The newest book in the Real Utopias Project series is Redesigning Distribution (UK). The books are all based on conferences held at Madison, and each one focuses on a particular “real utopian” proposal – an institutional proposal which is supposed to embody or further some egalitarian ideal but is supposed to be in principle implementable in the real world and, more importantly, to be self-sustaining in some hard-to-specify way. This volume compares Basic Income Grants with Stakeholder Grants. Philippe Van Parijs makes the case for a BIG, a universal grant that all citizens would receive on a regular basis from the age of majority, funded most likely out of general taxation; Bruce Ackerman and Anne Alstott argue by contrast for a Stakeholder Grant, a one-off payment of (in the US at current rates) $80k paid to all high school graduates at the age of majority, funded by an inheritance tax (and returnable, with growth, to the Treasury at death).
I’ll assume some familiarity with the proposals (for the details of BIG see here and for the details of the Stakeholder Grant see Ackerman and Alstott’s book). I’ll also say at the outset that although I’ve been familiar with both proposals for a long time, and find both very appealing, I haven’t got a stake in the debate really. But I was surprised how much new and interesting stuff was in the book, so I thoroughly recommend it whether you are a newcomer to the debate or an old hand.
First to note that both proposals fall short of attempting to implement every aspect of egalitarian ideal, and both do so self-consciously. BIG incorporates a paternalism that is explicit, and thus fails to allow people to fall below threshold even if their choices would lead to that outcome. SG does allow people to fail, that is to lose or blow their stakes. But it deliberately tries to shape the culture and ethos to make that less likely. And, like BIG, it does not attempt to correct for all luck inequality. So both proposals allow people both to suffer the bad consequences of brute bad luck, and allow for a good deal of free-riding.
On the other hand both the proposals focus on raising a floor of resources the least advantaged in a society will have, if in different ways, and this may have a huge impact on real freedom, which is the animating value (as Stuart White characterizes it in his excellent contribution, giving an agent the “ability to act as she wishes without being subject to interference by others”). Even a small unconditional income frees individuals to a considerable extent from being subject to the will of others.
As several of the commenters in the volume note, without strict regulation BIG and the SG are formally equivalent because, of course, receipt of the SG enables you to buy an annuity equivalent to a BIG, and guaranteed receipt of the BIG enables you to take out a large loan equivalent to an SG. But as Erik Wright points out, they are not, nevertheless, really equivalent. Their different forms contain different dynamics, and what we know about bounded rationality suggests that recipients will respond very differently to the different proposals – most people will use whichever grant they get in the form in which it appears.
To be honest, it seems to me that everyone in the book treats BIG as the default; even A&A feel the need to make the case for their proposal against the SG. And they make some interesting points. Just three of them here:
i) The SG better embodies the real freedom ideal because it is not oriented to consumption but to investment or consumption as people choose.
ii) The large/one-off feature has the potential to impact the culture as a whole.
iii) The political advantage of being able to push it without making a fuss, and building it up later. The great example here is the baby bond implemented recently by the Labour government in the UK. The form of this is that each baby born gets a bond of 500 pounds, growing tax free (with some parental supplements allowed), which they can cash when they reach 18. 500 pounds is not enough to make a big difference to most people’s lives, even if it grows to, say, 3000 pounds by the time they are 18. But it is a popular reform which makes a small difference, and should be easy to ratchet up as political circumstances allow. Its not at all inconceivable to me that the baby bond will be a really substantial amount of money in 30 years time.
A lot of debate revolves around the stakeblowing/stakelosing problem. Having a large SG allows 18 year olds to blow the lot on consumption, get a down-payment on a house, invest in a business, or get an education. (Note: currently we have very generous subsidies for about the most advantaged 50% of 18 year olds which are highly regressive, tracking, as they do, their background level of advantage, but which they can only access by attending college). BIG makes stake-blowing more difficult, obviously (though not impossible). A&A defend the SG on the grounds that once the SG is in place a culture would emerge around investment and money use that would make stake-blowing and stake-losing less likely, and by arguing that the benefits of focusing resources on the period of early adulthood outweigh the social costs of the fact that some will lose their stakes. (Such people obviously needn’t become indigent – they can still work for a living).
I don’t know what to think of this. Erik Wright points out that most small businesses fail, and do so within a year. Suppose that considerable numbers of people choose to invest in small businesses. Then much stake-losing would be inadvertent, and it seems to me that in that eventuality, society is using the behaviour of the stake-losers for the sake of the economy as a whole. Given this, if young adults end up investing often in small businesses, the SG doesn’t look so much as if it realizes real freedom.
Ackerman and Alstott’s response is interesting. They point out that, at present, we don’t withhold subsidies for higher education, for example, on the grounds that some people blow their subsidy by drinking their way through college (a phenomenon that, at Yale, I’m shocked to hear that they encounter, but there you are). This is true. But it seems to me that stake-losing/blowing problem is more serious in the SG case. Yale students who “blow” their educational subsidy by drinking rather than studying are taking certain risks, but it’s not clear to me that they are truly blowing their stake. Two reasons: first, they know that they are bonding with the next generation of the elite, and networking, and they sense, rightly, that this is more important than getting good grades for their future positions. Second, for most of them, and even for most students at good public 4 year colleges, there are in fact some parental resources to fall back on (Madison, for example, the most subsidized of the University of Wisconsin campuses, draws almost its entire in-state undergraduate population from households in the top 20% of income earners).
Well, now I’ll make the embarrassing comment that until I saw her name on conference schedule some years ago I had never heard of Barbara Bergmann. Too bad for me. Her essay in the book is sharply and smartly critical of both proposals. Bergmann understands that context is everything, and that within the context of the social democratic welfare states both proposals might make sense, but argues for the greater urgency of establishing some sort of more standard welfare state in the US which focuses on providing standardly important merit goods (healthcare, unemployment benefit, education, childcare, etc) for all. She (probably rightly) conjectures that these proposals really do compete with a sensible and egalitarian expansion and reform of the welfare state in the US, and worries about the following problems: the amount will not be enough to cover the cost of “essentials” which many people lack, like health insurance; they introduce perverse dynamics, like loosening control of parents over teenage children, reducing the incentive to attend college, and possibly undoing female labor force participation (note, Charles Murray considers this last effect a benefit, of course); they reduce the incentive to do paid work, which is what generate tax revenues that pay for these things.
As I say, context matters here. Bergmann’s context is the contemporary US and she is basically evaluating the proposals against that benchmark. A&A could reply that the prospects for social democratic reform are very bad and that in the US context, with a deep commitment to means-tested over universalist benefits, there are inevitable huge leaky bucket/perverse incentive problems. But, although a supporter of BIG and SG in the abstract and in some contexts, I don’t see much support for them being generated within the political debate and social movements in the US, so doubt that the impetus is here for either.