This piece was originally published by the Chronogram Magazine in 1999. It’s an early example of some ideas that still form a big part of my thinking. I reproduce it here because the Chronogram does not keep content from the 1990s online.
-Hudson Valley, New York, 1999
Apparently, black lives don’t matter in America. For several years a lot of people have been pointing out that a lot of blacks–who aren’t guilty of capital crimes–are getting killed by police and/or in questionable cases of self-defense. Any check of the stats will show a lot more blacks are getting killed this way than whites, and a lot more whites are getting killed this way in the United States than citizens in all similar countries (including many with higher crime rates, such as the United Kingdom and France).
If black lives did matter, the response to that fact would be obvious: all human life is precious, so we would go on a national campaign to find out what every other country is doing, learn some lessons, and try to save some lives. Instead, America has done anything but taking that action. Common responses have been to say that people have made the complaint in the wrong way, that decreasing the number of civilians killed by police is somehow bad for the police officers, and that other things also kill lots of black people (as if that we’re relevant).
If black lives mattered, we wouldn’t care who complained about it or how they said it, it would matter only that human beings are at stake.
Inaction speaks loudly, and it says black lives don’t matter in America. Actually, it kind of says that white lives don’t matter either. But that’s a topic for another day.
-Karl Widerquist, Beaufort, North Carolina, June 7, 2018
This essay was originally published on Basic Income News in June 2014.
This book was recommended to me a a technology-based argument for the basic income guarantee (BIG), and it is, but its support is tentative and only for BIG in the form of the Negative Income Tax (NIT), not in the form of a Universal Basic Income (UBI).
The authors define the computer revolution that is currently underway as “the second machine age.” The industrial revolution was “the first machine age.” It brought machines that could apply power to do simple but profoundly important tasks, eventually replacing most human- and animal-powered industries with steam, electrical power, and so on. Machines of the first machine age could often do those tasks much better than humans or beasts of burden ever could. For example, the replacements for horses—automobiles, trains, and airplanes—can carry more people and more cargo father and faster than horses ever could.
Machines of the second machine age have gone beyond the application of power; they are also replacing some human brainwork. Calculators have been around so long that few people are aware they replaced a form of human labor, called “computers.” In the early 20th century, “computers” were people who did computations. It was skilled brainwork, far beyond the capabilities of the up-and-coming technologies of the day, such as the internal combustion engine. Computers (as we define the term today) have almost entirely replaced that form of human labor, and their ability to substitute for human labor only continues to increase—especially when combined with robotics.
The computational powers of computers are so strong can already beat the best chess masters and “Jeopardy” champions. Self-driving cars, which have turned driving into a complex computational task, will not only relieve us all of the task of driving to work, they have the potential to put every professional driver out of business. Perhaps computers, then, will someday learn not just to calculate, but also to think and evaluate. If so, might they eventually replace the need for all human labor?
Erik Brynjolfsson
Perhaps, but Erik Brynjolfsson and Andrew McAfee, the authors of the Second Machine Age, do not base their arguments on any such scenario. The possibility of a truly thinking computer is out there, but no one knows how to make a computer think, and no one knows when or how that might happen.
So, the authors focus on the improvements in computers that we can see and envision right now: machines that can augment and aid human thought with computational ability increasing at the current exponential rate. As long as computers are calculating but not truly thinking, humans will have an important role in production. For example, although computers can beat an unaided chess master, they cannot beat a reasonably skilled human chess player aided by computer. This is the focus of the book: computers and robotics taking over routinized tasks (both physical and mental), while humans still the deep thinking with access to aid from more and more computer power.
This change will be enough to radically transform the labor market and eliminate many (if not most) of the jobs that currently exist. At the enormous rate of increase in computing power, one does not have to envision a self-aware, sentient machine to see that the effects on the economy will be profound. According to the authors, “in the next 24 months, the planet will add more computer power than it did in all previous history; over the next 24 years, the increase will likely be over a thousand-fold.”
The book’s analysis of those changes is very much based on mainstream economic theory. In the books analysis, increases in unemployment and decreases in wages are attributed almost entirely to a decline in demand for labor thanks to the introduction of labor-replacing technology. Political economy considerations, in which powerful people and corporations manipulate the rules of the economy to keep wages low and employment precarious, are not addressed. When the authors consider shifting taxes from payroll to pollution, they don’t consider that powerful corporations have been using their power over the political process very effectively to block any such changes.
Andrew McAfee
Yet, the book demonstrates that even with purely mainstream economic tools, the need to do something is obvious. We have to address the effects of the computer revolution on the labor market. The second machine age creates an enormous opportunity for everyone to become free from drudgery, to focus their time on the goals that they care most about. But it also creates a great danger in which all the benefits of second machine age will go to the people and corporations who own the machines, while the vast majority of people around the world who depend on the labor market to make their living will find themselves fighting for fewer jobs with lower and lower wages.
The technology-replacement argument for BIG has been a major strand in BIG literature at least since the Robert Theobald began writing about the “triple revolution” in the early 1960s.[*] So, approaching this book as I did, I was on the lookout through a large chuck of the book, waiting for BIG to come up. I was very surprised to see the entire “Policy Recommendations” chapter go by without a mention of BIG.
The authors finally addressed BIG in the penultimate chapter entitled, “long-term recommendations.” In the audio version of the book, the authors spend about 20 minutes (out of the 9-hour audiobook) talking about BIG. They recount some of the history of the guaranteed income movement in the United States with sympathy, and write, “Will we need to revive the idea of a basic income in the decades to come? Maybe, but it’s not our first choice.” They opt instead for an NIT, writing “We support turning the Earned Income Tax Credit into a full-fledged Negative Income Tax by making it larger and making it universal.”
Their discussion of why they prefer the NIT to UBI is perhaps the weakest part of the book. They favor work. They want to maintain the wage-labor economy, because, taking inspiration from Voltaire, they argue that work saves people from three great evils: boredom, vice, and need. I am skeptical about this claim. I view it as an employers’ slogan to justify a subservient workforce, but my skepticism about this argument is not why I find the book’s argument for the NIT over UBI to be the weakest part of the book. The reason is that the argument from work-incentives gives no reason to prefer the NIT to UBI. The authors view the NIT as a “work subsidy,” but it is no more a work subsidy than UBI.
The NIT and the UBI are both BIGs, by that, I mean they both guarantee a certain level below which no one’s income will fall—call this the “grant level.” Both allow people to live without working. UBI does this by giving the grant to everyone whether they work or not, but taxing them on their private income. NIT does this by giving the full grant only to those who make no private income and taking a little of it back as they make private income. In standard economic theory, the “take-back rate” of the NIT is equivalent to the “tax-rate” of the UBI, and so either one can be called “marginal tax rate.”
Applying standard mainstream economic theory (which is used throughout the book), the variables that affect people’s labor market behavior are the grant level and marginal tax rate. The higher the grant level and the higher the marginal tax rate, the lower the incentive to work whether the BIG is an NIT or a UBI. You can have an NIT or a UBI with high or low marginal tax rates and grant levels, and you can have a UBI or an NIT that have the same grant level and marginal tax rate. It is for this reason that Milton Friedman, the economist and champion of the NIT, gave for drawing equivalence between the two programs:
INTERVIEWER: “How do you evaluate the proposition of a basic or citizen´s income compared to the alternative of a negative income tax?”
FRIEDMAN: “A basic or citizen’s income is not an alternative to a negative income tax. It is simply another way to introduce a negative income tax”.
-Eduardo Suplicy, USBIG NewsFlash interview, June 2000, https://www.usbig.net/newsletters/june.html
If the book’s arguments for work incentives are sound, I seen an argument for a modest BIG with a low marginal tax rate, but I see no argument one way or another why the BIG should be under the NIT or the UBI model.
Whatever one thinks about the issue of NIT versus UBI, the book presents an extremely sophisticated and powerful argument for moving in the direction of BIG. Therefore, it is a book that anyone interested in any form of BIG should examine closely.
-Karl Widerquist, Cru Coffee House, Beaufort, North Carolina, June 2, 2014, revised June 14, 2014
Erik Brynjolfsson and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W. W. Norton & Company, 2014. Audio edition: Grand Haven, Michigan: Brilliance Audio, 2014.
This essay was originally published on Basic Income News in December 2012.
This year Alaskans received a dividend of $878, not bad compared to all the other states, but this dividend is the smallest since 2005, and it is only the second time in more than 20 years that the dividend has been below $900 per person. Alaska’s Permanent Fund Dividend (PFD) needlessly fluctuates widely. This year’s dividend is 25 percent smaller than last year’s dividend of $1,174, and it is 57 percent smaller than the 2008 record-high dividend of $2,069 (not counting the one-time supplement of $1200 that was added to that year’s dividend).
The declining dividend does not mean that the PFD is in trouble. Actually the Alaska Permanent Fund (APF), which financed the PFD, is at near-record high levels. It closed the 2011-2012 fiscal year at 40.3 billion dollars. The dividend was low this year because the state uses a complex formula averaging the returns over a five-year period to determine yearly returns. The five-year average was chosen to smooth out fluctuations in market returns to create a more stable dividend, but—as Alaskans can easily see—a five-year average is not enough to do that job. Markets tend to have stable long-term trends, but they can have occasionally large yearly fluctuations (either up or down) that can dwarf a five-year average. The mid-2000s market boom, and the 2008-2009 market bust were just such fluctuations. Now, several years later with the boom returns falling out of the calculations but the decline still in, the 2008 market bust affects the dividend the more than it did at the time.
There’s a better, more stable way to calculate the dividend. It’s called percentage of market value (POMV). Most financial managers agree that an individual can afford to withdraw up to 4 percent of a well-invested diversified portfolio and still expect it to grow in real terms over time.
If Alaska used this rule to calculate the PFD, this year’s dividend would have been $2,380. It would have been a record-high dividend, because the APF closed the fiscal year at a record-high level. Suppose then there was a major sell-off in the markets and the fund declined by 25% to $30 billion. The dividend would decline by 25% as well, to $1,846. Suppose instead it rose by 25% to $50 billion. The dividend would rise by 25% as well, to $3,076. Because 25% is an unusually large fluctuation, we can expect this to be an unusually large change in the dividend. Most often it would change by less than 10% from year to year, and in most years it would increase.
Perhaps Alaskans should be more conservative. The goal of the fund is not just to payout as much as possible. It is also to save for the future. The more the APFC pays out in dividends now, the slower the APF and the PFD will grow over the long term. So, perhaps a POMV rule of 3% would be better—a little more cautious—than the 4% rule. If so, payouts this year would have been $1860. Payouts after a 25% decline to $30 billion would be $1,395. Payouts after a rise to $50 billion would be $2325, and Alaska could expect to larger reinvestments by the APFC to help the APF get to $50 billion much more quickly.
POMV just makes sense. Nobody likes the big fluctuations. No one wants their dividend to be less than half of what it was a few years ago. POMV stabilizes dividends, making it easier for Alaskans to plan, and it can be part of a conservative payout strategy that will keep the fund growing over time.
-Karl Widerquist, Doha, Qatar, November 2012
This essay was originally published on Basic Income News in August 2012.
Last February two conservative commentators, Bill O’Reilly and Lou Dobbs, from the Fox News Network, praised the Alaska Dividend as “a perfect Model” of what America should be doing with its resources. It is amazing that prominent conservatives can praise a policy that redistributes income from the wealthiest Americans to all Americans unconditionally—without means test or work requirement.
O’Reilly began by saying, “It is my contention that we, the people, own the gas and oil discovered in America. It’s our land, and the government administers it in our name.”
Later, Dobbs added (as O’Reilly nodded and voiced agreement), “All of the vast energy reserves in this country belong to us, as you said. In Alaska, there’s a perfect model for what we should do as a nation. We should have—what it’s called there is a Permanent Trust. Let’s call it the American Trust. And the oil companies, that pay about $10 billion per year in fees and royalties—have that money go into this trust fund, not to be touched by the Treasury Department or any other federal agency, but simply for the investment on behalf of the American people (citizens). A couple things happen. One is, it reminds people whose oil this is, whose coal this is, and what the rights of an American citizen are. And it even puts a little money, a little dollar sign, next to what it’s worth to be a citizen. Have dividends disbursed and distributed every year. … [The other thing is] Peg [the royalties] to the price of gasoline … and that money go into that trust fund for the American people. I think you’d see a lot of people start to pay a little different attention to what people think and respect citizens a little more.”
It was a very good statement of what the Alaska model is for and how it ought to work.
But I doubt the two commentators realize how subversive their words were. If the government realized that the land belongs to all the people and truly began to administer it for everyone’s benefit, many changes would happen. If all the oil, coal, and natural gas of America belong to all Americans equally and unconditionally, so do all the gold, silver, bauxite, fish, timber, land, and groundwater. So do the atmosphere, the broadcast spectrum, and many other things worth an awful lot of money. If everybody who asserted private ownership of any of these things had to pay into the kind of public trust fund O’Reilly and Dobbs endorse, that fund would finance the most massive redistribution of wealth from rich to poor in the history of the United States (if not the world), and it could probably support a basic income large enough to permanently end poverty in America.
-Karl Widerquist, South Bend, Indiana, August 2012
Video of Bill O’Reilly and Lou Dobbs discussing the Alaska fund and dividend is online at: https://www.foxnews.com/on-air/oreilly/index.html#/v/1472237953001/government-
For more on the Alaska model, including cost estimates of the potential value of the natural resources the government gives away for free see the following two books:
Alaska’s Permanent Fund Dividend: Examining its Suitability as a Model, co-edited by Karl Widerquist and Michael W. Howard (Palgrave-MacMillan, 2012):
https://us.macmillan.com/book.aspx?isbn=9780230112070
Exporting the Alaska Model: Adapting the Permanent Fund Dividend for Reform around the World, co-edited by Karl Widerquist and Michael W. Howard (Palgrave-MacMillan, 2012)
https://us.macmillan.com/book.aspx?isbn=9781137006592
Or contact me: Karl Widerquist <Karl@widerquist.com>
