UBI: Reply to Dolan By Bryan Caplan

Ed Dolan thoughtfully replies to my Universal Basic Income challenge on the Niskanen blog. Here’s my point-by-point reply. Dolan’s in blockquotes, I’m not.

Here are three kinds

of libertarians who might take a UBI very seriously indeed. Libertarian pragmatists …By some calculations,

the government already spends enough on poverty programs to raise all

low-income families to the official poverty level, even though the

poverty rate barely budges from year to year. Wouldn’t it be better to

spend that money in a way that helps poor people more effectively?

Sure, holding spending constant.

A UBI would help by ending the way benefit reductions and “welfare cliffs” in current programs undermine work incentives.. A UBI has no benefit reductions. You get it

whether you work or not, so you keep every added dollar you earn (income

and payroll taxes excepted, and these are low for the poor). But, wait, you might say. Why would I

work at all if you gave me a UBI? That might be a problem if you got

your UBI on top of existing programs, but if it replaced those programs,

work incentives would be strengthened,

not weakened.

This is a serious overstatement.



First, as Dolan acknowledges elsewhere, the disincentives are theoretically ambiguous. Yes, the UBI encourages work via the substitution effect – if you get paid more per hour after taxes, work is more attractive. But it also discourages work via the income effect – if you get more free money, work is less attractive.

Second, as I emphasize in the piece to which Dolan is responding, existing welfare states make it hard for prime-age, healthy, childless citizens to get free money. For the vast population in this category, a UBI is a clear addition to existing programs, because they’re currently ineligible for most existing programs.



Or, you might say, a UBI might be

fine for the poor, but wouldn’t it be unaffordable to give it to the

middle class and the rich as well? Yes, if you added it on top of all

the middle-class welfare and tax loopholes for the rich that we have

now. No, if the UBI replaced existing tax preferences and other programs

that we now lavish on middle- and upper-income households. Done properly, a UBI would streamline the entire system of federal taxes and transfers without any aggregate impact on the federal budget.



I urge the friends of UBI to click on the “Done properly” link. In it, Dolan crunches a lot of numbers to estimate the maximum feasible UBI if (a) taxes stay the same, and (b) we abolish a vast array of government programs. His answer: $4452 per person per year. I say this confirms the obvious: A UBI high enough to be politically appealing would be utterly unaffordable because it wastes so much money on the non-poor.





Classical liberals Not all of those with libertarian

sympathies are anarcho-capitalist purists. Many classical liberals, even

those whom purist libertarians lionize in other contexts, are more open

to the idea of a social safety net as a legitimate function of a limited government.

Indeed. But even moderate classical liberals have traditionally tempered this concession with elevated concern for scarcity, disincentives, desert, and long-run fiscal stability. Concern for scarcity makes them ask, “Shouldn’t we target anti-poverty resources on the very poor, instead of helping everyone?” Concern for disincentives makes them ask, “What about the UBI’s effect on prime-age, healthy, childless citizens?” Concern for desert makes them ask, “Shouldn’t we target anti-poverty resources on people who genuinely can’t help themselves, like children and the severely handicapped?” Concern for long-run fiscal stability makes them ask, “Shouldn’t we get our fiscal house in order before we contemplate massive new spending programs?” I’m not saying that libertarians should oppose the UBI because it’s inconsistent with anarcho-capitalism. I’m say that libertarians should oppose the UBI because it’s even more oblivious to our many well-founded reservations about the welfare state than the status quo.



Lifestyle libertarians The libertarian sympathies of still others arise from the conviction that all people should be able to live their lives

according to their own values, so long as they don’t interfere with the

right of others to do likewise. These lifestyle libertarians are drawn

to a UBI because of its contrast with the nanny state mentality that

characterizes current policies. Why should social programs treat married

couples differently from people living in unconventional communal

arrangements? Why should welfare recipients have to undergo intrusive

drug testing? Why should food stamps let you buy hamburger and feed it to your dog, but not buy dog food?

Simple: Because people on welfare are interfering with taxpayers’ right to live their lives according to their own values. It’s entirely appropriate, then, for taxpayers to impose conditions on (a) who gets the money, and (b) what they have to do to get it. This principle is widely accepted even for voluntary charity: If you want to sleep on my couch and eat my food, you have to follow my rules. This applies even more clearly for involuntary charity: If you’re living off my money without my consent, you have a grave responsibility to spend my money prudently and strive to become self-supporting.

Writing for Reason.com,

Matthew Feeney urges libertarians to stop arguing in principle against

the redistribution of wealth. Instead, he says, “scrap the welfare state

and give people free money.” Feeney sees a UBI as an alternative that

“promotes personal responsibility, reduces the humiliations associated

with the current system, and reduces administrative waste in

government.”

This neglects a middle path for libertarians: Arguing for limits on the redistribution of wealth. What kind of limits? “You shouldn’t get money unless you are absolutely poor through no fault of your own” isn’t just great place to start. It also has great intuitive appeal for non-libertarians.