This essay was originally published on Basic Income News in August 2014.
The right-libertarian journal, Cato Unbound, has published a 4-party debate on Basic Income Guarantee (BIG) this month. Matt Zwolinski started it off with a second-best or pragmatic argument for BIG. He doesn’t say outright that BIG is better than many right-libertarians most favored policy of eliminating of all redistribution of property, but he argues that BIG is far superior to the complex and inefficient system that characterizes the current welfare system.
Manzi’s response stems from standard for the property-rights-with-no-exceptions version of libertarianism. In a nutshell, BIG would probably reduce how much propertyless people work for people with property; therefore, necessarily, it is bad. He dismisses Zwolinki’s argument that work disincentives can be a good thing by labeling it “subjective” and “value-laden,” without noting that a subjective and value-laden argument can only be countered by another subjective and value-laden argument, which he does not offer. He just assumes any and all work disincentives are bad. So, he doesn’t actually lay a glove on Zwolinski’s argument.
The closest he comes to explain the values that led him to the belief that all work disincentives are bad is to say that BIG has always been unpopular in the United States. Yet, to say something is unpopular is not say whether it is a good or bad thing. It doesn’t say whether we should try to change people’s minds about it. At any time in American history up until five or maybe ten years ago, he could have made the same argument against same-sex marriage. Now it’s popular; thanks to people worked hard to change other people’s minds. Is BIG or anything else worthy of a similar effort? Manzi implies that nothing that is currently unpopular is ever worth the effort to change people’s minds.
Manzi mentions my article, “A Failure to Communicate: What (If Anything) Can we Learn From the Negative Income Tax Experiments,” but doesn’t actually engage with its arguments about work disincentives. One argument is that any decline in work effort would—by standard theory—cause an increase in wages partly counteracting the decline in work effort and further increasing the incomes of the working poor—presumably the people a BIG is supposed to help.
Another argument in that article is that the “decline” in work effort was only relative—the experimental group vs. control group. But the experiments also found whether people were in the experimental or control group was not the primary causal factor determining whether they worked or not. The macroeconomic health of the economy was more important in determining how much a person worked than whether or not they received a BIG. Therefore, the experiments indicated that if you have a strong macroeconomy, you can have both BIG andhigh employment. People who received a negative income tax took more time to find the right job, but in all the experiments, if good jobs were available, people took them. If you want propertyless people to work for the owners of property whether or not jobs pay decent wages or provide good working conditions, then the absence of BIG or anything like it is what you should favor. If you want all jobs to be good jobs, BIG is the policy to favor.
Cato Unbound
Another of the main arguments in my article was that, without foundation, many people responded to the evidence of a relative decline in work effort by making a subjective and value-laden assumption that all reductions in work effort are necessarily a bad thing. Manzi makes that very assumption and does not explain—much less defend—the subjecctive foundations underlying his assumption.
It’s what he leaves out, what he doesn’t call attention to, that is the real problem in Manzi’s article. Typical of some brands of right-libertarianism, it’s from a tradition of newspeak. He’s for slavery and he calls it freedom. It’s perhaps unfair to hang all of the rest of what I have to say on Manzi, but it is a common position running throughout a great deal of right-libertarian literature from Nozick and Rothbard and many, many others. Manzi’s essay, by the absence of its foundations, is a good example of how successfully this argument has become taken for granted—not just among right-libertarians but in mainstream political dialogue.
In the rights-based libertarian tradition, a situation in which one group of people has no other option but to work for another group of people is called “freedom” as long as that other group of people are called “property owners” and the working class is propertyless. I call it slavery, but to right-libertarians the opposite is slavery. Any redistribution to relieve people from forced work is supposedly reduces freedom; it’s even “on par with forced labor,” in Nozick’s words. If property owners give jobs or charity to the propertyless, that’s “voluntary” and consistent with freedom, but if the government taxes and redistributes property that’s “force,” “coercion,” and “interference” which supposedly violates negative freedom.
How did these propertyless people get into the position in which they have to work for the propertied? Over a long history, property owners use the force of the legal system to force, coerce, or interfere with other people, establishing “property rights” without the consent of or compensation for the people they thereby force into a state of propertyless. Before property rights, all were free from interference to use the resources of the Earth as they wished; under the type of property rights we have today and under the ideals envisioned by right-libertarians, “property owners” are free to interfere with any use the propertyless might make of the Earth’s resources. When everything is owned by someone else, the propertyless lose so much liberty that they’re unfree to work for themselves. They’re effectively born in debt, owning their labor to the to at least one member of the group that owns property. They face interference with anything in the world they might do for themselves unless and until they accept a subordinate position to a property owner? Doesn’t that make them unfree in the most negative sense of the term?
Right-libertarians usually get around this question by definitional fiat. The interference the rich do to the poor, when they say “We own the Earth and you don’t,” simply doesn’t count. It’s not interference because it doesn’t violate your rights. You have no right to the land; therefore, you have no right to be free from laboring for the people who do, and so we don’t even call it a loss freedom when use the force of the legal system to maintain that situation. The poor are always born in debt, every generation owing their labor to the propertied group, but that doesn’t make them “unfree” because they have no right to be free from being born into debt. I hope this makes my allegation of right-libertarian “newspeak” clear.
Of course, right-libertarians tell us that they defend property rights because they believe in freedom. Now we see that they’re simply defining freedom as the defense of the property rights system they want to see. This is why I think it is fair to use to term tautological libertarianism to describe versions of it that simply define freedom as the freedom do what you have the right to do. They argue we must have libertarian property rights so we can be free, but libertarian freedom turns out to be defined as nothing but the exercise of property rights so defined. Or they argue that we must define property rights this way so that people can be free. And around and around the logical circle we go. Not all libertarians (or even all right-libertarians) take the tautological shortcut, but far too many of them do. A circular argument can appear very powerful if you don’t reveal the whole circle at once. One paper argues this: we must have the definition of property rights because freedom is important. Another paper argues this: we must have this definition of freedom because property rights are important. If you show only one argument at a time, it appears powerful. You put both arguments together, and you have no argument at all. The less of the logic you see, the more powerful the argument appears to be.
You would need a powerful argument to explain why interfering with the propertyless in such a way as to put them effectively in debt to the upper class simply doesn’t count as a violation of freedom. And such an argument could only be subjective and value laden. But if the treatment of property ownership as synonymous with freedom is pervasive enough, you never have to make that argument. You can take it for granted.
Manzi expects his readers to take that kind of argument—or some other subjective and value laden argument—for granted when he assumes that any reduction in the number of hours the propertyless are forced to work for the propertied group is necessarily a bad thing. That’s slavery caused by the application of force, interfering with negative freedom of individuals to do things for themselves. He can call it freedom if he wants, but it’s still slavery.
-Karl Widerquist, Virginia Beach, VA (revised Roanoke, VA), August, 2014
The basic income is known for cutting across ideological lines. Libertarians, who have had a long history supporting the basic income, are also giving the idea a fresh look as a way to replace the current welfare system.
Many libertarians, though, remain skeptical of whether a Universal Basic Income (UBI) is in line with libertarian ethics, and other libertarians believe it would cause economic damage.
Daniel Eth, a PhD student at UCLA studying computational nanotechnology, argued in Thinking of Utils that strict libertarianism, particularly without UBI, “enables oppressive systems to emerge, even when no one is acting in bad faith and all agreements are consensual.”
Eth joined the UBI Podcast to discuss the problems of libertarianism that does not endorse basic income.
One of the primary issues with strict libertarianism, Eth argued, is that without a social safety net, workers are not truly volunteering for work, because they are agreeing to work simply to survive.
“There is an uneven power dynamic and that contracts are almost inherently exploitative, at least for those that are living hand to mouth,” Eth said.
At least with a basic income system in place, Eth said, the workers could decide to walk away from unreasonable working conditions.
“if a basic income is large enough to satisfy people’s basic needs, it goes a long way to correcting for that (power dynamic),” he said.
One area of agreement between Eth and libertarians is that market-based solutions “tend to be much more effective than the alternative of central planning.”
That is to say, without appropriate taxes to account for things like pollution, then the market outcome will not reflect these costs to society and the environment.
From this framework, Eth said something like a carbon tax would be a “great way to pay” for a basic income because it would account for pollution, but also allow the market to solve.
“The market is almost like an algorithm, like what a computer might use to solve a problem and I think it tends to be better at finding solutions than central planning. But you have to ask it the right question. You have to make sure you are solving the problem you want to solve,” Eth said.
Book review of “Libertarianism without inequality,” by Michael Otsuka14th February 2005, Oxford University Press, 2003, 158 pages
Review by Karl Widerquist, originally published in the Citizens Income Newsletter, 14th February 2005
According to the dust jacket, “Michael Otsuka sets out to vindicate left-libertarianism, a political philosophy which combines stringent rights of control over one’s own mind, body, and life with egalitarian rights of ownership of the world.” In so doing, he creates a political philosophy more true to the ideal of self-ownership than libertarian philosophers such as Robert Nozick, and more true to the idea of society as a voluntary association than liberal egalitarian philosophers such as John Rawls. Otsuka reconsiders self-ownership and the “Lockean proviso” on which much of Nozick’s argument against the redistribution of property rests. He presents his work as a revision of Locke, but one that is true to the voluntary spirit of Locke’s treatise.
Otsuka defines “robust self-ownership” as “in addition to having the libertarian right itself, one also has rights over enough worldly resources to ensure that one will not be forced by necessity to come to the assistance of others in a manner involving the sacrifice of one’s life, limb, or labour”. Nozick does not consider robust self-ownership and seems willing to sacrifice it to preserve nominal self-ownership and unrestricted rights of property ownership. He, therefore, ends up with a world in which people are much less free than Otsuka’s society.
Locke, like many other philosophers, begins with the recognition that all people have equal claim to the land and resources of the world, and argues that individuals can appropriate portions of it as long as they leave “enough and as good” for everyone else. If one interprets this to mean that others are no worse off than they would be in a primitive state of nature, the proviso allows great inequalities to result from the appropriation of land. But Otsuka defines an “egalitarian proviso” to mean that one can only appropriate resources if they leave others with the ability to acquire an equally advantageous share. Such a rule might allow inequalities, but none that follow from control of resources outside of one’s own mind and body.
By basing his theory of government on the principles of robust libertarian self-ownership and the egalitarian Lockean proviso, Otsuka seeks to create a society in which all people give their actual consent to the political society in which they live, not the weak tacit consent offered by Locke nor the hypothetical consent offered by Rawls. Otsuka goes on to apply his theory to issues such as the right to punish and intergenerational equity. However, the distributive implications of these two principles will be of most interest to readers of the Citizen’s Income Newsletter.
Otsuka does not discuss what practical policy would be needed to ensure that these two principles are upheld in a modern society, and he does not discuss basic income at all. He sticks instead to the hypothetical model of an agrarian society in which these principles can be attained by granting plots of land. However, a very good case for basic income could be made using these two principles. The egalitarian proviso justifies a large amount of redistribution from the wealthy to the poor, and the principle of robust libertarian self-ownership implies that redistribution should come in the form of an unconditional grant large enough to cover one’s basic needs. What policy could do this other than basic income?
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An early version of a book, Alaska’s Permanent Fund Dividend: Examining its Suitability as a Model, is now available for free download on my personal website. A summary, from the first chapter of the book (2012), is reprinted below. If you want to cite or quote it, please see the published version:
Every year, every Alaskan gets paid. Every man, woman, and child receives a dividend as a joint owner of Alaska’s oil reserves. Alaskans are free to use this money as they wish with some potentially putting it towards a home improvement project. After all, if your looking for metal buildings Alaska is your place to find them. In 1956, Alaska ratified a constitution recognizing joint ownership of unoccupied land and natural resources. In 1967, North America’s largest oil reserve was discovered in publicly owned areas on Alaska’s North Slope. In 1976, the state government voted to dedicate a part of its yearly oil revenues to a state investment fund, called the Alaska Permanent Fund (APF). In 1982, the state government voted to distribute part of the returns from that fund as a yearly dividend, called the Permanent Fund Dividend (PFD), sometimes called “the Alaska Dividend.” In 2008, the dividend reached a high of $3269,[1] which comes to $16,345 for a family of five. More often in recent years, the PFD has been between $1000 and $1500 per person, which comes to between $5000 and $7500 for a family of five.
Karl Widerquist (left) Michael W. Howard (right)
The Alaska Dividend is one of the most popular government programs in the United States. It has helped Alaska attain the highest economic equality of any state in the United States. It has coexisted with, and possibly contributed to, the state’s growing and prosperous economy. And, seemingly unnoticed, it has provided unconditional cash assistance to needy Alaskans at a time when most states have scaled back aid and increased conditionality.
The Alaska fund and accompanying dividend seems to be a model worthy of imitation and adaptation. This book examines whether and how the Alaska Dividend is a model that can and should be imitated and adapted for circumstances elsewhere. It is an “edited volume” with authors who differ in their level of enthusiasm for (or skepticism of) the Alaska model. But we believe that the evidence provided by this book shows that the combination of policies we call the Alaska model is worthy of examination by other states, nations, and regions.
What is the Alaska model?
The “Alaska model,” as we use the term here, does not refer to the whole of Alaskan state government policy, nor to even to the whole of its oil revenue policy. It refers only to elements in the combination of APF and PFD. Although the APF is the source of revenue for the PFD, the two are different programs created at different times by different kinds of legislation. The APF is a Sovereign Wealth Fund (SWF)-a pool of assets collectively owned by the members of a political community usually invested into interest-generating assets. It was established by a constitutional amendment that did not specify what was to be done with the returns to the fund. The PFD is the policy of devoting the APF’s returns to a dividend for all Alaskan citizen residents. It was created by a simple act of the state legislature. Many nations and regions have SWFs, but only Alaska’s SWF pays a regular dividend to citizens. Many nations and regions provide some form of cash benefits, but so far, only Alaska pays a regular cash dividend to all of its residents.[2] The APF and the accompanying PFD link a resource-revenue-management policy with a progressive social policy. As an SWF, the APF helps to ensure that the state will continue to benefit from its oil after its reserves are depleted. As a dividend, the PFD helps every single Alaskan make ends meet each year without a bureaucracy to judge them.
We call this unique combination the Alaska model. It consists of three elements: (1) resource-based revenue (2) put into an SWF or some other permanent endowment, (3) the returns of which are distributed as a cash payment to all citizens or all residents. The extent to which a policy has to contain all three of these elements to qualify as following the Alaska model is not so important. But we will discuss the importance of each of these elements separately.
(1) Resource revenue.
The argument for the Alaska Dividend is simple and powerful: the oil, by right, belongs to all Alaskans. The PFD is an efficient and effective way to ensure that every single Alaskan benefits from it. If that argument works for Alaska’s oil, why not Maine’s fisheries, South Africa’s diamonds, Hong Kong’s real estate, Oregon’s forests, America’s broadcast spectrum, or the world’s atmosphere? Governments have allowed private, for-profit exploitation of these and many more resources, claiming that we will all benefit from the jobs and economic activity they create. But do we? Does a homeless person in Denver benefit from the gold being mined in Colorado? Does a shanty dweller in Johannesburg benefit from the diamonds being mined in South Africa?
The PFD has made sure that every single Alaskan has benefited from the state’s oil industry. Whatever benefit they might or might not get from more jobs or increased economic activity, every Alaskan can point to the dividends they’ve received since 1982 and say, I got this benefit from the state’s decision to exploit its oil reserves. Not many other programs do that, but many more could.
The case for taxing natural resources is at least as good, and probably far better than the case for taxing any other source of wealth. Resource taxes have the benefit of discouraging overuse of scarce resources. If properly employed, they can be an important part of a green environmental management strategy, giving people the incentive to reduce their consumption of scarce resources to sustainable levels. Yet, few if any countries in the world employ resource taxes in this way. Resources are often given away by governments to individuals and corporations who sell them back to the public with value added, but the sellers capture not only the value they add but also the natural resource value along with it.
A resource tax is literally a user fee. Anyone who takes possession of a resource makes it unavailable for others. The tax represents a payment for the burden imposed on others. This justification for resource taxation is more closely associated with “left-libertarianism,” discussed in chapters of this volume by Ian Carter, Alanna Hartzok, and Gary Flomenhoff. But as we will argue in a later chapter resource taxes are also consistent with liberal-egalitarian, utilitarian, and other theories of justice.
Of course, not every country has as much oil as Alaska, but one of the key lessons of this book is that a country does not have to be “resource rich” to have a resource dividend based on the Alaska model. We make this argument fully in the final chapter of this book. Here we preview only a small part of that argument.
One reason we know that a country does not have to be resource rich to have a resource dividend is that every country and every region has valuable resources. Later chapters of this book will show that the total value of natural resources (including not only mining, fishing, and forestry but also land value, the broadcast spectrum, the atmosphere, etc.) is surprisingly high even in areas not thought of as being resource rich. Gary Flomenhoft (this volume) shows that even “resource poor” states, such as Vermont, can create a substantial resource dividend.
Another reason we know that a country does not have to be resource rich to have a resource dividend can be seen from what a small part of Alaska’s resource wealth actually goes to supporting the fund. Alaska has many valuable natural resources, but the APF is supported almost entirely by taxes on oil. These taxes are extremely low by international standards, and only about one-eighth of the state’s total oil revenue goes to supporting the APF. Thus only a tiny fraction of Alaska’s resource wealth is used to support the PFD.
(2) A permanent endowment
Alaska introduced the APF largely because Alaskans knew that oil drilling would provide a very large but temporary windfall. They wanted to extend the period in which that windfall would benefit Alaskans by putting some of it away into a permanent fund. The APF was one of the first SWFs. Today many resource-exporting nations have them. Some nations have funds more than 10 times the size of the APF.
We see the essence of the Alaska model as a strategy to make sure that the system functions as a permanent endowment, but an SWF is not the only mechanism that can do so. To some extent treating resource taxes as user frees does so on its own. Some resources are capable of producing a permanent stream of revenue from user fees. These include land, the broadcast spectrum, and renewable resources. Such resources do not need to put revenue into a fund to function as a permanent endowment, and the Alaska model can be employed with only the first and second elements. Other resources produce only temporary resource streams. No nation can produce oil forever. Pollution taxes will hopefully discourage pollution. For revenue from sources like these to produce a permanent endowment, a mechanism such as an SWF is necessary.
(3) A cash payment to all citizens
To some extent the dividend was a way to sell ordinary Alaskans on the idea of a permanent fund. But to some extent the motivation for the fund was to support the dividend. Some of the lawmakers who created these programs, particularly Governor Jay Hammond, were influenced by the movement for what is now known as a “basic income”-a small unconditional income for every citizen to help them meet their basic needs. At the time, the policy was best known as the “guaranteed income” or the “negative income tax.” It was widely discussed by policymakers in the United States in the 1960s and 1970s. Hammond had unsuccessfully proposed a similar policy on a local level when he was a mayor of Bristol Bay Borough, and he very much saw the APF as an opportunity to create a basic income.
Basic income is a widely discussed topic in the academic literature in social science and philosophy. Researchers have examined the political and economic feasibility of the idea, its likely effects, and the ethical arguments for and against it. The United States and Canadian governments have conducted five social science experiments to see how a very similar policy would work. The Indian government will soon begin its own experiment. Basic income comes and goes in political popularity. It has recently appeared on the political agenda in Germany. It has considerable grassroots support in southern Africa today, and the Brazilian government is officially committed to phasing it in, although no timetable for moving beyond the first stage of the phase-in has been set. It is currently popular with Green and left-leaning parties in Europe, but its support (much like the support of the Alaska Dividend) often cuts across party and left-right divides.
As we will see in later chapters, not everyone agrees about the extent to which the Alaska Dividend fits the definition of a basic income. Usually, a full basic income is defined as an unconditional income, large and regular enough to meet a person’s basic needs. The Alaska Dividend is neither regular in size nor large enough to meet a person’s basic needs. But it is regular in timing and unconditional. So, it constitutes only a partial, irregular basic income. But it is the only version of basic income currently in practice in the Western industrialized world.
We (the editors of this book and the authors of this chapter) became interested in the Alaska model because of our interest in basic income. We’re excited to see an idea-so controversial in theory-has proven to be effective and extremely popular in the one place it has been tried. The Alaska model shows not only how basic income works, but also how the unique attributes of the Alaska model can be designed to work well elsewhere. The Alaska model is not perfect, but it is a successful strategy on which to build something better.
Employing the Alaska Model
By endorsing the Alaska model, we do not mean that governments should replace everything they do with the combination of a resource taxes, fund and dividend. We mean only that they should examine it as a possible addition to their toolkit. It’s only being used by one government, but it has proven to be more popular and more effective than many things that governments all around the world are doing. Certainly, it’s a policy that other governments should take a look at.
A preview of the book
The three parts of this book evaluate the Alaska model and discuss whether and how it can be adapted for other areas.
Chapters in Part One provide the background necessary to evaluate the Alaska model. Cliff Groh and Greg Erickson examine the unlikely history of the APF and the PFD and explain how the two programs work in practice. Scott Goldsmith discusses the impact of the dividend on Alaska’s society and economy.
Chapters in Part Two examine the ethical and political case for using the Alaska model as a tool for social justice. Jim Bryan and Sarah Lamarche discuss the political consequences of linking natural resource wealth and basic income, and how this policy combination can serve justice for future generations. Ian Carter presents the resource dividend as a left-libertarian economic policy. Christopher Griffin discusses the PFD as a practical application of the theoretical idea of Stakeholding. Stakeholding is a variation of the universal, unconditional grant idea. It differs from basic income in being delivered as a large lump sum grant rather than as a steady flow of smaller payments. Almaz Zelleke criticizes the extent to which the Alaska model, structured as a resource dividend, can be thought of as the practical implementation of basic income or even a step toward it. Jurgen de Wispelaere and David Casassas argue that the Alaska model, as it stands, is of limited value in promoting Civic Republican objectives. Steve Winter criticizes the Alaska Dividend for making recipients complicit with the oil industry. In the final chapter of Part One, we (Widerquist and Howard) respond with a chapter addressing the concerns of the authors in this section, and a discussion of why the link between resource taxation and basic income is important for different theories of social justice.
Chapters in Part Three discuss empirical questions about how the Alaska model can be adapted to be used most effectively in other states, nations, and regions. Gary Flomenhoff provides a detailed empirical investigation of the resource tax revenue available in the state of Vermont. He finds that even the resource-poor state of Vermont can raise $2000 (and possibly much more) for each resident each year. Michael Howard looks at the cap-and-dividend approach to global warming as a version of the Alaska model applied to pollution control. Karl Widerquist proposes personalizing the Alaska model into what he calls “Citizens’ Capital Accounts.” Alanna Hartzok argues that any dividend program based on an SWF has a strong responsibility for socially responsible investing, and presents evidence the APF currently fails to live up to that goal. Michael A. Lewis addresses the issues of fund and risk management, which will be important if the Alaska model is to further economic security of recipients. Angela Cummine discusses whether other existing Sovereign Wealth Funds (particularly in the Middle East) should move toward an Alaska-style dividend. Greg Erickson and Cliff Groh discuss the challenges to the APF and PFD in Alaska today and the extent to which the model can be expanded and improved within Alaska.
In the concluding chapter, Howard and Widerquist respond to the concerns of authors in Part Three and discuss six lessons they take away from the Alaska experience.
[1] Including a one-time supplement of $1200 from that year’s state government budget surplus.
[2] Iran is currently in the process of phasing in a regular dividend.
Chapters in Part Two examine the ethical and political case for using the Alaska model as a tool for social justice. Jim Bryan and Sarah Lamarche discuss the political consequences of linking natural resource wealth and basic income, and how this policy combination can serve justice for future generations. Ian Carter presents the resource dividend as a left-libertarian economic policy. Christopher Griffin discusses the PFD as a practical application of the theoretical idea of Stakeholding. Stakeholding is a variation of the universal, unconditional grant idea. It differs from basic income in being delivered as a large lump sum grant rather than as a steady flow of smaller payments. Almaz Zelleke criticizes the extent to which the Alaska model, structured as a resource dividend, can be thought of as the practical implementation of basic income or even a step toward it. Jurgen de Wispelaere and David Casassas argue that the Alaska model, as it stands, is of limited value in promoting Civic Republican objectives. Steve Winter criticizes the Alaska Dividend for making recipients complicit with the oil industry. In the final chapter of Part One, we (Widerquist and Howard) respond with a chapter addressing the concerns of the authors in this section, and a discussion of why the link between resource taxation and basic income is important for different theories of social justice.