Redesigning Distribution

In my experience, the students with the most to lose by blowing their collegiate stakes rarely do. Financial aid recipients, first-generation college attendees, and generally kids for whom getting to go to an elite college represents a really big break and a chance to transform their life– but with no safety net guaranteeing that their life would continue on the same track if they screwed college up– don’t drink their way through.

I guess that means that my intuition is: even 18-year olds, when faced with genuinely high stakes, can routinely choose responsibly.

I should read more about this stuff than I have, and don’t feel like I have a very informed opinion on the debate. But I always wonder what BI would do to inflation. It’s not that I care strongly about inflation like some people do, in the sense that I think we ought not do things for the poor if it will increase inflation, but what’s the reason to think that, when more money to spend on basics is put in to the system that this won’t nearly all but sucked up by an increase in prices of basics? If the BIG was put in to productive action this might not happen but on nearly all accounts it’s too small to do that very well for most people. Maybe this isn’t a problem or people have talked about it but I’ve not seen my on it in the very limited reading I’ve done. Is there something I’m missing or should look at?

Matt — the same worry arises for the SG, by the way, since presumably lots of the SG will be spent either on investing in housing or on college tuition. There is some discussion of this in the book, but it is all sensibly conjectural (by which I mean no-one pretends they have a clear answer). I think the basic idea is that not everything will be eroded by inflation, and the bigger the grant the bigger the net gain at the low end.

My experience mirrors jacob’s. BUT I am v. cautious about that because I rarely teach freshmen, and I know there is a very high drop-out rate among students from poorer backgrounds in the first year or two, so there may be a big selection problem.

abb1’s right. But that is a very specific case. It also, though, looks like a very sensible way of distributing a bounty like oil revenues. Maybe we should suggest to our good friends in the Iraq government that they introduce a BIG funded by oil revenues. Perhaps Charles Murray can do it.

I think engels is right – you can only convert revenue stream into a lump-sum if there is a legal framework for this kind of transaction for this particular kind of revenue stream. Otherwise we’re in mob territory. You can’t legally convert your social security income into lump-sum and I don’t think it’s done illegally either.

But I always wonder what BI would do to inflation.

I kinda wonder about the effects of SG on the marriage market….

I wrote “a book review”:http://www.ingridrobeyns.nl/Downloads/redesigning.pdf of this book for The Political Quarterly.

Harry and Jacob–both of you teach (as Jacob implicitly acknowledges) at high-powered institutions with comparatively low acceptance rates. Consequently, it follows that members of various educationally and/or economically disadvantaged groups who manage to make it into your schools–Wisconsin and McGill–must have figured out both why it’s worth shooting for these schools as well as how to get into them. That means, insofar as “blowing their collegiate stakes” are concerned, the students you know are unfortunately not particularly representative of the populations most likely to be served by BIGs or SGs. In my experience (teaching at lower to middle-ranked state schools, and now at a very nice but by no means prestigious liberal arts school), there are in fact a large number of students who have–thanks to parents or teachers or governemnt aid or demographic luck–squeezed through the admissions process and are in a position to radically break from their underclass–both rural and urban–backgrounds…and yet don’t have the slightest idea how to do it or even why to do it. I would love to support a redistribution program that could reconstruct the ugly options and expectations that some of my poorer and/or less prepared students face and have internalized, but I also fear that a SG, coming to them out of the blue, would often–certainly not always, but often enough–not be used well. I guess this makes me an egalitarian who wants to take Barbara Bergmann’s recommendations seriously, and then work on what needs to happen culturally so that more socially democratic options can be pursued thereafter.

I am an attorney who represents public benefit claimants and recipients. I work for one of probably the top legal aid organizations in the U.S. From where I sit, Barbara Bergmann sounds like a sociopath. The very last thing my clients need is more “targeted” welfare programs designed to micromanage their lives (which is different from saying they do not need these things). I could give you tons of stories about how my clients attempts to get better jobs, education, or just get out of poverty are hampered by “welfare to work” rules. My favorite anecdote about the insanity of the U.S. welfare system is to mention the regular trainings I attend about how to advise my clients to “spend down” their savings. Let me repeat this – AS A RESULT OF AMERICA’S “ANTI-POVERTY” PROGRAMS, I HAVE TO REGULARLY ADVISE POOR PEOPLE HOW TO STAY POOR. I HATE this. If Republicans think businesses in America are over-regulated, they should try going on welfare. My clients can run their own lives better then the government, thank you very much.

So some woman accademic researcher is worried about “possibly undoing female labor force participation”? And so she defends a system that forces poor mothers to get dead-end minimum wage jobs at Wall-Mart and suggests that taxpayers help to subsidize Wall-Mart’s forced labor workforce with health and child care? Realistically, a BIG would only reduce women’s work force participation in the short-term. In the long term, the end of poverty would lead to fewer children needing to be taken care of, and contra Barbara Bergmann, it would INCREASE the number of women (and men) going to college, by making it financially more available. Look at who goes to college now. Not the people who NEED it most, the children of the poor, but those who are most ABLE to go to college, the children of the better off.

I am SICK, SICK, SICK of supposed egalitarians who enjoy using the threat of starvation to run the lives of the poor.

Sanbikinoraion: not as far as I know. Perhaps someone who attended the confernce can tell us more.

Russell – yes, point well taken. My colleague who really knows about this stuff is not around to ask. But I know there’s a lot of research on the reasons for lower-income kids’ attrition rates from all levels of HE, so this is a decidable empirical matter. Its awfully hard to know what the implications are for what would happen if we adopted SG — there is a case for saying that SG, because it allows one to get the subsidy without going to college would be less likely to be blown.

decnavda — the comment I made assumes some version of luck egalitarianism, and you’re right to say that if you drop that assumption the comment is false. On Bergmann — I read her more generously, because I think she just doesn’t think that a high BIG is on the table, and that talk of it threatens other goods. I don’t think that education and healthcare need be subject to the corruptions of perverse incentives etc, but I agree with you about welfare etc, and this is one of the big appeals of BIG and SG for me. I’m also sceptical that forcing people to work at Walmart is really great for them, and didn’t mean to seem to endorse that point.

Decnavda, you have a really good argument there in #16. And also if this ‘highest sustainable rate’ is flexible and self-adjustable, then the system should be able to find its own equilibrium. When less stuff is produced, the BIG will automatically scale down, thus creating stronger incentive for idle people to start working. And vice-versa.

abb1-

The credit for the argument in #16 goes to Karl Widerquist, from his Oxford dissertation. I think he is currently at Tulane University.

I remember, when I was working as a tax forecaster, playing around with BIG for the NZ economy. This was playing, no paper was ever published out of it. We just got talking about the idea and had the databases to hand to run some quick programs. We assumed that the BIG would replace all current social welfare spending (unemployment benefit, sickness benefit, superannuation, social welfare’s case workers, etc).

To make payments that somewhat approximated current levels of the dole and NZ super, we were getting average tax rates well above 50%, and of course unless you have a flat tax system that implies a far higher marginal top tax rate.

Do the papers on BIG include any analysis on the level of tax rates necessary to fund this?

Incidentally, on the topics of business failing – I recently set up a company. It’s only intended to be temporary, I plan to be doing something else in another country in a year’s time, but it suits me right now. It just occurred to me that when I close this company it’ll probably be counted as a business failure, when in fact that’s not at all how I’d regard it – it’s just a convenience to be discarded when times are more appropriate. I wonder how much of that is going on with the stats.

Oh. Never mind. You meant that the government would increase the initial amount of the baby bond over time, and not that a 500 GBP bond would compound into a small fortune over the course of 30 years, didn’t you?

#27 — Yes! Thanks!

re #24 — its funny — Alstott has a proposal specifically to deal with the disadvantages that women who exit the workforce for childrearing face, and that is structured like a BIG, not an SG. I haven’t figured out why (she argues for it in a different, later, book).

pithlord — of course they were wierd teenagers, they’re Yale Law Profs. But, transition issues aside, I don’t see any reason to believe there would be high rates of reckless stakeblowing. As for democratic majorities — didn’t the US Congress recently do this on a small scale by halving the interest rates on student loans? Something that, I’d guess, will mainly benefit college professors, but still, a very popular move, directed at increasing the subsidy for kids to drink beer, no?

(I hope that didn’t come across as dismissive; I take BIG and SG seriously and I’m looking forward to reading the book, and I thank Harry for his college as actually existing large subsidy to the top 50% argument, which will be fun to use the next time I’m talking about this stuff with students…)

they reduce the incentive to do paid work, which is what generate tax revenues that pay for these things.

Isn’t this the elephant in the room that nobody’s addressing? (Apart from Decnavda, of course, who simply defines it out of existence.) After all, whatever else one might say about the 1996 welfare reform and its aftermath (the empirical manifestation of the elephant, so to speak), it did give pretty convincing evidence that (1) a great many able-bodied, employable people–far more than entitlement advocates supposed at the time–will readily choose even a meager guaranteed income over employment (*), and (2) beyond a certain level of freeloading, a democratic populace will rebel against the entitlement regime. Doesn’t this history seriously call into question the BIG/SG advocates’ claim that their ideas are “in principle implementable in the real world” and “self-sustaining”?

(*) I argue here that it’s the guaranteed nature of the income, rather than its level of generosity, that’s makes entitlements so dangerous.

beyond a certain level of freeloading, a democratic populace will rebel against the entitlement regime

Dan, you’re right, but you’re 90 years too late.

I was at the Redesigning Distribution (or ‘Redesigning Redistribution’ as it was originally called) conference at Madison in 2002 which resulted in the book. As it was nearly five years ago now, I don’t recall that much about what Ackerman and Alstott and Van Parijs said in reply to the other papers, and hat memory I do have is probably unreliable. But in an effort to respond to Ingrid’s request for more information on this, here goes….

For some reason, I recall the concerns about the SG proosal more clearly than those about the BI proposal. Much of the concern about the SG proposal focused on the ‘stakeblowing’ or ‘stakelosing’ worry. (‘Stakeblowers’ use their SG in imprudently; ‘stakelosers’ invest in what look like reasonable ways, but suffer bad luck.) Against my argument for a more conditional SG, Bruce Ackerman and Anne Alstott pointed to the administrative complexity and cost of monitoring how SGs are used (a concern that I, in turn, addressed in revising my paper for the book). Bruce also argued that even if someone loses their stake, they can gain valuable experience from having had the opportunity to start a business or the like. But most fundamentally, if my memory serves me right – and it IS nearly five years ago! – Bruce and Anne argued that at the end of the day the choice as between SG and BI depends on what you take be most important – roughly speaking, autonomy/opportunity or ‘security’. If you put greater emphasis on security in the market place, then BI looks preferable to the SG. But if you give greater emphasis to autonomy/opportunity – the opportunity to launch out in life in a creative spirit – then SG looks preferable to BI.

Another issue which the conference spent a lot of time on was the difficulty of making the SG-BI comparison. Was it fair, or worthwhile, in particular, to compare the Ackerman and Alstott proposal of an $80,000 grant on maturity with a sizeable basic income paid every year for the whole of one’s life? In simple arithmetical terms, the two proposals are not of equivalent value, the basic income stream being worth much more for most people.

In addition to responding to Ingrid’s request for more information, I wanted to make a few other points in response to the discussion.

First, on the issue of what young people think about SG proposals, we have some empirical evidence on this. Rajiv Prabhakar and Andrew Gamble did some focus group research with young people in 2004 exploring their views about three SG proposals: (1) a modest Child Trust Fund-type policy which gives people a sum of about 2 or 3 thousand pounds on maturity; (2) a full-blown Ackerman and Alstott policy of $80,000 on maturity; or (3) an intermediate policy giving about 10,000 pounds on maturity. The results? Young people felt the full-blown policy gave them too much responsibility; that the most modest policy was fine, but didn’t go far enough; the intermediate policy was the best, giving some real opportunity but not leaving young people with too much responsibility. Placing restrictions on use of SGs was also broadly favoured. Some of their research is written up in Andrew Gamble and Rajiv Prabhakar, ‘Attitudes of young people towards capital grants’, in Will Paxton and Stuart White with Dominic Maxwell, eds., THE CITIZEN’S STAKE: EPXLORING THE FUTURE OF UNIVERSAL ASSET POLICIES. This book also contains a paper by Will Paxton and myself on the issue of placing use-restrictions on the use of capital grants. I still think this perfectly OK in principle, but I’m less confident than I used to be that it can be done in practice, and the chapter considers other, less coercive ways of trying to foster ‘responsible use’ of SGs.

On the British Child Trust Fund policy, there is a continuing debate about how to further develop this policy (which THE CITIZEN’S STAKE book tried to contribute to). There is concern about the low levels of initial state payment into the accounts, and also about the likely inequality in family payments into the accounts (families can put up to 1200 pounds per year into the accounts). One idea is to introduce an element of ‘matched contributions’ into the scheme, so that payments by poor families into their children’s accounts will be matched by contributions from the state.

So far as the general political situation is concerned, of the three main political parties, the Liberal Democrats remain opposed to the CTF. As there is some possibility that the Lib Dems could hold the balance of power after the next election, there is (for me) a nightmare scenario in which this innovative, promising policy gets ditched as part of coalition horse-trading. Quite why the Lib Dems oppose the CTf is, moreover, a mystery. Having spent much of the 20th century campaigning for ‘ownership for all’, the British Liberals have opted to oppose the first public policy that takes this slogan seriously. This explains why I will be spending an horrendous amount of time on trains this weekend, travelling to Harrogate to address a fringe meeting at the Lib Dem spring conference….

dan simon-

I defined the “feeloading” problem out of existence, given certain philosophical assumptions about extenral property you did not dispute, but I did not address the work incentives of BIG. I did address the work incentives of the current American welfare system, noting that they hamper and discourage work, regardless of the intent.

harry b gives the right theoretical answer to your work incentives point. Fortunately, empirical evidence also exist from the negative Income Tax experiments conducted in the 60s and 70s. Breifly, the various experiments had different “take back” rates, averaging 50%, and yeilded a work disincentive of about 13%. This came primarily from secondary (mothers) and teritery (teens) workers quiting, and to a lesser extent from primary workers quiting second jobs and taking longer to find work between jobs. No example of a primary worker quiting to live off the free money was found. The experiments also showed decreases in infant mortality, and increases in the health, grades and school attendance of children. We can only speculate about how this affected the children’s future ecconomic prospects. A paper describing the results of the NIT experiments is here:
http://usbig.net/papers/086-Levine-et-al-NIT-session.doc

Also, I clicked on your link and read the post where you argued that the problem with welfare is the disincentives to work caused by the stability of the payments. I have to say, the idea that TANF payments are stable is shocking to me, and would be to my clients. Maybe you should take my job, since you might be able to prevent the beuracrats from making frequent random errors that stop my client’s income better than I can.

Decnavda – .. Briefly, the various experiments had different “take back” rates, averaging 50%, and yeilded a work disincentive of about 13%. This came primarily from secondary (mothers) and teritery (teens) workers quiting, and to a lesser extent from primary workers quiting second jobs and taking longer to find work between jobs.

So this implies that an average tax rate of over 50% to fund BIGs would lead to a decrease in people working for money. Was this included in the discussions of BIG?

Dan, as I understand it the maximum credit under the IEC wouldn’t come close to paying for full-time childcare for a preschooler, so there was no reason to expect it to override the incentives of AFDC. Even with IEC the effective marginal rate was 100% or more. There are also big issues about transparency (I’d hazard that decnavda’s clients are not quite completely on top of the tax code, but that’s just a guess — he or she can tell us).

I watched the debate over AFDC/TANF from two different places — the academy and a far left political organisation. I didn’t know anyone who was unaware of the incentive built into AFDC, and I didn’t know anyone who made the kind of arguments you refer to. But of course academics and the far left hardly have much impact on politics. I did see them being made by more mainstream and less academic types, and assumed, as usual, that the people making those arguments were using overblown rhetoric as a counter to equally overblown rhetoric on the other side (I’m not accusing the intellectual framers of TANF, or many of the politicians involved in pushing it, who it seems to me were often well-willed and as honest as contemporary politics allows). I do think TANF would have been much less successful had it been tried 6 years earlier, btw — it was good luck that it was implemented during the second half of the Clinton job miracle, the half during which it was lower end jobs that were being created. I also think we still have to see the effects. I am also highly sceptical that it is better for young kids to be cared for in poorly regulated institutions by low-paid and ill-trained workers in who are not their parents than by someone who is their parent, and a full evaluation of TANF would try to make some sort of judgments about the long term effects on the kids (which would also, I should add, involve the effects which I’d imagine would be positive, of having a parent who is integrated long term in the labor force).

Hi Chris,

I looked at the gender aspects of Basic Income in 1998, and published two papers on that topic.

One paper was more empirical, trying to see what evidence we have to predict the gender effects (published in a book edited by R. van der Veen and L. Groot, Basic Income on the Agenda, Amsterdam University Press, 2000.)

The other paper was normative, and it did indeed argue precisely what you predict too. Basic income divides the care-centered feminists and the employment-centered feminists, since the evidence that we have is that it reinforces the traditional gendered division of labour. This is a bad thing for women who want to have a more egalitarian gendered division of labour, but it is not the first concern for women who are very poor and with limited labour market earning capacities. That paper was published in Analyse und Kritik in 2001 and “can be downloaded here”:http://www.analyse-und-kritik.net/download.php?id=10
There is also “a reply by Philippe Van Parijs”:http://www.analyse-und-kritik.net/download.php?id=11 on my and a number of other papers, and his response on the gender issue was, well… rather disappointing from a feminist point of view.

I am desperately trying to finish a Dutch-English translation of a 40.000 words research report, and once that is finished I will try to write a post on gender and basic income, since I think there are many very intersting but also seriously troubling aspects of the basic income proposal from a gender perspective.

Why should the SG idea be discussed at all, let alone compromised with? It doesn’t seem to have enough merits to be considered in the first place.

Fair enough, but don’t the smart rich usually prefer the BI approach – aka ‘trust fund’?

I don’t know, it probably has something to do with the inheritance taxes too, but – imagining myself rich – I think regardless of the tax advantages I would prefer the trust fund mechanism for my children. Seems obvious to me, though apparently it isn’t.

Tracy, I don’t know about the discussions of BIG, but I think the tax rate would be only a part of a whole different dynamic created by this reform, and the effect of it can’t be analyzed separately.

So has anyone analysed the “whole different dynamic” – and in particular what tax rates it implies?

For example, this reform would certainly eliminate all low-paying jobs. That would cause many jobs to disappear, either by automation (parking, gas station attendants) or just disappear completely (store greeters, grocery baggers). Decrease in the number of people working is not necessarily a bad thing.

This change would not increase the resources available in society to pay the BIG, and thus my initial point remains – the BIG implies extremely high tax rates if it’s set at a level to replace existing social welfare payments.

If there was a substantial gain in productivity from automating current low-wage jobs, then it is a puzzle as to why those jobs haven’t been automated already. (Any productivity gains would of course need to be substantial to provide a significantly different answer to that first stab eat the tax rates necessary to pay a BIG).

Has anyone done any analysis of this situation, and what evidence have they come up with as to the extent of possible productivity gains and th impact on the required taxes to pay a BIG?

(Incidentally, this line you are running abb1 implies that BIG will not address relative poverty, not particularly an issue for me but may be for many of the readers of the book).

Ingrid, thanks a lot for your paper and Van Parijs’s response. I’ll try and read it carefully because it’s an issue that’s vexed me and I’d like to understand the details better.