Economic justice and basic income

Last week at our student economics discussion group we had a nice exchange about  universal basic income.  I suggested that wouldn’t everyone (right, left, libertarian and socialist) agree that in a wealthy society few would object to a program of minimum income?  So nobody would end up living under a bridge through a series of unfortunate events; rather everyone could afford reasonable accommodation (maybe not on the Sausalito waterfront, but certainly in Stockton), access to communication (clearly Internet access is essential in our society for fostering a community and engaging in commerce), and basics of living (Adam Smith’s linen shirt).

My colleague Bill Sundstrom has a nice podcast covering some of the basics of economic justice and how they lead to a basic social safety net.  The Catholic Council of Bishops has a statement about economic justice.  Some libertarians favor a basic income guarantee.

And Tyler Cowen over at Marginal Revolution has had numerous blog posts on this topic.  Here is a good post, focusing on the practicalities and (in his view) likely inevitable evolution of the simple concept into a complex, rent-seeking-riddled government bureaucracy!

Back of the envelope calculation?  Let’s say the guarantee was $10,000 per person in the U.S. per year.  Let’s say it only applies to adults.  250 million adults means transfers of $2.5 trillion per year.  U.S. GDP is about $17 trillion.  So this is less than 10% of GDP.  And remember, for maybe 70% of the adults the tax and transfer just wash out (if you are a working adult paying $30K in taxes, you get a $10K transfer, so on net you are paying $20K taxes the same as you might be paying now.)  So this is certainly feasible or possible.  Now if the basic income were $30,000 per adult, then we are talking about possibly very distortionary taxes to raise that much revenue.  Incentives matter!

Any economist of course right away puts on their “one hand, other hand” hat… in regions of the country where the cost of living is extraordinarily low (houses for $25,000, nothing to do on Saturday night) should not the transfer reflect that?  Might not a geographically uniform transfer generate a lot of unanticipated migration across states and cities?  And we’re off!

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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