A Capitalist Case for UBI

11 Apr A Capitalist Case for UBI

Universal Basic Income (sometimes called a Living Wage) is more crudely defined as giving people money for doing nothing. A well-groomed capitalist should balk at such a concept. However, there are some rather attractive economic properties of money in the primarily consumerist society we are starting to become that might cause us to take a second look to decide if human driven task of spending money is actually “doing nothing.”

Traditionally money has been something that can be used to purchase someone else’s productive time, attention, and the output of their work. If you pay someone to wash your car, that’s time you didn’t have to invest in that task. You trade the money you received for doing some other task for someone else so you can do more of that and less of tasks you are either not good at or don’t prefer to do.

This system makes sense when another limited and consumable restouce (someone’s time) is being used solely for your benefit. But in a system where production is done increasingly by machines (capital) instead of workers (labor), and the marginal (variable) cost of products or services people buy decreases in favor of fixed costs which are spread out by economies of scale, the actual act of spending money becomes less of a trade for productivity or resources, but rather an action of informed decision making which conveys a uniquely human value to society.

The actual choice a user makes between, say, Uber vs. Lyft when the pricing is (1) highly subsidized by VC, (2) the services both get you from point A to point B, is really a choice of which provides the most marginal value (either in social or environmental good, societal efficiency, or personal convenience). Why should anyone (VCs, governments, etc.) subsidize people to take $2 rides across town (sometimes cheaper than than a bus) and give them a choice between multiple platforms? Could it be so that the hivemind can be used to refine these services and collectively influence the building of the most effective solution?

In this example, the end goal always was to replace private “point-to-point” taxi service or public “area-to-area” transit with something in the middle: semi-private point-to-point cost-effective car-pooling (that’s a lot of dashes!). In theory, this middle ground is the most environmentally and socially productive – wasting the least amount of energy for the most efficient outcome – offering equality in mobility and broad efficiency for people’s time. In practice, it requires (1) scale, (2) complex technology, (3) user trust. In a capitalist setting, these are achieved by giving people what amounts to “unlimited free cheap samples” of multiple options and see which one gets used more by tallying the chips at the end. The end result – society has helped shape its own more efficient future.

Take the opposite extreme case of luxury goods. Ignoring the inefficiencies of “status symbols” and the like, here society has allowed a subset of the population, elites, to vote with their wallets. Cost is rarely the deciding factor between luxury handbag #1 or #2, but quality is everything. We have developed a mechanism where scale and cost efficiency are temporarily suspended, and we go in search of perfection. This is exactly the recipe Elon Musk famously followed to launch Tesla – start with a luxury car, perfect the craft, and then worry about scale and cost to get it to the masses.

With a lens like this, it’s plain to see what society plays a fundamental role in determining quality and influencing progress. Product subsidies are the cost of surveying the public and asking them to take a risk on your product before its proven or perfected.

So the question then becomes: who should shoulder the burden of this subsidy? Should it simply become part of the cost of launching a new product? Or should society place value on the net good created by those who tried something imperfect first and provided feedback (perhaps through an angry tweet) to make it better?

The question is perhaps easier than you might consider. Let’s consider a proof by contradiction. Imagine an extreme scenario where human survival is entirely automated – food is grown in abundance by agro-robots, and houses are 3D-printed via a drag and drop interface in an app easy enough for a child to use. If competitive market forces are allowed to follow, the price of these escentials will fall to ~0 as the tech becomes ubiquitous over a long horizon. Since survival and comfort are all but guaranteed, there is now no need for anyone to “work” except to create and innovate and keep human progress alive.

To follow through with our proof by contradiction, imagine there is no way to make money except by being that innovator – no government subsidy, and profits have been driven to 0 in all simple jobs because of automation. While not everyone will be the next inventor or theorist, everyone will be happy to discern between the best ideas and the worst. But here is our conundrum – if there is no work, there is no ability to obtain money and buy anything new and unproven (not scaled to complete automation), and thus no way to perform the socially valuable task of contributing your opinion on the next innovation to make society better. So how does society continue to empower innovators?

You might guess VC funding but we’ve just stumbled on another battery issues:

1. Do we really want to constrain innovation to being essentially granted “permission to try” by a class of capital holders; remember that there is no sense of bootstrapping as there is no other productive labor someone could follow to self-fund their ideas. Why would we centralize the ability to try something new which is so core to capitalism and innovation?
2. Even if we decide grants decided by some central committee are the path forward in contrast with the decentralized capitalist spirit, remember that you will literally have to give 100% subsidies if there is no other way to make money. But this in turn breaks an important physiological aspect of capitalism: if everything is free, i.e. not even an opportunity cost to taking everything you will run into hoarding, and lack of meaningful consideration when decisions are being made which was the whole point to begin with.

So here we are, unable to proceed unless every participant has some seed money to (1) bootstrap thier ideas for validation, (2) spend on validating the ideas of others. And if every participant, regardless of their actions needs this universal basic income to participate meaningfully in society, there is only one entity central enough to provide this whose incentives align with the desire to keep society functioning – the government who issues the mechanism of voting – the currency.