As the 2020 election approaches, we’ll probably hear more about the idea of “universal basic income” from politicians. And it can sound tempting for two main reasons. Reason 1: Free money! Yay! Reason 2: Technological innovations will put people out of their jobs, whatever will we do?! (Answer: Free money! Yay!) (And perhaps Reason 3: I can show compassion towards the less fortunate without having to do anything but vote! Wow, that feels good!)
But it won’t work.
My viewpoint is this: What is money? What does it mean, what does it represent? Ultimately it represents a person’s labor1, another person’s value of that labor. (A product you buy or don’t buy is the product of people’s labor. Even if it was made in a factory. Even if that labor was in the past. That’s really what you’re paying for.) Its value is not arbitrary. It is completely psychological, and collectively psychological at that. It is determined by the countless economic exchanges people make everyday. What is a dollar worth? It’s worth whatever the holder of that dollar is willing to exchange it for, and what someone else is willing to trade to get it.
In other words: THE VALUE OF MONEY IS DEPENDENT ON ITS DISTRIBUTION. Its value cannot be dictated by some authority other than the countless economic exchange decisions people make, because the worth of a man’s labor cannot be dictated by some authority. You can’t just redistribute it with no associated exchange of labor (abstract as that may be) and expect it to retain its value.
This is the biggest and most dangerous flaw of logic so many people seem to make, thinking that money could forcibly (that is, through governmental force rather than organic economic incentive) be exchanged and retain its value. Why / how would it retain its value?!
So when money is exchanged without any associated exchange of labor, as would be the case with universal basic income, you break the game. You devalue money. It logically doesn’t work because the money no longer represents an exchange of labor (or anything at all for that matter). This means the money won’t be spent as though it is. This means the “worth” of whatever the person buys with their “free money” is warped for everyone. Ultimately you just get a rampant cycle of inflation along with the devaluation of needed labor.
This is also why minimum wage sets “by force” (law) doesn’t work2, at least not long term; because wages are not then economically organic, and you actively incentivize businesses to innovate and replace the now costly employees or go out of business. The idea that the wealthy CEOs at the top will just shrug and swallow the loss and devalue their own work is ludicrous. The idea that shareholders of profitable companies will just snap their fingers and say “ah, shucky darns!” and devalue their own investments is ludicrous.
Also note that this has nothing to do with tax (“we can tax production instead of income!”) or issues of “so where does all this free money from?!”3 It doesn’t matter. It’s the act itself that’s the problem, the act of giving people money for nothing. The exchange is meaningless and so the money is meaningless, and so every economic exchange that ripples from the spending of that free money is devalued.
Granted, it’s difficult (if not impossible) to measure this devaluation, as it’s purely psychological4. But that shouldn’t be controversial, because the value of money itself is purely psychological to begin with.
I also thought the video below was an interesting perspective. Jordan Peterson comes at it from a more personal psychological point of view. He says that the idea of “universal basic income” tries to rectify the wrong problem. The problem is not that people lack money, he says, but that they lack purpose. A person without concrete purpose will waste their money, essentially, so it doesn’t solve their problem. “Provision of money without purpose is not helpful.” Money without meaning will do more to hurt an individual than help. “You don’t want no responsibility,” he says.
Makes sense. And so I think he sees the other side of the same coin. Money is psychological. Unearned money is not spent like earned money. This creates both personal and economic problems.
Of course, economic problems already exist. Social security, welfare, government bail-outs, spending waste, national debt, forced insurance (healthcare!). They devalue money (or labor) in one sense or another. But the system doesn’t bear these “cheats” because they somehow actually work, the system works despite them. It can be like saying, well, the camel is still standing, what’s another little piece of straw? Aside from already not moving as fast as he could, the camel is doomed to collapse if you keep adding weight to his back; that he hasn’t collapsed yet is not somehow evidence that he will never do so, especially when history is full of the graves of crushed camels (that is, socialist nations). And universal basic income would not be another little piece of straw, it would be boulder.