Wednesday, December 14, 2011

Basic Income Guarantee, Negative Income Tax, and Austrian Economics

I was invited to submit a paper for a book on the idea of the Basic Income Guarantee. The editor, Guinevere Liberty Nell, is still working on getting full permission to do the book, but she says things are looking good. In any case, here is the proposal, which has been accepted:

Civil society is made up of a variety of spontaneous orders, including the economic order and the democratic order. Each has its own values and its own ways of communicating information – and different orders can come into conflict with one another. What is good economics may not be good democratically, and vice versa. And this is certainly most clear when dealing with programs that touch on both orders, such as welfare programs. There is a very large amount of literature out there proving that welfare programs are bad, economically. However, welfare programs are still popular democratically. One could just chalk this up to economic ignorance on the part of the populace – or, one could consider the fact that there are values other than those found in and promoted by the market economy, including social values, that people find just as important. When looked at in this manner, a different set of arguments opens up.

Whatever the economic argument are against welfare programs, from the point of view of the democratic order, they are beside the point. If they are beside the point in one sense, because the populace want such programs, it then behooves us to try to figure out what kinds of programs are least economically problematic. It is from this perspective that I will be comparing welfare as currently constituted in the United States, and comparing it to both the idea of a Basic Income Guarantee (BIG) and to Milton Friedman’s proposal for a Negative Income Tax (NIT). There were some experiments with NIT during the 1970’s that resulted in it being abandoned as an idea, but I will be considering some problems that would necessarily have to be taken into consideration in analyzing those results. I will also be comparing how such programs could be set up, the costs of such programs, etc., to try to suggest which one would produce the best social results at the cheapest costs. Along these lines, I want to pay particular attention to the unseen elements as much as the seen, as replacing all of our welfare programs with one program is going to affect the nature and extent of the current system in place. What will happen if we can eliminate a significant portion of those working in the welfare bureaucracy at both the public and private levels? The natural assumption is that all of those people will now be laid off, but the fact of the matter is that they will be freed to pursue other economic avenues, which may in fact contribute to economic growth and the creation of even more wealth, now that they are no longer participating in non-wealth-creating activities. One has to look down the road quite a bit to truly understand why a program may be either desirable or undesirable. This is the approach I will be taking in analyzing all three – current welfare, BIG, and NIT.

I am sure my regular readers will be a bit surprised at the above proposal. My answer to them: there's always room for second-best ideas. In any case, I'll be writing this paper as a good scientist investigating the interface of two spontaneous orders rather than as the polemicist I can sometimes be here on my blog. There is and should be room for both in one's life.
Post a Comment