade these bonds in the market, aggregate them into "Government Backed Transfer Securities" or whatever. Then eliminate all that administration associated with the SS administration, and move on with setting up a UBI.

  2. Daniel Lakeland
    January 25, 2017

    Another clarification: Sure, those who choose to take jobs have baked in their taxes to the choice, provided that the taxes aren't too complicated to calculate (which of course they are! complicated taxes ARE theft!)

    But, what about those people who choose not to work even though they would have chosen to work if there were no taxes? This is at least one of the main sources of the dead-weight loss associated with taxes. If you were willing to work for $10/hr and someone was willing to hire you for $10/hr but your take home pay would have only been $8/hr... then you will not work, and the employer (and by extension the eventual customer) loses out on getting the value you would have created.

    In the situation where the value of labor is rapidly declining due to automation, pretty clearly the ability to smoothly transition to a situation where everyone eats a bigger and bigger pie of wealth created by the robots at a fixed UBI transfer is far superior to the alternative where the corpses of the dead workers are used as fertilizer for the land barons.

    In other words, we don't get to choose between a world where there are no taxes and no transfers and everyone eats a bigger and bigger pie vs a world where there are taxes and transfers and everyone eats a bigger and bigger pie but not as big because of dead-weight loss...

    The choice is more close to choosing between everyone eats a bigger and bigger pie but there are some dead-weight losses gee that's too bad, vs eventual rioting in the streets on a regular basis like in France only much much worse.

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