UBI and principles

Sam Altman of Y Combinator wants universal basic income (UBI). UBI is a policy where the government hands out money to people unconditionally.

Altman explains what problem he is trying to solve in an interview:

Spectacle: So the idea is that basic income is an answer. But what’s the question that it’s trying to answer?
Sam Altman: The question I’m interested in: How do we unlock maximum human potential? I think resources are distributed incredibly unequally around world. Obviously, there are a lot of people who could do great things that would benefit all of us. Create art, start companies and yet they can’t. I think 50 years from now it will look pretty ridiculous that we motivated people by fear of not being able to eat, not having a place to sleep, to work in jobs they hate for bosses they hate, or not do what they really wanted.
I think YC was an example that I saw firsthand of something like a basic income that allowed people to pursue what they wanted to pursue. Airbnb and Reddit would not exist had they not gotten basic income from YC.
One thing I didn’t realize at the time, but now I do looking back, is that Y Combinator itself is very much like a basic income. When I went through YC, $12,000 got invested in my company. We used that to live on. Buy some servers, do some projects, but mostly to live on. And everybody else got that as well. Some people totally fail. But some people create companies that they never otherwise would’ve been able to start.

He then talks about UBI having a branding problem of being associated with socialism and handouts:

Spectacle: There’s a huge branding problem—especially in the U.S.—of people who will basically say, “These are handouts.”

Sam: “This is socialism…”

Spectacle: Yeah, how do you change their minds?

Sam: What I would propose is a model like a company where you get a share in U.S. Inc. And then, instead of getting a fixed fee, you get a percentage of the GDP every year. As the whole country does better, you do better. I think that is how you align everybody. That message you can get a lot of people behind, even people who traditionally hate welfare, hate socialism.

Spectacle: Profit sharing in the United States?

Sam: Some version of that.

People often have trouble dealing with government policy issues, like UBI. Some people may get more money from UBI and have more stuff at least in the short term. Some of the gainers may be poor and UBI might improve what they can buy a lot. You might expect government deficits to go up or something like that. But who is to say whether all these effects balance out or tend to favour one side or the other?

Worse, lots of unpredictable stuff will happen. People will invent all sorts of clever ways to get as much money out of this system as possible. People will also adapt to whatever the means the government uses to finance UBI.

Faced with all this complexity, people tend to say that these issues should be sorted out by experiments, but this is a bad idea. If you can’t sort out the merits of some complicated set of possible effects of a policy, an experiment will have no clear results. And if there are a load of unanticipated results how are those supposed to be judged good or bad except by whim after the experiment? When somebody sez we need to decide a policy by experiment you should translate that to the following. “I have no argument that could explain to you why you should adopt this policy. But if you try it and people come to depend on it, then I may be able to blackmail you into keeping it, so I want to run an experiment.”

The best way to sort out issues like this is to understand them in terms of principles, not by doing “experiments”. A principle is a guideline about what you shouldn’t do and why you shouldn’t do it. A principle can be clearly understood and criticised and replaced if it is no good. A principle can also help you work out effects of a policy you wouldn’t expect without the principle.

The relevant principle in this case is private property rights. Property should only be transferred between people as a result of a voluntary agreement. If a transfer takes place without such an agreement you have the right to take property from the thief without his consent. If you do transfers without voluntary agreements, then you’re ignoring objections to the transfer, which is irrational.

How will UBI be provided? There are two ways it could be provided. (1) The government could take money from some people and give it to other people. (2) The government could print money or issue credit.

Both (1) and (2) involve taking resources from people by threatening them with force.

In case (1) if you refuse to give the government the money then the government will try to take more money from you (fines), or try to put you in prison and if you resist by force then the government may kill you. If you try to avoid prosecution in the courts, that will cost you a lot of money and your defence may fail even if you haven’t broken the law. So if the government comes after you, the best case scenario is you lose a load of money and property.

In case (2) the value of money will decline relative to other goods, so you may want to use some other medium of exchange that retains its value. You can’t refuse to take government money in settlement of a debt because of legal tender laws.

Whether governments would prosecute people who make their own money is unclear. The US government prosecuted Bernard vonNothaus for minting his own money saying that it could be mistaken for US dollars. Governments haven’t decided to prosecute bitcoin users so far. Bitcoin changes value a lot and I suspect lots of bitcoin owners are speculating that it will rise in value. Most people will not put much of their assets in bitcoin partly because they don’t know much about it and don’t understand it. I suspect governments don’t see bitcoin as a serious threat so they aren’t pursuing those who trade it in any serious way. Bitcoin transactions can often be tracked to the people who made them, so if governments decide bitcoin is a threat they could go after many users.

Western governments provide some useful services with the money they take, like police, courts, roads and national defence. They also hold elections in which the current government can be thrown out of power. So governments aren’t completely useless and have some means of correcting errors. But governments still take money from people without their consent. We shouldn’t want reform in the direction of government doing more stuff.

So UBI involves taking money from people by force and giving it to other people. UBI is a violation of property rights and should be opposed.

Let’s be a bit more specific about what’s bad about UBI. The people who are net donors to UBI are more productive than those who are net receivers. Taking stuff from the donors may prevent them from undertaking productive activities. It will also make the donor’s life worse cuz he will have fewer options. So UBI punishes competence and prevents some improvements in how stuff is produced.

The recipients are also harmed by UBI. A person can’t have stuff that isn’t produced, so the production-preventing aspects of UBI mean there is less stuff the recipient could have. Also, a person who is short of money in a free market is bad at making decisions. Hiding his incompetence from him by giving him money taken from other people by force will stop him from realising he should change his ways. If he had to rely on people privately giving him charity he might get some advice and help on how to be more productive. Since people in government get money through threats of violence, they are generally not going to be able to give good advice on how to be more productive. Another problem: since UBI is not given out by any rational standards, there is no reason why the government should continue to give the money. So recipients are making their lives dependent on totally arbitrary whims of government officials.

There is another side to principles. You can ask what principles a policy endorses and then see if they are any good. UBI involves taking money from some people by force and giving it to others. So UBI endorses the principle that hurting people who have done nothing wrong to help others is good and necessary. This is the same as the principle behind other government redistribution schemes. So if you want to understand the principle properly, it’s useful to look at the societies in which it has been taken most seriously. It helps explain the state of Soviet Russia, North Korea, Venezuela etc. This principle pits people against one another in a bitter war for survival. Not a metaphorical war, but an actual war involving guns and bombs and destruction of property and murder. UBI is not just an isolated vague fuzzy warm idea. UBI entails an evil and destructive view of the world and should be rejected as evil garbage.