29 Aug 2017

Review: In Our Hands

Charles Murray wrote this short, clear book in 2006 [free PDF], and I downloaded it to see what a "libertarian conservative" (he thinks many government welfare programs are ineffective) had to say about basic income. (Guy Standing, an intellectual on the left, has just released a new book in favor of basic income.)

Right off the bat, Murray is different from Standing et al., since Murray would only provide basic income to people "poor enough" to qualify (up to roughly $30,000 per year of income in the US), as he sees the main goal of a BI as a replacement for ineffective programs run by myopic bureaucrats. Standing and others (including me) support a Universal Basic Income (UBI) that goes to everyone (I prefer citizens over 18 years old, but that's a side debate), regardless of their earnings.

The benefit of UBI over BI is simplicity and reliability, as there's no need to keep any records of earnings nor fear of losing BI due to a change in circumstances. Murray might concede this advantage because he spends a lot of time trying to explain (and justify) the removal of BI as people earn more. I think he tries to defend that choice as a means of preventing sloth (more below) and making the system "affordable," but I think he's mistaken on the latter, as there's no difference between a UBI that gives $10k to a rich person whose gross contribution is $90k (thus $80k net) and charging that person $80k because you know how much they make. It's much easier to give UBI to everyone and then pay for the program by taxing wealth or pollutants (such as GHGs).

(Murray assumes the current tax system would be used to fund BI, but he misses a great opportunity to switch from income taxes -- which discourage work and are hard to track -- to property taxes that would still be progressive but are easier to implement. Such a switch would actually affect rich people, so it may be impossible in countries where the rich control politics.)

Turning back to thresholds and earnings, Murray is eloquent in his defense of BI as a means of helping people choose jobs that better match their skills (rather than those that pay more) as well as how BI -- by ending many government welfare programs -- would allow civil society to step back into its role of taking care of the needy, a role that was crushed by the massive expansion of US programs in the 1930s and much of Europe after World War II. That said, Murray and others such as John Cochrane worry that people who have "no reason to work" will form a permanent, unproductive underclass. Although I see the potential for such abuse, I think they would be trivial (just as the "Welfare Queen" that Reagan complained about was a one-in-a-million scammer). Although we may never agree on whether free money will create more problems than it solves, the current wave of (U)BI pilot projects will help us understand whether it enables or undermines human flourishing.

Now, back to the book. Part I describes The Framework, i.e., design, eligibility and funding in two short chapters. Part II discusses Immediate Effects on retirement, health care, poverty, the underclass and working (dis)incentives. Part III covers The Larger Purpose, i.e., the pursuit of happiness, vocation, marriage and community. The book concludes with some useful appendices where Murray goes over the details of how his BI proposal might affect US Government finances.

In Part II, Murray presents the debate for and against paternalism with respect to retirement and health care, stating his support in favor of people's freedom to manage their retirement options (with a risk that they may go bankrupt) while endorsing mandatory payments towards health services/insurance. Regarding retirement, Murray follows the classical libertarian guideline of trusting people to look after themselves better than bureaucrats, while allowing for their ultimate safety via a means-tested BI. On health care, he sees mandatory health care payments as necessary to protect people from uninsured risk but also as a means of using consumer choice to increase competition and efficiency. I agree with both of these positions.

In the next three chapters, he talks mostly about how BI will make it easier for "the poor" to change their lives (and neighborhoods), take responsibility for their actions (absentee dads can't claims they have no money to support their kids), and look for work without fear of losing unemployment insurance immediately. I also agree with most of this discussion, but I think UBI is superior because it's easier to administer and admits citizens based on their membership in a society ("American") instead of a class ("BI poor").

John Cochrane thinks that we should make it hard for people to collect BI to save money. I think we should make it easy to collect UBI, as a means of helping the least able get a break. (It's widely known that the wealthy are much better at collecting "their due" -- as Mr Trump implied with his "I'm smart" response to the observation that he pays no income taxes.)

In Part III, Murray attacks the "Europe Syndrome" of short working hours, unwedded relationships and a collapse of church going, which "explains why Western Europe has become a continent with neither dreams of greatness nor the means to reacquire greatness" (page 86). I repeat this groundless  critique to set up Murray's "three active raw materials for the pursuit of happiness... intimate relationships with other human beings, vocation, and self-respect" (page 90). I don't know about your experience of Europe versus the US, but I can surely say that I see a lot of intimacy, vocation and self respect in the Netherlands, most of northern Europe, and many other places in southern and eastern Europe. Indeed, Murray seems to be living in a Fox-news-inspired bubble of life over here:
Europe is especially useful as the canary in this part of the coal mine. Government regulation has made the costs of hiring an employee so high, and made it so hard to dismiss an employee, that the European labor market has become rigid. New jobs are scarce, and long-term unemployment is high. So an employee who has a job he hates nonetheless will tend to keep it rather than quit and look for a better one. European peasants used to be tied to the land. In this new version of serfdom, European workers are tied to their jobs. A major strength of the American economy is its history of high labor mobility. (page 96)
These sentiments are more cliché than true when you factor in two-tiered labor contracts in Europe, the value of job security to employees (and banks!), and higher minimum wages (vs employment at will and $2.13/hour for restaurant workers in the US), and how Europeans can work in 28 (soon to be 27!) countries. From the US perspective, Murray needs to look further into "occupational licensing" (a libertarian bugbear), the concentration of market power in larger firms, and how mortgage debt and fear of losing heath insurance have reduced mobility for American workers. Perhaps he was accurate in 2006, but not today, where the US is in 16th place in terms of employment rates, at 70 percent of the potential workforce.



Putting aside his ill-informed beliefs about Europe, Murray is right to focus on happiness via relationships (choice of partners and friends), self-respect (freedom to work in low wage but interesting jobs) and community (working with neighbors rather then living with state interventions).  BI (or better, UBI) could increase happiness without disrupting US or EU culture.

So why don't we have (U)BI? Murray and I agree that politicians like spending other people's money on programs they design and control. Besides inviting corruption, such hubris is also doomed to fail in the face of our individual and collective diversity, which is why UBI (or "selfie-welfare") is so much more promising as a way of letting people best help themselves.

Murray is perhaps most eloquent and passionate when he turns to the power and value of community in giving us support and identity, and he is right to point out how the centralization and growth of the US Federal Government in the 1930s under FDR really undermined the power of one of America's best institutions -- the voluntary association, as memorably described by De Tocqueville (1835):
Americans of all ages, all stations in life, and all types of dispositions are forever forming associations. There are not only commercial and industrial associations in which all take part, but others of a thousand different types—religious, moral, serious, futile, very general and very limited, immensely large and very minute. Americans combine to give fêtes, found seminaries, build churches, distribute books, and send missionaries to the antipodes. Hospitals, prisons, and schools take place in that way. Finally, if they want to proclaim a truth or propagate some feeling by the encouragement of a great example, they form an association. In every case, at the head of any new undertaking, where in France you would find the government or in England some territorial magnate, in the United States you are sure to find an association.
And what could undermine these associations? Murray quotes De Tocqueville again, who had indeed seen the danger of intervention by a (well meaning?) state:
A government could take the place of some of the largest associations in America, and some particular states of the Union have already attempted that. But what political power could ever carry on the vast multitude of lesser undertakings which associations daily enable American citizens to control?... The more government takes the place of associations, the more will individuals lose the idea of forming associations and need the government to come to their help. That is a vicious circle of cause and effect.
I can't help by agree with Murray's point here, just as I see UBI as a convenient way to protect the safety net that most of us take for granted while encouraging people to re-engage with their communities that can -- and should -- find local solutions to suit their local problems.

Returning back to the politicians who are most likely to oppose UBI,* I think that UBI offers an opportunity to break the ideology- and corruption-fueled deadlock of Washington DC that is turning the US into "the sick man of the developed world." If all Americans agree that Congress is a mess (20 percent approve; 74 percent disapprove), then perhaps it's time to stop fighting for control of Congress (and further wreckage) and start fighting to take power from Congress. UBI would hit them where it hurts -- their corruption-prone laws, regulations and give-aways.

Bottom Line I give this book FOUR STARS for its clear and thoughtful exploration of Basic Income. Read it, and then decide on what (U)BI would work for you and your community. It's time.

* I mentioned an idea to "empower" students at my school by giving them more choice on how their funds were spent on their behalf by (our version of) the student council, but both councilors who I approached disliked the idea "as it would leave us with less money to manage, so we don't think they know how to spend the money."

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