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posted by martyb on Thursday January 20, @01:12AM   Printer-friendly
from the of-course-nobody-ever-gets-bored dept.

Study: Basic income would not reduce people's willingness to work:

A basic income would not necessarily mean that people would work less. This is the conclusion of a series of behavioral experiments by cognitive psychologist Fenna Poletiek, social psychologist Erik de Kwaadsteniet and cognitive psychologist Bastiaan Vuyk. They also found indications that people with a basic income are more likely to find a job that suits them better.

The psychologists received a grant from the FNV union to research the behavioral effects of a basic income. They simulated the reward structure of different forms of social security in an experiment. "We got people to do a task on a computer," says De Kwaadsteniet. "In multiple rounds, which represented the months they had to work, they did a boring task in which they had to put points on a bar. The more of these they did, the more money they earned."

The psychologists researched three different conditions: no social security, a conditional benefits system and an unconditional basic income. De Kwaadsteniet: "In the condition without social security, the test participants didn't receive a basic sum. In the benefits condition they received a basic sum, which they lost as soon as they started working. In the basic income condition they received the same basic sum but didn't lose this when they started work."

The basic income did not cause a reduction in the participants' willingness to work and efforts, say the psychologists. Nor did their salary expectations increase. "In the discussion on a basic income, it's sometimes said that people will sit around doing nothing if you give them free money," says Poletiek, who saw no indications of such a behavioral effect.

What would you do if you were to receive a basic income?


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  • (Score: 0) by Anonymous Coward on Monday January 24, @05:20PM (2 children)

    by Anonymous Coward on Monday January 24, @05:20PM (#1215290)

    Thanks for clarifying your thoughts. I do see some differences of view. Firstly, I don't really believe the federal reserve prints money, rather they enable/prevent banks to print money, which banks choose to do or not do based upon their needs. The Fed does have some impact on short term interest rates, but can not stimulate growth. They are pushing on a string. Barring window guidance (an activity the US does not do AFAIK) I think MMT and the current system both are the same world at least in regards to the federal reserve's impact on both inflation and money supply.

    The federal reserve does engage in some activities that regulate the money supply fairly directly, as well as enabling banks to affect things indirectly. In practice, they could hardly stop the banks from responding and often the banks don't quite do what the fed had hoped. However, MMT definitely steps away from the current world in a couple of important ways, the first being positive and the second, normative. In the positive sense, MMT regards the fed as basically a source of fiat money to fit the fiscal needs of the government. Need to spend umpteen bajillion imperial credits on a dam and canal system? Spin up the tool to umpteen bajillion, and the fed cranks the lever per orders. Today, the fed is a semi-autonomous system that makes its own decisions based on mandates that are not based in the fiscal decisions of congress. In the normative sense, MMT says that monetary policy should take full employment as the goal, inflation be damned (or more accurately, inflation to be managed by other means, and not really a problem in the first place). The MMR guys try to soft-pedal that part, but they're more or less on the same plane.

    I can see how you'd reach the conclusions you do, although in my mind MMT is a theoretical description of the existing system rather than an ideal new place to go.

    Sure. Except that their theoretical description very clearly misses the mark. According to MMT, the government can dictate the value of currency by various means, including ultimately demanding payment in currency and thereby fostering a demand based in fear of the government. If this worked, Zimbabwe would never have had a currency collapse. Instead, it's a so-crazy-you-can't-make-it-up cautionary tale. So right at the ground floor, MMT needs a new theoretical base. It's the economic equivalent of saying that what goes up can stay up until the great sky jellyfish lets it fall. This comes from all angles; from the studies showing that the real world result of substantial government debt is a substantial slowdown (there was a paper that got a correction on this; many people point at the correction and say that it's all wrong and debt doesn't matter when in fact the result was that, rather than a cliff around 90% of GDP, it's a more gradual slowdown that starts earlier - based in an Excel error, as I recall). It comes from the lived experience of watching the fed desperately trying to correct for consumer sentiment in the US (something about which MMR is largely silent). It comes from the very muddled description of what full employment is, and to whom. It comes from assumptions about the elasticity, and rate of response of various elements of the market that the fiscal controls are supposed to handle. In short: MMT fails before it starts because it doesn't even address the reality that it purports to describe.

    There is no agenda in the descriptive parts, no politics. If the description is wrong in a meaningful way then the prescriptive parts are simply invalid. If the description is right then the prescriptive parts are possible, although not consequence free.

    ... and yup, here we are. The prescriptive parts are as invalid as someone telling you: "Unicorn farts are pure methane, so we could run your car off them. We can make cars run on methane - where did I leave my unicorn flatulence device?" while you try to find where he might have a unicorn.

    - snip bit about immigrant entrepreneurs and cultural influences -

    Regardless, would you agree if the UBI was used on average for productive purposes, the rich would be more inclined to accept the cost?

    Productive to whom? If there were some plausible evidence leading people to believe that the UBI would lead to a massive bonanza of economic growth and the proverbial tide raising all boats, on a par with technological advances, then sure, people would stick around for that. However, that's rather like saying that if you had a goose that laid golden eggs, you'd totally pay for some poultry feed - but there is a lot of cause for serious concern about the existence of your gifted goose, here. "Pay us a shit-ton of taxes today for a benefit that will totally show up ten years in the future, trust us!" ... uh, yeah, no.

    Going back to the rich not wanting to be taxed and being willing to run to avoid taxes, it seems that is a bit a-historic. The wealthy have put up with ever higher taxes in the past and have accepted slowly increasing taxes over time. Not that long ago there was no income tax and before that there was no property taxes. Why is the UBI tax the straw that breaks the camels back?

    You're confusing two different things here. a) rich people dodge taxes. Actually, there's a large accounting industry, along with tax havens, wealth planners and so on who'd like a word with you about that. Rich people are very good at, and highly motivated at, reducing their tax burden. The extent to which they'll do this varies by the burden and the opportunity costs, and they will use businesses to pass those taxes on to anybody else. Classic case in point: the luxury yacht tax that ended up absolutely raping the US's yacht construction industry, thereby putting a lot of american craftsmen out of work. Didn't mean that the rich didn't like yachts any more. They just commissioned them elsewhere. A related case: Reagan-era simplification of the tax code reduced the headline tax rate (insert pearl-clutching here) but also removed a hell of a lot of loopholes which made a lot of extant tax dodges worthless. The net tax collection rate didn't change much. Now for b) the UBI tax is the straw - beside the point. You might not levy a tax for UBI, but there's a sting in the tail: if it's just a huge cash dump, you do bad, bad things to your money supply. The MMT answer is to soak up the cash with taxes and bond issues. However, if nobody's buying your bonds, that leaves you with taxes. Interestingly, if you have enough wealth flight, that solves the problem too - but the UBI itself doesn't engender tax increases.

    My story of why it will be rejected is both political and even if the politics allowed for it, growth oriented. If the UBI created growth rather than mal-investment (e.g. a larger pie) I think it would be accepted, but it isn't clear it will. Your story is that the rich don't want to pay too much taxes, where UBI is defined as too much. In other words, your just arguing something like the tlogic of Laffer curves. Based upon some simple research, it seems like 70% tax rates are max "reasonable" within the curve: https://en.wikipedia.org/wiki/Laffer_curve#Income_tax_rate_at_which_revenue_is_maximized [wikipedia.org] [wikipedia.org]

    Laffer curves depend on a whole lot of assumptions, including various assumptions about the perceived opportunity cost of moving out. Your statement of "... where UBI is defined as too much." is incorrect. I do take the position that the fiscal burden of a UBI as stated is not one that fits within the current fiscal position of many (probably all) countries today, but that stands irrespective of the tax policy attached, ergo Laffer curves aren't even necessarily relevant. It's possible that punitive levels of taxation are the least bad way of supporting a UBI, but even that bids fair to wreck the economy in other ways.

    Given that most would be refunding some of those tax dollars, a possible 60% tax rate doesn't seem impossible. Is 60% viable? Here is a quick and dirty tool to examine that question: https://dqydj.com/negative-income-tax-cost-calculator-united-states/ [dqydj.com] [dqydj.com] It seems very possible to do so. Granted there are state taxes, etc. Probably have to figure out all the things you'd want to change and there are dynamic feedbacks such a tool does not capture, but it certainly would simplify a lot and it would allow the federal gov't to sack a lot of workers and streamline business needs. That would be the quid for the quo to convince the rich it is worth the change.

    This again comes back to the realm of pure fantasy. The federal government isn't going to sack people by the million. The unions wouldn't wear it, and the federal unions have a lot of political influence. Even if the long run plan were to simply reduce employment by attrition, that would be a plan that would take dozens of years to come to pass. But even if we ignored that, there's a problem with the UBI in that you have to actually deliver it for it to be useful, regardless of whether you get to tax it back out after the fact. In other words, you have to fork over the money first because you don't know a priori whether Joe High Income will lose his job this week or not, and if the UBI is to mean anything, it means that he will get that money to spend on food the next week. Or health care. Or whatever. In other words, you can't reduce your expenditure a priori. Best case you use a graduated tax to claw it back after the fact. So now you have to ask yourself how much tax gets extracted on average from whom to supply a net UBI, and the answer is that (cutting a long story short) you need to tax the middle classes (as in: a $80K four person household) like a cheesegrater to balance that budget. Unless you're giving up on balancing your budget ...

  • (Score: 0) by Anonymous Coward on Tuesday January 25, @09:55AM (1 child)

    by Anonymous Coward on Tuesday January 25, @09:55AM (#1215542)

    "According to MMT, the government can dictate the value of currency by various means, including ultimately demanding payment in currency and thereby fostering a demand based in fear of the government."

    If I print a dollar, there is more currency. If I tax a dollar and burn it there is less currency. The amount of currency in circulation, the speed it circulates by, as well as the threat of violent force unless you use the currency to pay taxes is basically how you value how we judge the value of each unit of currency. Granted there is a bunch more stuff like alternative currencies, etc. but the model basically seems true. I don't see how that theory requires it to end with magic money printing. That may be what people do (e.g. a behavioral model), but the description isn't wrong until that behavior is proved to always happen. Also: MMR?

    "...showing that the real world result of substantial government debt is a substantial slowdown..."

    The problem with this argument is to lower debt to GDP you run into:

    ""Pay us a shit-ton of taxes today for a benefit that will totally show up ten years in the future, trust us!" ... uh, yeah, no."

    I may agree with the issues of too much gov't debt in theory, as you agree with me in theory, but ultimately we both conclude the politics of it revolves around instinctive voter conclusions--be it to believe modern-Keynesianism (e.g. Print in the bad and print slightly less in the good, maybe) or Austrian style austerity and undeniable economic forces. One can easily argue the political will forces more spending and another can argue once it goes bad the politics will force more savings. Visit Greece some time and tell me austerity is good; it's obvious why you'd want to avoid it, at least until you hit inflation. Worse yet, it isn't even clear that austerity solves tax problems since tax revenues shrink when the populace's income from government expenditures shrink.

    "a) rich people dodge taxes."

    Of course they do, but you are missing my point. Look at the level the UK taxed back in the 1700s: https://en.wikipedia.org/wiki/History_of_taxation_in_the_United_Kingdom#From_1707 [wikipedia.org]
    Compare that to taxes today. Why have the rich accepted more taxes now vs then?

    "UBI itself doesn't engender tax increases."

    Agreed, but the point of my first post was to say MMT had a proposed solution to possible inflation--increase taxes.

    "...mexicans (who, if here legally, would be eligible for the UBI otherwise what the hell would the point be?)"

    I'm confused, why would the USA financially support migrant workers (not even green card holders but those who are visiting for a few months and then going home to Mexico)?

    "Microsoft isn't established in Washington - as I recall it's a Nevada corporation."

    Their licensing is done in Reno Nevada ( https://www.theguardian.com/technology/blog/2009/sep/23/microsoft-tax-avoidance-questions [theguardian.com] ), and before that they paid no taxes by printing CDs in Puerto Rico.  You can read up on that here: https://www.propublica.org/article/the-irs-decided-to-get-tough-against-microsoft-microsoft-got-tougher [propublica.org]  The fact that corporations have largely found ways to pay no taxes at all does not mean it should be that way ( https://en.wikipedia.org/wiki/Taxation_in_the_United_States#/media/File:Taxes_revenue_by_source_chart_history.png [wikipedia.org] ).  That it cannot change because the corporations have mostly taken over the US gov't isn't really evidence that the rich will flee, rather they would want to stick around to keep using their investment.

    "This means a headline expense of 6 trillion or more, every year, in the USA. If you're not paying that much, you don't get the advertised benefits."

    I took up this challenge just for my own sheer curiosity. I know you might say it isn't enough, but keep in mind this is above the federal poverty line for a single individual. Furthermore it is clearly above folks like this who live on ~7k a year (his 2016 numbers suggest 5k + cost of a house): https://earlyretirementextreme.com/how-i-live-on-7000-per-year.html [earlyretirementextreme.com] . I started with a budget to show my clear assumptions:

    Food^: 200, Housing~: 500, Health care*: 500, Misc$: 200

    * Based upon per capita GDP * 10%/12 months. This is the historic norm for the UK, the second most expensive health care in the world: https://www.statista.com/statistics/317708/healthcare-expenditure-as-a-share-of-gdp-in-the-united-kingdom/ [statista.com] Given that this could go directly into a "pick your own insurance or public option" style tax break rather than cash, we'll assume this amount is directly saved by companies on their overall insurance spending. I know there are lots of objections to this choice, but it makes it a lot easier to remove SS/Medi* cleanly rather than estimating partial impacts on lots of fiddly bits.

    ^ Eating rice and beans for half the meals, can allow you to be well under the approximately 2 dollars a meal this provides. You can afford to cook for yourself since you don't have to work.

    ~ Renting a room in MO, a trailer for two (e.g. ~1k a month) or 4 people in a college dorm all cost somewhere in this neighborhood. Roommates often don't pay utilities or share them, so I figure that 500 is utilities built in. Yes, I know average housing is way more expensive, but when you look at it from a roommate basis 500 isn't really off the mark as you can see here: https://loz.craigslist.org/search/roo?searchNearby=2&nearbyArea=222&nearbyArea=423&nearbyArea=30&nearbyArea=221&nearbyArea=29&max_price=500&availabilityMode=0 [craigslist.org] .

    $ Everyone has different needs, be it buying a TV or spending more on nicer food. Others may want a car or use the bus. This gives enough to make that possible. This is a sort of "allowance."

    This sort of UBI costs 1400 a month or 16800 a year. Limit it to all adults (260M) and that is about 4.3 T in cost. Now I will agree that some folks will need more--they are really disabled. We probably will need some level of gov't program for those folks, but that will be a much smaller group. Those people would not get a UBI check or more correctly, it would go to their care. Prisoner's UBI goes to prisons. I have not seen a serious model to estimate this, but we can take a quick whack at it. Looking at the 2020 fed budget ( https://en.wikipedia.org/wiki/United_States_federal_budget#/media/File:2020_US_Federal_Budget_Infographic.png [wikipedia.org] ) it seems that the SS/Med* are about 2.33 T. The US States contribute another .13T in Medicaid, raising the total to just a bit under 2.5T. This is before SNAP, EITC, etc. which I'll get to later. Using the amount of SS going to people with disabilities we can estimate 90% of folks are probably going to be purely on UBI. So 2.5T * .9 = ~2.2T. That is what we can cut. 4.3 - 2.2 = 2.1 T of additional spending. Then we have to adjust for employer savings in that employees have $500 dedicated to health care. Using 2019 employment numbers (~157M workers x $500 a month) that is approximately .95T in "savings" which could basically go to taxes rather than being spent directly on employees. Therefore 2.1T - .95T = 1.15T in excess spending. But wait, what of the EITC, reducing unpaid hospital bills, reduction in HUD housing, reduction in VA costs, reduction in prison costs and the like that I ignored earlier? That is a bit hard to estimate with just a few hours of research, but it must be somewhere between .15T and .75T. Let's take the low end and say .15 T. So now we are down to a nice even 1 T price tag. That is a 5.4 T budget, below your 6T. The total might be as low as 4.8 T. Compared to a 4.4 T budget (using 2019 numbers as 2020 had lots of "unusual line items") that isn't really that bad.

    What do we get from this? Everyone has some form of healthcare. Everyone has the ability to have some form of housing. Everyone has the minimum amount of food. We provided millions of workers to the corporations in that we removed many federal employees.

    Please note this is just a simple budget to show 6 T is excessive, not if this is possible given the politics we currently have nor if this is some sort of optimized solution set. This also doesn't consider what tax rate changes you'd apply.

    - JCD

    • (Score: 0) by Anonymous Coward on Tuesday January 25, @04:14PM

      by Anonymous Coward on Tuesday January 25, @04:14PM (#1215599)

      "If I print a dollar, there is more currency. If I tax a dollar and burn it there is less currency. The amount of currency in circulation, the speed it circulates by, as well as the threat of violent force unless you use the currency to pay taxes is basically how you value how we judge the value of each unit of currency. Granted there is a bunch more stuff like alternative currencies, etc. but the model basically seems true. I don't see how that theory requires it to end with magic money printing. That may be what people do (e.g. a behavioral model), but the description isn't wrong until that behavior is proved to always happen. Also: MMR?"

      MMR is Modern Monetary Realism, a way to try to work around the shortcomings of MMT by taming some of its wilder assumptions. At this point taking on MMT is rather like shooting fish in a barrel, which is why people are shifting towards MMR (which offers less in the way of a free lunch but still runs into its own problems).

      Money supply isn't all that goes into money valuation. When you remember that any given currency is a fungible commodity that rests on a sort of collaborative valuation, but that there is nothing inherent to the valuation in terms in intrinsic value, then you can see how the bottom can drop out of a currency regardless of the supply situation. If nobody trusts the management of the currency, regardless of the situation on the ground, it loses its value as a medium of exchange.

      "I may agree with the issues of too much gov't debt in theory, as you agree with me in theory, but ultimately we both conclude the politics of it revolves around instinctive voter conclusions--be it to believe modern-Keynesianism (e.g. Print in the bad and print slightly less in the good, maybe) or Austrian style austerity and undeniable economic forces. One can easily argue the political will forces more spending and another can argue once it goes bad the politics will force more savings. Visit Greece some time and tell me austerity is good; it's obvious why you'd want to avoid it, at least until you hit inflation. Worse yet, it isn't even clear that austerity solves tax problems since tax revenues shrink when the populace's income from government expenditures shrink."

      As a matter of fact the drag of debt on GDP wasn't a theoretical article, but empirically measured, so it's not hypothetical at all. As far as austerity is concerned, it worked out very nicely for Ireland, thanks. Greece has other problems that were completely beside the point, such as a completely sclerotic system.

      "Of course they do, but you are missing my point. Look at the level the UK taxed back in the 1700s: https://en.wikipedia.org/wiki/History_of_taxation_in_the_United_Kingdom#From_1707 [wikipedia.org] [wikipedia.org] Compare that to taxes today. Why have the rich accepted more taxes now vs then?"

      The relative wealth in terms of capability, and the relative power of the rich in political terms, have changed like night and day. In 1707, the rich were not merely abstractly rich but also the big landholders and other entrenched nobility, ecclesiastical figures and so on. This was nearly a century before Napoleon made the scene. Structurally, it was not the modern world at all. Basically, this isn't an apples-to-apples comparison, it's not even apples-to-oranges. A much more relevant case would be to compare the last half-century, during which the system hasn't substantially changed, during which technological changes haven't utterly changed the terms of life (despite being monumental). Asking what an eighteenth century bishop, an ex officio member of government, would accept in taxation to a crown in the wake of the Glorious Revolution, really isn't relevant to today's system.

      "Agreed, but the point of my first post was to say MMT had a proposed solution to possible inflation--increase taxes."

      Yeah, but that's not an answer to the whole enchilada because if your straightforward reading of MMT is that inflation demands a monetarily-mediated fiscal balance, not only will your taxes yo-yo to compensate for every shock that comes along and changes public sentiment, it completely dodges the MMT monetary goal of full employment. See the contradiction? Putting it slightly differently, if the fiscus is supposed to manage money supply, there is no real role for monetary policy. If there is the (conventionally understood MMT) mandate to drive full employment through monetary policy, the fiscal side simply can't directly control inflation. If the fiscal side could and would somehow do that, it cuts the legs out from monetary policy.

      "I'm confused, why would the USA financially support migrant workers (not even green card holders but those who are visiting for a few months and then going home to Mexico)?"

      If you're trying to create an employment context in which you have no minimum wage, in which you have no payroll taxes (besides the generic to try to balance your UBI), in which your barriers to employment are as low as possible on the assumption that you will just be topping up the UBI of workers who are supported - the migrant workers won't come for that pittance without a UBI. Or, if you're paying them so lavishly that they'll come regardless of UBI, you're _massively_ increasing the effective labour costs of agricultural produce because now the farmer is bearing the full tax burden of supporting a society that provides a UBI plus a payroll that pretends that UBI were never implemented. That's the straightforward worst of both worlds. From the migrants' point of view it would stop the whole thing cold, anyway. It turns from: "Come sweat like a pig in our fields for better money than you could get at home!" to "Come sweat like a pig in our fields for a pittance that would make a beggar laugh."

      "That it cannot change because the corporations have mostly taken over the US gov't isn't really evidence that the rich will flee, rather they would want to stick around to keep using their investment."

      It is evidence that the rich will work awfully hard to reduce their tax burden because they like money. Again, there's a big industry that supports exactly that inclination.

      Your estimate of cost of living is low and incomplete. You should go back to look at what's actually involved in those calculations. My 6T was actually pretty conservative (i.e. low). But even if we take your 5.4T as gospel (it ain't), it's way over the cost of SS (which it wouldn't completely replace, as you admit), over the cost of medicare/medicaid, over the cost of all the unemployment payments, and so on. It obliterates, numerically, the present cost of the federal social safety net. And MMT doesn't really help you here because even today the federal budget isn't even close to balanced. You'd have to print trillions more per year to make it work, or tax so much harder than we presently do, that the rational move for any affluent organisation is to look for the exit door.

      Wrapping this up: the UBI as stated is a punitively heavy fiscal burden that cannot be paid for by replacing similar programmes effective today. Paying for it by printing money (virtually or otherwise) bids fair to be a huge cash dump that would guarantee inflation far beyond the COVID-driven efforts of the federal government over the past year, while taxing to cover it bids fair to be the strongest driver of the wealthy and the profitable overseas that we've seen for decades. MMT and MMR don't help because their answer to inflation is to tax or borrow (bond issue) it away, such huge debt increases would be terrible for an already struggling economy, such huge tax increases would drive out the precise people and organisations that we'd need to keep it all going, and any hope of shooting for full employment (as per standard MMT/MMR monetary policy recommendations) would run hard into the changed landscape that MMT/MMR + UBI create. The market asymmetries introduced by the implicit labour subsidies would not prevent lopsided commodity value alterations from additionally screwing your primary industries. In short, it's a bad idea even if your mass hypnotic powers could get everyone to sit still for it.