Making Universal Basic Income Real
For the past couple years, I’ve been loosely tracking the idea of Universal Basic Income (UBI). My interest grew from a growing concern about people’s ability to keep up with the blistering pace with which automation and machine learning are tackling what had previously been human work.
Over the holidays, I read Peter Barnes’ book, With Liberty and Dividends for All (https://goo.gl/OdU9YN). It’s a quick read and it makes a compelling case for UBI.
Then, today, I watched Kartik Gada outline his thinking on how to make UBI a reality, while simultaneously solving some other gnarly economic and societal problems. Here is a quick summary of his main points:
* We are entering a phase in our economic growth where deflation poses a more serious threat than inflation. The cause of this deflation is the growing percentage of total economic output that is subject to technological deflation.
* To deal with deflationary pressure, central banks are creating more money through a process of quantitative easing. We are now in the third wave of this easing, and it’s not enough. Deflationary pressures will accelerate as a growing portion of the economy becomes subject to technological deflation.
* The banks rely on treasuries and mortgage-backed securities to do their quantitative easing, but those channels for money creation are losing their effectiveness. We need a broader set of channels.
* One way of broadening the channels through which new money is infused into the economy is to simply distribute it directly to citizens in the form of a UBI.
* In Kartik’s proposal, the UBI would be universal rather than means-tested. I’ve come around to this view thanks to arguments by Peter Barnes. It would also gradually replace other forms of government assistance and insurance, and in so doing, eliminate income taxes and streamline/eliminate government agencies tasked with taxes and redistribution.
* Here’s the key insight: as technology accelerates, so does its deflationary pressure, and the need for ever increasing amounts of quantitative easing. As a result, UBI payments would naturally grow as the economy becomes increasingly technological in nature.
So, why am I illustrating this post with a picture of the “Go” space from a Monopoly board? This is an analogy from Peter Barnes. The UBI acts as a kind of $200 cash infusion into the board. Without that infusion, the game can’t move: there’s not enough money to buy properties, houses, hotels, etc. Think of the UBI as a new way of injecting liquidity into the economy: one that doesn’t rely on our banking system’s ability to create money by issuing debt.
This is a really interesting proposal. You can find Kartik’s Google Talk here:
And here is his website with a more detailed summary (which I haven’t yet read):
A heartfelt thanks to Mark Bruce, without whom I would not have come across this work. If you’re not following Mark already, I highly recommend him. Lots of interesting stuff in his stream here on G+.