Thoughts on an Unconditional Minimum Income

The concept of an unconditional minimum income is one that has fascinated me for quite some time. Particularly, I have been finding myself stumbling across different shades of the idea on a fairly regular basis lately. Hayek, back in 1944, had already argued in favor of a weak form of such an arrangement. Milton Friedman’s Earned Income Tax Credit, though in its current form tied to actual employment and thus hardly unconditional (appart from phasing out as income rises), points in a somewhat similar direction. When even reading about what seem to be related concepts on Mankiw’s (post of Nov. 18th) and Sumner’s blogs I knew it was time to write down some of my thoughts on it.

But first I decided to get through a creatively named book by an author named Karl Reitter I picked up at this year’s Elevate Festival. And while it proved to be considerably less informative than I had hoped (I’d like to assume this speaks to my vast knowledge of the issue and unmatched level of intelligence, but am rather inclined to think this would be megaloamanic and nothing else), the author pleasently surprised me by only occasionally going off on the typical rants against the “neoliberal economic system” I have come to expect from similar publications. In its purest form, an unconditional minimum income is exactly what it says it is: a concept that ensures a certain level of income to any and all persons living in a country, without any strings attached. Anyone under 18 could receive a reduced level of the transfer, but that’s pretty much it. Ideally, one would scrap all forms of often distorting social programs and replace them with such a system in a way that turns out to be neutral in terms of direct budgetary impact. Let’s get down to the details.

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Links of the Week

Since all of us have better things to do, we asked our robot intern Watson to find this week’s most interesting news stories and compile them into a short list for your convenience. Here’s what he came up with.

Stress Best, from The Economist

The Economist takes a look at Antifragile: Things that Gain from Disorder by Nassim Nicholas Taleb, a book that argues that the best way to deal with uncertainty is not to attempt to minimize it, but rather to put yourself in a position to benefit from shocks as they happen. Lowering interest rates at the first sign of weakness, writes Taleb, allows risk to accumulate until a major disaster occurs.

The Weird Coalition Sounding the Alarm on Global Warming, by David Wagner

Several new reports on climate change were released recently, their predictions including a near-unavoidable 4° C rise, a  temperature increase of 6° by the end of the century, and “consequences that exceed the capacity of the affected societies”. Well, who’s behind these alarmist headlines? Greenpeace and the WWF? Try again – this is straight from the World Bank, PricewaterhouseCoopers and the CIA.

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The Myth of Capitalism and Inequality

The idea that capitalism is necessarily associated with a high degree of inequality seems to have become part of conventional wisdom. Yet it is an argument that is as widely spread as it is wrong. A big deal of confusion seems to come from failing to differentiate between gaps of income that arise due to the process of “equalizing differences” and those that occur because of market inefficiencies (often even governmentally enforced). Capitalism having become synonymous with Gilded Age type policies often summarized under the label “neo-liberalism” does not help either. Countless think tanks supposedly interested in promoting a free market society have further built a reputation by distorting what the meaning of such an arrangement actually is. Freedom House’s measure of “economic freedom”, for instance, increases as “levels of government regulation over the economy” decreases. The Heritage Foundation’s Index of Economic Freedom does essentially the same thing in a slightly more elaborate fashion. Clearly, anyone who believes that less regulation (or government in general) automatically means more economic freedom has not thought the issue through. It is preposterous that these institutions are hailed as defenders of a free society when it is clearly their agenda, either on purpose or through almost criminal negligence, to destroy it.

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Grover Norquist is an Idiot

This isn’t exactly news, I know. But I still felt like getting it off my chest.

You see, Norquist is at the center of the hyper-ideological movement within the Republican Party that believes, and I am not making this up, that raising taxes is bad under any circumstance. Now, the scary thing is, this man has an M.B.A. from Harvard, and, whether he truly believes in this ridiculous crusade or not, he has certainly found it to be personally profitable to embody a vocal radical position to anyone who will listen.

What makes Norquist so dangerous is the childlike pledge he asks political candidates to sign, promising they will oppose any attempt to raise taxes. Here is the relevant passage in the version of the pledge presented to members of the House:

ONE, oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and

TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.

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Links of the Week

Since all of us have better things to do, we asked our robot intern Watson to find this week’s most interesting news stories and compile them into a short list for your convenience. Here’s what he came up with.

We’ve got Sweden, scandals and setbacks…step right in, these are the links of the week.

Sweden: the New Model, from The Economist

The past two decades, Sweden has been trying to revitalize its own economy. Inequality has risen as benefits and transfers were slashed, but less than might be expected. This article looks at the Swedish attempt at modernizing and reforming the European welfare state.

Why the Tea Party Failed, by David Weigel

The Republican base, energized into forming the radical Tea Party just a few years ago, stands dejected before the ruins of yet another failed Presidential campaign. What went wrong, and will they be able to survive the calls for moderation from within their own party?

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The Incompetent Central Bank Case for Fiscal Stimulus

Keynesianism has made a roaring comeback in the aftermath of the Great Recession. No matter what ideological leaning different world leaders had at the time the crisis struck, they all threw their ideologies out of the window and implemented massive fiscal stimulus measures. A big reason Keynesianism was brushed aside in the past couple of decades is that the contractionary part of it more often than not simply does not happen, mainly for political reasons. And as far as the expansionary side of the coin is concerned, opponents of Keynesianism rightly point out that it is unnecessary and even counterproductive in times where our economies are running at something close to full employment. Even without fully rational expectations, the effects expansionary policy can have on the Philips curve are very real. Yet the whole edifice of Keynesian stimulus actually working at least in bad times is built on shaky ground as well – it is made under the assumption that a country’s central bank simply drops the ball when it is needed the most.

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Links of the Week

Since all of us have better things to do, we asked our robot intern Watson to find this week’s most interesting news stories and compile them into a short list for your convenience. Here’s what he came up with.

If you just rejoined civilization after a prolonged period of Sandy, there was an election in the United States. As you can imagine, most of the news this week dealt with the results and the consequences.

As Nation and Parties Change, Republicans Are at an Electoral College Disadvantage, by Nate Silver

FiveThirtyEight took a look at the Presidential tipping point state, and came to the conclusion that Obama could still have been expected to win an electoral college majority even in a close defeat in the popular vote. These geographic realities must be troubling to Republicans, who look to be at a demographic disadvantage for years to come.

Hope and Change: Part 2, by Thomas L. Friedman

We’ve already looked at what this loss means for the Republican Party moving forward, and Tom Friedman continues that train of thought. Echoing the ideas from his latest book, he looks at the challenges America faces in the future, and examines what role the GOP would have to play to be a productive part of the solutions.

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