I participated last week in a discussion at New York University about the popular proposal for a “universal basic income.” I was shocked that the philosophers advocating for it had so few worries. An economist is paid to worry.
The UBI, as it is known to its friends, is an old idea. In the 1950s Milton Friedman from the liberal side and another Nobel economists, James Tobin of Yale University from the progressive side, both proposed for poor people a “negative income tax.” It was to be a substitute for the dozens and dozens of special programs, such as subsidies for housing or for having children that distort markets, or the minimum wage (think: not income) laws that drive the very poor out of employment entirely.
As an economist and true liberal, I approve of the negative income tax. How to help people without money? Give them the money. Obviously. Just don’t imagine that it will achieve equality of outcome or even equality of opportunity. Those, I’ve told you, are out of reach.
Yet recent advocates go much further than Friedman and Tobin. The word “universal” is only one of UBI’s problems. It’s wholly impractical to give much to literally everyone. And it’s even impractical to give it only to the poor—unless all other programs are stopped. Even the U.S. and Brazilian states, which are well below France and Sweden in this regard, grab 30 or 40 percent of income for their schemes. Adding a big UBI drives the share far above 50 percent.
So what? Aren’t we a big, happy family that can safely share out its income to its members? No. Taking from Peter to pay Paul gives Peter little incentive to work or invent. The size of the pie falls. And on the other side of the incentive, Paul has little incentive to work. Look at Argentina, or the children of very rich people spending the season at Cannes. The size of the pie falls again. What is sensible for an actual family, or a little group of loving friends sharing a pizza, is crazy for an economy of 332 or 213 million.
Most good people don’t get it. The nation as family is Romantically powerful. But you should worry.
Weekly column in Folha de São Paulo, Brazil
Translated into Portuguese for the newspaper.