Redesigning Distribution

by Harry on February 28, 2007

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.

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Jacob T. Levy 02.28.07 at 3:49 pm

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.


abb1 02.28.07 at 4:14 pm

…I don’t see much support for them being generated within the political debate and social movements in the US

But in Alaska, don’t they already give a couple of grand to every resident every year as a part of their oil revenues sharing program?


Matt 02.28.07 at 4:45 pm

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?


engels 02.28.07 at 4:54 pm

and guaranteed receipt of the BIG enables you to take out a large loan equivalent to an SG

I’m not familiar with these proposals at all but is this really supposed to be true? You are free to securitise your future income stream and then blow it all at once? If so, then I don’t really see the “explicit paternalism” you refer to above ie. it does not “guarantee” a minimum income in practice. Erik Wright’s point that “most people” are not “likely” to do this does not seem like a very strong one to me. (The reason I care about this is I have never liked the sound of the one-off payment proposals at all [especially our Gordon’s beloved “baby bonds”] but I thought I was quite sympathetic to the guaranteed minimum income proposals.)


harry b 02.28.07 at 4:55 pm

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.


harry b 02.28.07 at 5:05 pm

engels — well, it depends. Some BIG proposals explicitly bar conversion. But it would be very hard to enforce that, requiring a lot of monitoring, and since many people have other sources of income and wealth it is hard to see how to prevent at least part of it being converted (think about how easy it is to get credit even without a BIG).


abb1 02.28.07 at 5:15 pm

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.


engels 02.28.07 at 5:34 pm

Apart from libertarians, most people think that there are some contracts which people should not be free to enter into, eg. selling oneself into slavery. In the same way, in the context of this scheme, I don’t think anyone should be able to enter into financial arrangements which could permanently deprive her of her basic income payments in the future. I don’t see why this would be so hard to enforce. Wouldn’t it be possible to have an analogue to bankruptcy: a legally protected option to start from a clean slate, except that one’s basic income would be intact going forward? This would mean that there was now a risk of default for anyone who wanted to offer an individual a lump sum in return for his future guaranteed income and so the lump sum offered would be lower.


eweininger 02.28.07 at 5:51 pm

But I always wonder what BI would do to inflation.

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


rcriii 02.28.07 at 7:30 pm

Engels, This libertarian at least thinks that people should not be allowed to sell themselves into slavery. But maybe I’m only semi-libertarian since I see some sense in these proposals.

Matt, The BIG (or SG) would only affect general inflation if it was provided with printed money. Harry points out that each is financed by taxes (general or inheritance). What they might affect are relative prices, assuming that the recipients have different purchasing priorities than those whose taxes finance the grants.


ingrid 02.28.07 at 7:37 pm

I wrote “a book review”: of this book for The Political Quarterly.


engels 02.28.07 at 7:44 pm

Rcriii – I didn’t say “all libertarians” think that. Some do (Robert Nozick, for one, IIRC). Anyway, it doesn’t affect my point.


Russell Arben Fox 02.28.07 at 8:11 pm

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.


sanbikinoraion 02.28.07 at 8:32 pm

Ingrid – do we now know what the authors think of the criticisms posed in the book?


Decnavda 02.28.07 at 8:54 pm

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.


Decnavda 02.28.07 at 9:05 pm

So both proposals allow people both to suffer the bad consequences of brute bad luck, and allow for a good deal of free-riding.

Not true, if you believe (external) property rights are conventional instead of moral. If external property rights are conventional and everyone is equal, then everyone should get an equal amount of stuff to use. If you have free market sytem with a BIG at the highest sustainable rate or less, then those who live off the BIG without working are NOT “free riding”. The are reciprocating for using the labor of others by using less than their fair share of stuff, and letting the extra be used by those who work.


Ingrid 02.28.07 at 9:29 pm

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


Ben A 02.28.07 at 9:34 pm

It sounds like a good discussion. Is there any coverage in the book of the relationship between BIG/SG grants and immigration policy?


harry b 02.28.07 at 9:40 pm

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.


Ingrid 02.28.07 at 9:40 pm

Decnavda: you are being very unfair. Barbara Bergmann advocates a Swedish-type welfare state, which is nothing like what you are describing. The welfare state provisions she is proposing are universal, hence not targetted, and they do not ‘force’ people to do anything.

There is, moreover, a serious concern with giving mothers the option to opt out of the labour market for long periods of time for little money, as a basic income would do. In some European welfare states, this has been possible because social assistance (at levels which would be ‘generous’ for US standards, i suppose) was given to all mothers with small children, without work requirement, and what we now see is that after their kids grow up these mothers have an incredible hard time returning to the labour market, and (as economists would put it) all their human capital has eroded. They have spend the first ten years of their kids’ lives with them, but they are virtually doomed for poverty for the rest of their lives. So perhaps, the Swedish systems with high quality universal child care, well paid very long maternity leaves may be a better alternative after all. But I suppose this is a long shot for reform in the US given the unacceptable low wages that poor people get for their work. It is no coincidence that this series is called the Real *Utopias* project….


abb1 02.28.07 at 9:42 pm

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.


lindsey 02.28.07 at 9:54 pm

It might help to mention an objection brought up by Stuart White’s chapter in the book. He was concerned about asset management capactity, which is the ability to assess and manage one’s basis for material freedom. White points out that “people who come from families with little wealth will be more likely to blow their generous stakes than those who come from wealthy families that have transmitted the attitudes and skills relevant to wealth accumulation.” So although everyone would recieve the same amount in a SG, not everyone comes from a background that has equipped them to put it to the best use. If you come from a family that invests money, you are more likely to invest your SG wisely. If those who come from poor families are set up for failure in this respect, then the SG isn’t serving its purpose (which I’m assuming is not to make only the wealthy richer).

Bergmann’s objections shouldn’t be taken lightly either. While the US may have a horrid welfare scheme as is (with purposeful poverty traps and such), that’s not the kinds she’s advocating. In fact, she proposes new institutions that would help meet peoples most basic/pressing needs. For example, the BIG is no where near sufficent to cover adequate medical insurance, and the SG will most likely not get put to that use. Yet there are a substantial number of people in the US without proper medical coverage. She also advocates for better child care services and improved education, both of which are expensive if paid for by the indivdual, yet extremely beneficial if provided (at adequate quality levels) by the government. And I’m fairly certain these would be available without means-testing.

Another objection to consider is the possible affect of the SG (and maybe even the BIG, but to a lesser extent) on the society’s attitude towards money. Would they promote materialism more than it is already glorified by our culture? Perhaps…but that’s just something to think about.


Decnavda 02.28.07 at 10:06 pm


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


Decnavda 02.28.07 at 10:26 pm

The welfare state provisions she is proposing are universal, hence not targetted, and they do not ‘force’ people to do anything.

Universal is better than targeted, and I favor some universal benefits as well as a BIG, but without a BIG, the system forces people to work. People need money.

I think with a BIG it would be easier for former stay-at-home mothers to get the education or business loans or what ever they need to get back into the workforce, but answering (or conceding)that objection requires empirical research. It might be a good point, but I suspect there could be other ways to compensate.


Tracy W 02.28.07 at 10:55 pm

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.


Brandon Berg 03.01.07 at 1:32 am

Its not at all inconceivable to me that the baby bond will be a really substantial amount of money in 30 years time.

Seems unlikely to me. The historical average real return on stocks is 7%, which means that your stake would double in real terms every ten years or so, which means that 500 pounds would turn into 4000 pounds after 30 years, or 32000 pounds after 60 years.

Those are inflation-adjusted figures, mind you.


Brandon Berg 03.01.07 at 1:34 am

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?


kim 03.01.07 at 1:39 am

The Alaska Permanent Fund isn’t quite “a couple grand a year” (abb1). In the early years of the program, checks were more on the order of $400, and for the past 10-15 years they’ve hovered around $1000 (it’s currently $1107). Nevertheless, it can still add up to a sizeable sum for an 18-year-old who has been saving and investing the checks all her life. I’d guess, though, that AK’s generous student loan program is nearly as effective, if not more effective, at fostering educational investments.

Interesting tidbit: a nontrivial proportion (but one known only to AK Airlines, I assume) of APFD checks were redirected to Alaska Airlines via a corporate program that offered >$1000 face value of flight coupons in exchange for signing over the check. Of course, because AK Airlines had a virtual monopoly in most local “cities” in AK, they could simply raise the face value of tickets without much fear of losing customers. That, combined with the inevitable unredeemed flight coupons, generated quite a tidy profit margin for AK-Air, subsidized indirectly by the state.

Decnavda @ #15: Why did you find it necessary to emphasize Bergmann’s gender (“some woman accademic [sic]”) in your critique? Is this somehow relevant for how seriously we should take her ideas?


harry b 03.01.07 at 1:50 am

#27 — Yes! Thanks!


Pithlord 03.01.07 at 2:03 am

I would say what Russell Arben Fox said, but ruder. The authors of the SG proposal (along with those who take them seriously) must have been pretty weird teenagers.

Thank God that no democratic electorate would be so stupid.


harry b 03.01.07 at 3:16 am

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?


djw 03.01.07 at 4:58 am

I don’t have anything particularly edifying to add to this conversation, but I’ll just mention that when I toss the basic SG idea to my students, which I do from time to time, they take the RAF line, but they’re even ruder than Pithlord would have been had he let himself go. As an adjunct, I’ve noticed more or less identical responses from the community college students, U. of Washington students, and the students at a private LAC. This is a rare policy question when my students might just have some special insight.

That said, and maybe it’s my internal cowardly Burkean shining through, I have an awfully hard time speculating with any confidence about how 18 yo’s would react to this, and I have a hard time imagining how anyone could place much confidence in their own speculations, or gain the kind of knowledge and insight that would elevate their speculation in a meaningful way.


djw 03.01.07 at 5:01 am

(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…)


Quo Vadis 03.01.07 at 8:48 am

Look at this a different way: What if the government simply offered every 18 year old $80,000 in credit with the interest payments serving as a sort of tax.

I suspect that this would wind up being a somewhat regressive tax, but considering the various ways persons of differing economic circumstances might use SG or BIG payments, would those programs be any more fair?


Dan Simon 03.01.07 at 3:18 pm

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.


harry b 03.01.07 at 3:57 pm

Dan — the abolition of welfare surely proved only that in the face of an effective marginal tax rate of 100% people will choose a meager guartanteed income over employment. No surprise there. BIG is designed among other things precisely to ensure that when moving from not working to working no-one faces an effective marginal rate of 100%.


engels 03.01.07 at 3:59 pm

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.


harry b 03.01.07 at 4:14 pm

Ok, I wrote in haste. What the welfare reforms showed was that when someone with children has the choice between staying at home with their kids or, for the same income, working a crappy job and having to pay out of that income for childcare that they know will not be as good for their kids as the care they themselves would have given, most will choose staying home with their kids. A flaw in human nature? Not in my view. AFDC did exactly what it was designed to do, because its designers understood quite well how people would respond to the incentives built in. Its hard to draw any more elaborate lesson from this, especially about BIG or SG, both of which eschew means-testing.


Stuart White 03.01.07 at 4:59 pm

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….


Decnavda 03.01.07 at 7:07 pm

Decnavda @ #15: Why did you find it necessary to emphasize Bergmann’s gender (“some woman accademic [sic]”) in your critique? Is this somehow relevant for how seriously we should take her ideas?

I emphasized it to aknowlege and counter what I percieved to be an implicit sugestion that her gender was relevant in positive way regarding a potentially feminist issue, women’s workforce labor participation, when I see women as the primary victims of America’s “forced labor through the threat of homelessness” system.

But I was wrong to do so. What really upset me was the idea of another liberal academic professional wanting to play around with the lives of the poor to promote some social agenda. But of course an academic man could have made the same argument and it would not change how seriously it should be taken, and I have no information suggesting that she presented her gender as giving her a privileged status from which to speak, so I should not have made such an assumption.


Decnavda 03.01.07 at 7:32 pm

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:

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.


Dan Simon 03.01.07 at 7:57 pm

Harry, I understand the AFDC incentive issue, but I’m skeptical of the claim that it was the “root cause” of the freeloading problem, for several reasons:

– The Earned Income Tax Credit was instituted long before welfare reform, to help mitigate AFDC’s incentive problem, and yet failed to slow the growth in the welfare rolls.

– As far as I can recall, the vast majority of welfare reform opponents did not argue that although millions of able-bodied welfare recipients would become gainfully employed following reform, the same effect could be achieved more humanely through incentive adjustments. Rather, they argued that welfare reform would doom milions of unemployable recipients to starvation. AFDC’s incentive problem therefore seems to be an ex post facto explanation–an excuse, if you will–for a failed prediction, and thus less convincing.

– Welfare regimes in other countries with less poorly aligned incentives suffer from freeloading problems no smaller than those in the US (although their political tolerance for such freeloading may be higher).

Am I incorrect about all of these points? And if not, do they not suggest that AFDC’s perverse incentives weren’t at the heart of the problem?


Tracy W 03.01.07 at 8:13 pm

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?


abb1 03.02.07 at 8:25 am

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.

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.


harry b 03.02.07 at 2:18 pm

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).


chris armstrong 03.02.07 at 3:39 pm

I reviewed this collection for Political Studies Review, and had this to say:

This collection is intended as an example of political theory with an empirical focus, considering as it does two related proposals for achieving ‘a more egalitarian capitalism.’ Specifically, the collection addresses the relative merits and demerits of two much-debated schemes: the Stakeholder Grant (SG) and the Basic Income (BI). An SG, on the version defended by Ackerman and Alstott, would award individuals reaching adulthood a one-off capital sum to invest or spend as they see fit. A BI, as defended by Van Parijs, would award individuals an unconditional, non-work-related income for life. The collection comprises a brief description and justification by each scheme’s advocates, a series of critical (though generally supportive) essays, and a response by each camp.

Whilst each defends their scheme vigorously, the normative commitments and political goals on both sides are broadly held in common. The authors share a concern with the inegalitarianism of current distributions of wealth and income, with the limited opportunities afforded to the poor in market societies, and with how individual decisions about careers, voluntary and caring work, and the decision simply not to work are influenced by economic conditions which are in themselves of limited justice. Much of the debate herein therefore focuses on questions of practicability, and the effects of implementing one scheme rather than another. On the surface of it, the two schemes are similar (especially since one could either invest an SG thereby to secure a constant return equivalent to a BI, or mortgage one’s BI to generate an SG equivalent.) Van Parijs pulls no punches in ruling this latter option out of court, however, and this refusal marks out a genuine difference of perspective. The real problem of ‘stake-blowing’ – the possibility that individuals receiving an SG might squander it in ill-considered ways – makes BI, Van Parijs asserts, much preferable. This claim opens a controversial set of issues concerning paternalism, discussed ably by Stuart White in his illuminating chapter. Other chapters concentrate on the priority of SG or BI vis-à-vis erstwhile commitments to the welfare state, and the effects of both schemes on democratic citizenship, as well as on poverty and class-based exploitation. Finally, some of the more empirically-minded chapters attempt to track the likely expense, and effectiveness, of both schemes. Overall, the collection represents a valuable attempt to think through some of the practical implications of a normative commitment to economic freedom and security for all.

***Nothing very controversial in that mini-review, I think. The gender implications of the policies are very interesting though, and seem to really divide feminist commentators. Personally, I’d have thought either would count as a good move in addressing many work-based gender inequalities, but some people are concerned, I think, that BIG could actually bolster the existing gender division of labour. Any views on this?


ingrid 03.02.07 at 7:06 pm

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”:
There is also “a reply by Philippe Van Parijs”: 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.


Alex Gregory 03.02.07 at 8:01 pm

Need the divide between SG and BI be so large? Would a compromise between the two be sensible – by having, for example, mid-sized payments between early adulthood and early middle age?


abb1 03.02.07 at 9:43 pm

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.


engels 03.02.07 at 10:11 pm

Why should the SG idea be discussed at all

Because it involves redistribution towards the poorest sections of society? Because it aims to give poorer people an advantage which right now is only enjoyed by the rich, who already get an SG in the form of inherited capital or parental support? If your aim is to narrow the inequalities which presently exist, then it sounds like it’s at least worth talking about, doesn’t it?


abb1 03.02.07 at 10:25 pm

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.


Decnavda 03.02.07 at 10:45 pm

Realistically, The EITC only acts as a work incentive in what may be called a “blind” fashion: It is easier to work after you have bought or repaired a used car, or if you can wash the family’s cloths at home rather than going to a laudrymat, etc. Planning on the EITC requires imcome stability, which, contra dan, very few poor people have, whether they work or not.


Tracy W 03.03.07 at 4:48 am

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.


abb1 03.03.07 at 8:02 am

I think the amount of resources available in society has to be proportional to the productivity and the number of productive work-hours.

Making labor more expensive would cause increase in productivity. As the number of productive work-hours goes down, the amount of resources available may go either up or down, depending on the specifics.

All I’m saying, I don’t see this as an impasse.


Tracy W 03.04.07 at 3:30 am

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).


abb1 03.04.07 at 7:58 pm

Well, I noticed this when I moved from Boston to Geneva (where the minimum wage is about $18/hr): self-service gas stations, no parking attendants, automatic car-washes, self-cleaning public toilets.

Why these jobs aren’t automated in Boston? I don’t think it’s anything, but simple economics: when people who clean the toilets are paid $6/hr it makes sense to use them, but you’ll buy a self-cleaning toilet to avoid paying $18/hr.

To be fair, when I was in Boston a few months ago, I saw a self-service check-out in a Shaw’s supermarket, which is something I haven’t seen here.

I think I read somewhere that technology of US agriculture along the Mexican border is extremely antiquated: why bother using machines when you can hire a bunch of Mexicans for next to nothing?

And if you can build a factory in China and pay workers 17c/hr to make T-shirts with old Singer sewing machines, you are not going to be trying to implement any new technology; in fact you’ll probably try to prevent it from being invented.

That’s just natural. For capitalist system to perform, there must be permanent pressure to increase labor costs, otherwise entrepreneurs don’t have to come up with innovations and the economy (or this particular segment of it) degenerates.


chris armstrong 03.05.07 at 11:12 am

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.


Tracy 03.05.07 at 10:54 pm

Abb1 – automating those jobs does not create any more productivity unless the people whose jobs were automated go off and find other uses of their time that are now relatively more valuable.

If those other uses of their time do not involve being part of the paid labour market then the extra productivity is not available to be taxed and redistributed as part of a BIG.

So your $6/hr gas station attendent quits his job and the gas station owner replaces him with a machine. And the $6/hr gas station attendant stays at home taking care of his kids – important work but as it is not producing taxable income it doesn’t reduce the level of taxes to pay for the BIG.

For capitalist system to perform, there must be permanent pressure to increase labor costs, otherwise entrepreneurs don’t have to come up with innovation…

Not so. For example, it’s hard to make up a labour cost theory to explain innovation in computer games.
And the traditional account of the Industrial Revolution is that the improvement in steam engines was driven by the need to pump water from incresingly deeper mines, not labour costs.

It appears from this thread that no advocate of a BIG has done any estimates of how it will be paid for. Which I thought would have been a basic part of the analysis.

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