I’m still on the same topic, but now with my philosophy hat on. Most Basic Income people who interacted with me over my last two posts seemed to be coming at it on the philosophical level rather than the economic level. Philosophy’s meant to be my job, so let me try to discuss it at that level.
I am told by people who know that one of the most complete and compelling arguments for an unconditional basic income (UBI) is still Philippe Van Parijs’s Real Freedom for All: What (If Anything) Can Justify Capitalism? The book is packed with careful arguments, and (like most libertarians) Van Parijs builds up his case from very basic principles. For now I’m only interested in one of his arguments, which occurs in the fourth chapter.
The argument concerns the legitimacy of taxing the incomes of people who work in order to pay a UBI to people who choose not to work. Because he is what he calls a ‘real libertarian’, Van Parijs refuses to make any value judgment concerning people’s decisions to work or not to work as such. But taxing workers to pay non-workers seems anything but neutral; it seems to reward those don’t work and punish those who do. Never mind the economic viability of removing the incentives for the very production that’s meant to supply the basic income. The arrangement seems unjustly skewed towards the interests of voluntary non-workers.
Van Parijs’ argument in reply is interesting. Before getting to it, let me point out that one of the good things about UBI advocates, in my view, is that they regularly challenge the principle, prominent in Marshall and standard in economics textbooks since then, that labour is a ‘bad’ and income is a ‘good’ – so that working for an income is paying a cost in order to reap a benefit. This may be true in many cases. But it seems a clumsy and inadequate way of thinking about paid work in general. Van Parijs proposes, instead, to think of jobs as assets. They are things that people want, even if they don’t exactly enjoy them. They also yield an income stream. Whether or not these two features are connected may differ from case to case. This seems relatively loyal to the excellent definition Dr. Johnson gave of ‘job’, namely: ‘a low mean piddling lucrative busy affair.’
To the argument: Van Parijs imagines a ‘Walrasian world’, in which an unemployment equilibrium is impossible and labour markets always (eventually) clear. He also imagines that everybody has equal capacities and that all work pays the same. In this world, competition in the labour market drives wages to the point where supply equals demand. In other words everybody willing to work for the market wage does so. Jobs at the market wage can’t be regarded as scarce: anybody who wants one gets one. There is no involuntary unemployment – that old bugbear of post-classical economics.
In the real world, of course, we know that there is involuntary unemployment, in the sense that there are people who are willing and able to work for the going wage and yet can’t get hired. Why is that? Van Parijs favours the various offerings from mainstream economics: wage-control by unions, the ‘insider-outsider’ theory, the ‘efficiency wage’ theory, and so on. The upshot is that wages are held up above the market-clearing rate. Instead of falling to the point where the demand for labour equals the supply, wages are held up at a point where supply exceeds demand. Lots of people are willing and able to work at the going rate; there just aren’t enough jobs around.
Van Parijs regards the difference between the actual wage and the market clearing wage as a kind of economic rent; he calls it ‘employment rent’. As with rent on land, those who collect it aren’t really entitled to it, since they’re just the lucky ones who happened to get to the scarce jobs first. Those who want work and can’t find it are being excluded by no fault of their own. And if they weren’t excluded, the wages of those in work would be lower by the full amount of the employment rent. Thus it seems just to tax away the employment rent and share it out among those who missed out on the scarce jobs. One way of doing so would be to pay it out as (at least part of) an unconditional basic income.
One apparent downside of this strategy is that those who want work and can’t find it do no better than those who wouldn’t take work even if it was offered to them. The latter are happy to free-ride on the system, yet they get the same handout as those who want to work but can’t find a job. But Van Parijs argues that this is no injustice. Voluntary non-workers have made it possible for workers to earn their wages by leaving the scarce jobs available to them. Involuntary non-workers have done the same, though not by choice. Non-workers of both types have made the same contribution to workers in leaving scarce assets available to them. To give preference to those non-workers who would, given the chance, take some of those scarce assets for themselves is simply to reward people for having expensive tastes: stronger preferences for a scarce asset.
For the same reason, Van Parijs rejects proposals to deal with the scarcity of jobs through forced job-sharing arrangements, or through using the revenue from the tax on employment rent to subsidise companies to hire more workers. In both cases the benefits go only to those willing to work. But, again, those who have chosen not to work have made their contribution too; they’ve left valuable, scarce job assets available for others to use.
Given the relevant assumptions, I find this argument relatively compelling. Stuart White suggests that sharing out employment rents to people who choose not to work might violate what he calls the ‘reciprocity principle’ – roughly, the principle that one shouldn’t benefit from society unless one has made a reasonable effort to contribute to society. But this strikes me as question begging; Van Parijs’ point is that people who choose not to work are contributing to society by leaving scarce jobs available to others. They are contributing in the same way that I am contributing to society by turning off the tap while I brush my teeth. The fact that the voluntary non-worker doesn’t want the jobs she leaves available seems no more relevant to the value of her contribution than the fact that I don’t want the water I run pointlessly down the sink.
Still, there is a major weak spot in Van Parijs’ argument. All the proposals he considers are proposals to partly expropriate the job-rentiers. But, as Keynes argued, rentiers should be euthanized rather than expropriated. Stop the rents from existing in the first place by stopping jobs from being scarce.
Van Parijs, enclosed within mainstream economics, is incapable of seeing this possibility. For him, the market simply fails to provide us with a Walrasian world, for a number of somewhat mysterious reasons. From an MMT perspective the matter is simpler. There is unemployment because the state creates it. It imposes a tax liability on its citizens; they now seek a way to earn the monetary unit of account. Being in search of a way to earn money is the definition of unemployment. The state, and only the state, can remove the unemployment by issuing the monetary units it demands for tax payments and making sure that all those who require them are able to earn them. For reasons best explained by others (try here), the best way to do that is with a job guarantee.
The problem with Van Parijs’ argument, in my view, is that he approaches the problem from the wrong angle. He thinks of job scarcity as a market-generated illness, with UBI as the best means of treatment the state is capable of offering. The MMT perspective suggests that the state doesn’t need to treat the illness; rather, it shouldn’t infect the economy with it to begin with.