Give a man a fish and he will eat for a day. Teach a man to fish and he will eat for a lifetime. Wait, scratch that — he won’t eat for a lifetime. Automation took over and fished the metaphorical seas dry.

Meanwhile, some bold tech leaders pipe up: “I have a brilliant idea. What if we just give everybody fish?”

California Optimistic

When 20,000 people move to L.A. every year to become famous actors and only five of them really make it, it suggests a special kind of optimism on the part of those people and that place, an outlook so extreme that it actually becomes gloomy. California Optimism is an admixture of this hope and desperation. L.A. weather fits the ethos; sunshine every day, as they say, makes a desert.

Imagine falling asleep in the 1990s and waking up today. You nodded off watching the news explain the looming pension crises, making a case for raising the retirement age by letting some really old guy talk about “cost disease.” You wake up in 2017 to discover that all of that actually happened, and now we really are out of money, Baumol is dead, and many “millenials” aren’t sure what the definition of a “pension” is, exactly. Then you read about Universal Basic Income (UBI). Many articles explain the potential positives of implementing such a system, but none explain quite how we’ve made the leap from “we can’t pay for people’s retirement anymore” to “let’s give everyone money and see what happens.”

If you really were asleep for 25 years you might suppose we entered a new age of plenty, or at least solved some political problems with an era of robust cooperation. I just checked Twitter; these things did not happen. That’s how you know that UBI qualifies as California Optimistic. The future speak is forcefully positive, but it’s desperation doing the talking. Most advocates propose UBI not because we have solved mankind’s big money problems and the next stepping stones clearly lead us to Star Trek. Rather, they advocate for UBI because they foresee even more problems if we do not try something new in the near future to stave off real pain.

I do think that a thoughtfully planned future is a brighter future, but in recent history some top-down society engineering projects resembled accidental dystopias. Scrutiny of any “grand scheme” is therefore warranted and necessary.

Math Assumptions

Math-based objections to UBI are the most commonly cited, so I want to skip them almost entirely, except to talk about inflation.

Price inflation of basic necessities

Rent is currently eating the world. Rental income just hit an all-time high. If we adopt a UBI system and everyone is given a very predictable amount of money, it may be seen as a system easily gamed by landlords and possibly other producers of essentials. Implementing UBI without reforming land-use and zoning regulations may result in nothing more than a slow transfer of money to landlords. What are the odds of that happening? Well, it seems like it already did happen with healthcare and college tuition (loans) in the U.S., and if we use those are our guide, the “money” part and the “meaningful reforms” part should be done in a very particular order.

Because housing rates are reasonable in some places (Japan and Montreal come to mind), I think the problem of combining a UBI system with current rent inflation is a problem that can be fixed. But without the fix put in place first, UBI may be punting real political problems while giving the appearance (until years later) of solving them. Plus it would make the price inflation obvious for landlords, just like it was for healthcare companies and colleges getting guaranteed loans.

Payments as a solution to a broken system is not the same as truly fixing the system. If UBI punts this real problem, we’ll be creating a financial time bomb.

UBI Is a Transfer of Wealth from the Needy to… Everyone

UBI can be a hard sell because it is a koan of fairness, activating one’s empathy and rage simultaneously. The income is meant to support people who desperately need it, but also to support wealthy hipsters who just don’t feel like working. The one hand clapping begins to feel like a slap.

Many of the funding ideas for basic income involve replacing all social safety programs: Disability (SSDI), Supplemental Security Income (SSI)¹, Social Security, food stamps, medicaid, etc. Many proponents suggest that the money saved eliminating all of these programs (and their overhead) can be used to give everyone a modest basic income.

On the face of it, this makes the numbers come close to acceptable. It also means that UBI schemes essentially take money out of the pot currently reserved for the needy and disabled, and distribute it to able-bodied people plus the needy and disabled. Such a scheme has the potential to have good effects: by eradicating welfare traps that keep people away from paid work, it might encourage people to enter the workforce. But if that’s the main positive motivation for UBI, why not just restructure the existing benefits so that these traps don’t exist, instead of blindly re-allocating money from the for-sure needy to those who just don’t feel like working? This is the same structural problem that occurs in rent-eating-the-world, college-costs-eating-the-world, healthcare-costs-eating-the-world (okay, the U.S.). It is not adequate to just provide funds as the fix — in fact, that may make the problem worse. We must make sure that our optimism for UBI is not simply masking very real and hard problems in society.

We must be careful to make sure that, if implemented, UBI is not a transfer of wealth from the needy to the hucksters.

Removing all welfare to create UBI (to give everyone the same amount) is a de facto pay decrease to anyone with needs outside their control — such as diabetics, who need all the things you do to live, plus insulin. So after cost-to-stay-alive is factored in, they get less money than you do from UBI. In this way, giving everyone the same amount results in its own kind of inequality starting from the very first check.

The difficulty of medicaid is under-appreciated

Speaking of hard problems to solve in society, the numbers aren’t the only issue with the “remove the old programs” assumption. Programs like medicaid provide more than just money or medicine; they provide case workers and associated footwork—and those things are needed. There’s a much higher no-show rate among medicaid patients than other cohorts. They don’t sign up, they’re afraid of doctors, they don’t have addresses, and so on. We know that the problems some groups face are deeper than others, and helping them may require difficult and not-very-efficient overhead, but it’s overhead that is still worth going through to become a better functioning society. This is what medicaid and medicare workers are doing every day.

If the government is already undertaking a program that is complicated and difficult to scale, but is (so far) the best organization to do it, why not let them keep doing it? We are at least better serving some populations this way. I think that when people speak of removing the “overhead” of other social programs, in their optimism they overlook the work that many of these programs are already accomplishing, which includes helping people who can be very difficult to help and employing others who are trying to do so.

The P.T. Barnum Objection

“Very in favor of UBI. One of the reasons I like the idea is because it’d hold everyone accountable for their bullshit choices. What’d you do with your money this month? Spent it all frivolously? Fuck off… until next month.” — Some Guy on reddit

Is a person with two children and a gambling addiction better off with food stamps and housing vouchers, or with UBI payments?

There are many difficulties facing the poor in the U.S. and “not enough money” does not begin to capture the whole picture. The complexity of modern life is profound, and subsequent complications are often the most intense for the people who are the poorest and least able to understand that complexity. It is especially grim for those who have a hard time navigating financial instruments. People who are functionally illiterate, for example, could struggle. That amounts to about 11 million adults in the U.S. Even those with “below basic” literacy, which is roughly 30 million adults (14 percent of the U.S.), might find financial forms nearly impossible.

What percent of people are poor because they hit a snag or were dealt bad cards, and what percent of people are poor because they are unable to understand money in a modern economy? And it’s not just incompetence or lack of education that impairs the ability to be financial independent; elderly people can be simply too trusting, and easily scammed. I don’t know the answer, and I’m not bringing up demographic delineations to be mean or to suggest that I know which is the greater culprit. I am only suggesting that the difficulty of the modern economy itself is certainly somewhat at fault.

Poverty reduction programs currently in place are not perfect, but they do make attempts to stop those most vulnerable from being exploited. What happens to these people if UBI is implemented? Will they continue to be confused by money management in this economy and to be scammed by others who have a greater understanding? I don’t think we can call that an improvement. (The U.S. legal system does already acknowledge that this is a problem, and not just for poor people. Conservatorship has helped many a life stay on track, perhaps most famously, Britney Spears’.)

Giving the poor direct cash may help some of them more than food stamps. People are usually good at sorting out their own priorities (or so says economic studies and libertarian internet-commenters). But for some percentage of people, this cash alternative might be more harmful than helpful. Are those people worth forsaking? The poor in the U.S. are faced with some pernicious financial instruments: payday loans, car title loans, furniture leasing, fees for keeping a low balance, lottery tickets, and, of course, everyday hucksters. This is the P.T. Barnum objection: There’s a sucker born every minute, and with UBI we’d be stuffing their wallet with plums for the taking.

All systems can eventually be gamed.

To implement UBI at the expense of every other social program is to make the presumption that the people helped by those programs are competent and capable of shifting to a life of budgeting and managing their own money and of avoiding exploitation. Think of the most vulnerable people you’ve ever encountered and remember that, with UBI, they all get the same amount of money. Now think of everyone from leaders at cigarette companies and at bling social-status brands to landlords who will want to take advantage of those vulnerable people. We must be careful to make sure that, if implemented, UBI is not a transfer of wealth from the needy to the hucksters.

The Existential Problem

“A basic income means they don’t have to work 40 hours a week just to survive so they can do what they really want to do in their spare hours.” — Some guy on Hacker News

When it comes to disability benefits, the data suggests that men really just want to watch TV and take drugs; that they don’t spend much time raising children or on civic engagement or other higher pursuits. Other people have written a lot about this, so I don’t want to spill more ink on the subject. The Commentary magazine article discusses the fact that most of those who are consuming disability benefits are not, in fact, physically unable to work.² This should be apparent from the fact that disability claims are strongly correlated with the economy, yet recessions do not cause people to become paraplegics. And this rise in disability claims has happened in spite of workplaces becoming safer over the decades. So we already know what many people collecting disability payments will do in their spare hours. Suggesting a more Utopia-laden vision may be unrealistically optimistic, and, when dealing with contemporary civilization, sobriety of view is recommended.

In light of the data that suggests predominant laziness, it’s possible that for many people the “not having money” part of their problems is the easy part. People may hate being unemployed more than they hate not having money. What if we implement UBI as a “solution,” but lack of money was not the problem? What if the problem is getting and keeping a job?

I am worried that the problem here is often under-discussed because the kind of person who advocates strongly for UBI (or at least writes articles) probably imagines only the best possible outcome, based on people behaving in the best possible way. Just as you can find Silicon Valley techies who think Soylent is the only sustenance a person will ever need, intellectuals tend to think everyone could be as content as they would be living life in their heads or inventing their own destiny. Most people need to be doing something to feel satisfied and a potential UBI system addresses this need just as inadequately as disability checks do now. Cue drug epidemics.

Judging from current population behavior, we have at least hints that UBI may be fundamentally attacking the wrong problem, and I think that many UBI advocates might be under-appreciating this. These advocates need to make the case for how writing “UBI” at the top of a check instead of writing “disability” will produce a better outcome.

The Systems View

The Nassim Taleb point of view is that to be sustainable and stable the world needs to be decentralized and antifragile. In other words, instead of a single government, it would be better to have 100 functional governments with small, local democratic governance. Large systems have difficulty adapting quickly, or at all, and can miss the nuance of local conditions. When a large system fails, it could fail millions or billions of people. Large systems can make evolution, tinkering, idea sharing, and other positive forces difficult or impossible.

All systems can eventually be gamed. Sometimes it can take 20–30 years for people to discover how to take advantage of a system. Sometimes the gaming makes a system useless or degraded; sometimes it causes systems to crash (see: tax evasion schemes, Utopian projects of the 20th century like hippie communes, patent trolls, every example in Seeing Like a State by James C. Scott). It is, therefore, a nice feature when systems are light, flexible, and easy to adapt to local conditions, or, in the event of failure, easy to replace altogether. When lives hang in the balance, this latter feature may be more of a necessity. If your small hippie commune fails, you can always rejoin the capitalist hellscape, or whatever everybody did in the 80s. If an encompassing and unwieldy system like UBI has been running for 20 years and fails… well, it will be a lot less simple to replace. How would UBI be made flexible and adaptable if in a few decades it isn’t working? You don’t build a nuclear power plant (or even a dam) without a plan for what to do if it goes critical. Any serious steps toward enacting a UBI system need a contingency plan, a strategy for what to do if the government runs out of money, or cannot distribute the money, or needs, for whatever reason, to shut it down.

When you read about UBI schemes, do the articles suggest such a plan? Go look at your favorite pro-UBI plan so far. Does it have a section titled “And This Is What We’ll Do If the Lights Go Out”? If not, you’re not looking at a plan, you’re looking at a California Optimistic muddle.

The absence of a contingency plan is a fatal design flaw for UBI. Top-down complexity has a cost. If UBI fails 10–30 years into the future we may have a significant population percentage that has never done any work and suddenly needs to. Because any UBI program failure would likely be a result of running out of money, it could be catastrophic for the communities that produced nothing and have no means of even trucking in subsistence food — kind of like the recent situation in Venezuela.

A pertinent Venezuela digression: The ruling party under Chavez used oil money to launch a number of programs aimed to combat poverty in the country. These programs can be thought of as the “hold my beer” version of basic income, plus some socialist style expropriations. Unintended consequences followed. The mission for quality food lead to increased reliance on imports, and Venezuelan farmers were harmed by the food subsidies, plus “expropriations performed by the Venezuelan government resulted in a drop in production in Venezuela.” If access to free food makes it no longer economically viable to produce food within the country, and then the free food stops, problems are imminent. This is more or less the trouble Venezuelans are in today. An outcome this dramatic probably wouldn’t happen under a true UBI, but it illustrates that what the state chooses to invest in (or not) can have some serious second-order effects. Venezuela wasn’t trying to kill their local farms, they were trying to increase access to food.

For grand schemes, good intentions are not enough. Contingency plans are a must, and robust or antifragile plans are preferred. UBI as it is commonly designed is super fragile. The correct solution to a problem is not always a top-down scheme with recurring, nebulous future obligations, and we should think very carefully before implementing one.

What you spend government money on matters

It is nice when money spent on civilization at large has a return on investment. Very broadly, some spending will disappear when great change or collapse occurs, and other spending (like roads or most infrastructure) creates more civilization-grade durable goods.

Giving everyone a set amount every year won’t create the highway systems, subway systems, nuclear power plants, hoover dams, space programs, water filtration systems, and more that we need as a society overall. In fact, if the total UBI system cost as a percent of tax receipts becomes too large, UBI may preclude these things from ever being built. If most tax money is merely being redistributed among the population, new feats of civil engineering won’t be developed or even envisioned. We need to really consider this trade-off. Think, for example, of Haussmann’s renovation of Paris, or the Paris metro project, or the Hoover dam in the U.S. What if instead of building that infrastructure, the money was distributed among all Parisians (or Americans) over those years. What would be the difference in positive effects, 200 years later?

If you could take from the rich and give to everyone or take from the rich and create a clean water or power supply, which is probably a better use of the money, decades on?

It is important to note, of course, that the U.S. is neither enacting UBI nor creating many more durable public goods.

Other Ideas that Might Work Better

I’m fond of exploring “guaranteed minimum agriculture” or “basic job” ideas. Such plans are more resilient against shock or system collapse.

Basic Agriculture would de-industrialize parts of local U.S. economies, softening the blow of what’s happening regardless. This could result in more diverse regional ecosystems, which (comparing small towns in the U.S. to small towns in western Europe) may alone be worth the cost. Besides which, it could be great impetus for different parts of the country to develop their own fancy opinionated cheeses.

Having some agriculture everywhere might also be a nice asset. As a society we probably spend too much on military system backups (in the event of a catastrophe), and not enough on civilian backups. What’s the point of a network that can resist a nuclear attack if the people who remain starve anyway, because food is centralized?

Basic Job schemes should also pass the “systems view” of things. If we pay people to do basic jobs (building infrastructure, local farms, local economy gigs), and then we run out of money to pay them, at least we built stuff that can still be used. In comparison, giving everyone UBI is much more hope-oriented; it (often optimistically) predicts that some of the people unburdened from work will create lots of value. This could very well be true for some people, but it sounds awfully California Optimistic and doesn’t seem to jive with the issues we already know exist. Even if it does happen, we can expect such fruits to be more rare, less distributed, and less predictable. Inequality is almost guaranteed.

Read Part 2 here.