Exporting the Alaska Model: An early version now available for free download

by Karl Widerquist | Oct 6, 2019 | Opinion, The Indepentarian

An early version of the book, Exporting the Alaska Model, is available for download for the first time. This is possible because most academic publishers allow authors and editors to post early versions of their works on their person websites. A preview, written in 2012, is below. If you’d like to cite or quote it, please refer to the published version:

Karl Widerquist and Michael Howard, Exporting the Alaska Model: How the Permanent Fund Dividend Can Be Adapted as a Reform Model for the World, Karl Widerquist and Michael Howard, editors. Palgrave MacMillan (2012)

In recognition of every Alaskan’s share of the ownership of the state’s oil reserves, every year, every Alaskan gets a dividend from the returns of the Alaska Permanent Fund (a sovereign wealth fund comprised of a pool of assets collectively owned by the residents of the state). It was created from royalties the state receives from the oil industry. Each year it pays a dividend to every Alaska resident. In 2008, the dividend reached a high of more than $3200 (including a supplement added from that year’s state budget surplus). That dividend amounted to more than $16,000 for a family of five.

Many other resource-exporting regions around the world have sovereign wealth funds, but only the APF pays a regular dividend to citizens. The APF and the accompanying Permanent Fund Dividend (PFD) are actually a combination of resource-management policy and a progressive social policy. As a sovereign wealth fund, it helps to ensure that the state will continue to benefit from its oil long after its reserves are depleted. As a dividend, it helps every single Alaskan make ends meet each year without a bureaucracy to judge them.

The PFD 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. Most importantly it has given unconditional cash assistance to needy Alaskans at a time when most states have scaled back aid and increased conditionality.

Cliff Groh

This book argues that the model provided by the combination of the APF and the PFD is worthy of imitation by other states, nations, or regions. Of course, not every country has as much oil as Alaska, but every country has resources. 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. The case for taxing natural resources is at least as good, and probably far better than taxing other sources of wealth.

One reason Alaska introduced the APF was that lawmakers realized that oil drilling would give the state a large and temporary revenue windfall. They wanted to extend the period in which that windfall would benefit Alaskans by putting some if it away into a permanent fund. To some extent the PFD was a way to sell ordinary Alaskans on the idea of the APF.

But to some extent the motivation for the APF was to support the PFD. Some of the lawmakers who created the APF, most especially 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 70s. Hammond had created a similar policy on a local level when he was a mayor of Bristol Bay, and he very much saw the APF as an opportunity to create a guaranteed income. The argument was simple: the oil, by right, belonged to all Alaskans. The PFD was an efficient way to ensure that every Alaskan would benefit from it.

A similar argument can be made for almost any natural resource.

This book takes an interdisciplinary approach to assessing whether the APF is a model to be copied with chapters in the disciplines of economics, philosophy, sociology, history, and social policy studies. It also has chapters written by political activists and practitioners.

Several chapters discuss the history of the APF and similar policies around the world (both resource taxation policies and income support policies). Others chapters discuss the ethics of unconditional cash grants and resource taxes, and how the Alaska mode fits in with recent theoretical models. As mentioned, the PDF is essentially a small basic income—a political proposal that has been widely discussed in political theory literature. Stakeholder grants would replace the yearly basic income with a large, one-time payment when individuals come of age. Resource egalitarianism is the belief that all people should benefit equally from the natural resources of the Earth. Policies like the APF, which link resource taxes to direct redistribution, advance resource egalitarian goals. We discuss what should count as a “resource” for purposes of the standard of “equality of resources,” and how this might be focused on resources that can become the basis of a sovereign wealth fund. A clean atmosphere, for example, is a shared resource that is being depleted by billions of individual polluters.

Several chapters debate whether it is a good idea to link a progressive social policy, such as a cash grant, to an environmental policy, such as a resource tax. One reason to make this link is that resource taxes redistributed as dividends reflect shared ownership claims to the environment. Other reason to do so is that the redistribution of resource tax revenue can compensate people for the cost of moving to less resource-intensive activities. One danger is if the redistribution of resource taxes is seen as a good thing, people might be more willing to accept increased exploitation of natural resources.

The book also discusses possible ways that the model might be altered and improved, including a proposal for Citizens Capital Accounts, which personalize the fund, giving each individual owner, among other things, the power to decide whether to take out regular dividends or let her earnings accrue as a protected investment. Instead of passively receiving a check each year, each citizen have some control over a small portion of the principle and the choice of when and whether to withdraw her available returns.

The book also has country- and region-specific proposals with estimates of what size dividend might be achievable in various places. As criteria for success we consider effects on poverty, effects on inequality, effectiveness in discouraging greenhouse gasses and other forms of pollution (for carbon-based taxes), efficiency, satisfaction of voters, and other factors.

Summary

This book is divided into three parts. Part I discusses employing the Alaska model in circumstances similar to those of Alaska: in wealthy, resource-exporting nations and regions. Part II discusses applications of the model further afield. And Part III discusses a hybrid proposal for an individualized version of Alaska’s fund and dividend.

Michael W. Howard (right) and Karl Widerquist (left) in the rain at the 2017 NABIG Congress in New York

Hamid Tabatabai (chapter 2) begins Part I with a discussion of the second place in the world to introduce a resource dividend: of all places, Iran. Like Alaska, Iran stumbled upon the dividend following a peculiar set of circumstances. For most of its period as a resource-exporting nation, Iran has used its resource wealth to support an inefficient system of commodity subsidies (mostly on gas and oil consumption). Iranian politicians knew that these subsidies had to go, but the policies benefited so many people in such a significant way that the politicians knew they could not eliminate them without a similarly broad-based policy (discussed as the fifth lesson in section 2 above). After lengthy discussions, the policy that emerged was a basic income in the form of a regular resource dividend. The policy is not funded by a permanent resource endowment, but it does employ the other two elements of the Alaska model.

Angela Cummine (chapter 3) looks at the very opposite issue. There are many SWFs in the world today. Some of them are many times larger than the APF. Yet, only the APF pays a dividend. Given the enormous popularity of the PFD, why have no other resource-exporting nations imitated it? Employing information gained from interviews and other sources, Cummine assesses the reasons SWF managers around the world are skeptical about dividends.

Alanna Hartzok (chapter 4) looks back at the Alaska model itself in advance of export. She argues that the APF and PFD embody the idea of socializing the rent of assets that rightfully belong to the people as a whole, but to do this, managers at the Alaska Permanent Fund Corporation (APFC) should take on a strong responsibility toward social investing, and they are not yet living up to that responsibility. Any nation or region wishing to socialize rent on a large or small scale should, therefore, take a look at what the APFC has done right and what it has done wrong.

Rather than looking at employing the Alaska model in other places, Cliff Groh (chapter 5) looks at the future of the Alaska model in Alaska. Although the PFD has a sound permanent endowment in the APF, it is the only part of the Alaska government that has such safe financial footing. Most of Alaska’s state budget is based on current oil export revenues. The volume of Alaskan oil exports has been declining for more than 20 years. So far, increases in the price of oil have more than made up for the decline in the volume of oil exports, but they will not always do so. When oil revenue begins to dry up, there will be enormous pressure on the state government budget, which will also put pressure on the APF and PFD. Groh discusses when this might happen, what it will mean, and what can be done about it.

Gary Flomenhoft begins Part II with a chapter (chapter 6) estimating the potential for a common-asset-based dividend in the “resource-poor” state of Vermont. He shows that even Vermont has many resources that are being given away for free by government to corporations who sell those resources back to the people at higher prices. Flomenhoft estimates how much revenue the state could generate by treating those assets the way Alaska treats its oil. In his low estimate, he finds that Vermont could support a dividend at least as large as Alaska’s; and in his high estimate, he finds that Vermont could support a dividend many times larger—perhaps more than $10,000 a year for every Vermonter. If a resource-poor state such as Vermont can do it, any state or nation can too.

Paul Segal (chapter 7) discusses employing the Alaska model in the poorer nations of the world and discusses the impact on poverty of doing so. He finds that a resource dividend could cut world poverty by more than half, as measured by the World Bank’s poverty rate of US$1.25 per day at purchasing-power-parity.

Jason Hickel (chapter 8) examines the potential impact of the Alaska model on a less developed nation—the newly independent state of South Sudan. Although South Sudan has large oil reserves to draw on, the potential impact of the Alaska model on it is hard to estimate because the state is so new and few good data are available. However, he finds that oil exports have the potential to finance both a substantial dividend and significant infrastructure improvements.

Governor Jay Hammond, “Father of Alaska’s Permanent Fund Dividend”

Jay Hammond’s contribution (chapter 9) applies the Alaska model to Iraq. Hammond was the fourth governor of the state of Alaska and is justly described as the father of the PFD. He campaigned for the idea long after he left office. His posthumous contribution to this book is a piece he wrote near the end of his life suggesting that a permanent fund and dividend would help ensure that Iraq’s oil revenues were shared by members of all of its diverse communities. This chapter includes a brief introduction by Larry Smith.

Michael W. Howard’s chapter (chapter 10) discusses the cap-and-dividend approach to global warming as a politically viable way of applying the Alaska model at the federal level in the United States. The idea of cap-and-dividend is simple. The government limits the amount of carbon emissions allowed (the cap). It sells the rights to make those emissions to the highest bidder and redistributes the proceeds as a dividend for all citizens.

Widerquist closes Part II with two chapters (chapters 11 and 12). The first examines the possibility for, and potential size of, a permanent common-asset-based endowment for the United States. The second examines the prospects of exporting the Alaska model back home to Alaska to widen and deepen the use of the strategy we call the Alaska model in Alaska itself. Widerquist argues that a fuller use of the Alaska model will strengthen Alaska against the likely eventual decline in resource revenues.

Part III of the book is entirely devoted to the discussion of a proposal by Karl Widerquist to create an individualized version of the permanent fund and dividend approach. Widerquist’s proposal, called Citizens’ Capital Accounts (CCAs) (chapter 13), assigns a portion of the principal of the fund to each individual at birth. They can decide when and whether to draw dividends, but the principal must remain in the fund for future generations. Widerquist argues that CCAs provide more economic security for the money than basic income or other similar proposals, because they allow individuals to keep the returns in their safe investment account until they are needed. Subsequent chapters by Michael W. Howard, Jason Berntsen, Ayelet Banai, and Christopher L. Griffin, Jr. (chapters 14–17) evaluate, criticize, and consider variations of the CCA proposal. In the final chapter of part III (chapter 18), Widerquist responds to criticism.

The book is available at:

Karl Widerquist and Michael Howard, Exporting the Alaska Model: How the Permanent Fund Dividend Can Be Adapted as a Reform Model for the World, Karl Widerquist and Michael Howard, editors. Palgrave MacMillan (2012)

Michael W. Howard (right) and Karl Widerquist (left) in the rain at the 2017 NABIG conference in New York

The book, “The Ethics and Economics of the Basic Income Guarantee:” Free Version available

by Karl Widerquist | Sep 17, 2019 | Opinion, The Indepentarian

The Ethics and Economics of the Basic Income Guarantee (2005) edited by Karl Widerquist, Michael Anthony Lewis, and Steven Pressman, published by Publishing is availed in a free version at this link.

This book available because most publishers allow authors and editors to post early version for free on their personal websites. That means it has lots of typos and other problems. But it’s a reasonable approximation of the final version. Please see the published version if you can. It’s available at university libraries.

Summary from 2005

This book is divided into four Parts. They cover the history of BIG, philosophical debates over the vision of society it represents, sociological and economic debates concerning its effects, and finally some practical proposals for a BIG in several countries.

The four chapters in Part One trace the history of the BIG proposal from its beginnings in the late eighteenth century to the present with special emphasis on the guaranteed income movement of the 1960s and 1970s in the United States.

Steven Pressman

In chapter 2, Fred Block and Margaret Somers examine the relationship between the welfare reform passed by the United States Congress in 1996 and Speenhamland, a British town that (in May 1795) decreed the poor were entitled to certain public assistance. As the program spread among English parishes, it generated a great deal of controversy. Critics argued that it provided relief to the able bodied, and thus reduced work effort and increased the local tax rates (to support the poor). Block and Somers revisit the Speenhamland episode. Drawing on four decades of recent scholarship, the authors show that Speenhamland policies could not have had the consequences attributed to them. They then seek to explain how the Speenhamland story became part of the accepted wisdom regarding public assistance to the poor and how it contributed to the 1996 welfare reform legislation in the United States. This argument has important consequences of BIG proposals, since it points out that income guarantees have not had negative consequences in the past and so they should not be rejected for this reason.

In chapter 3, economists John Cunliffe and Guido Erreygers focus on the historical antecedents of contemporary basic income proposals. Specifically, they focus on proposals put forth by the nineteenth century American writers Cornelius Blatchly, Thomas Skidmore, and Orestes Brownson. They argue that these writers may have been influenced by the ideas of Thomas Jefferson and Thomas Paine, American revolutionaries whose ideas about economic policy and distribution bear striking similarities to current basic income proposals.

Robert Harris gives an inside account, in chapter 4, of the politics behind the guaranteed income movement of the 1960s and 1970s. The movement grew out of dissatisfaction with the conditional welfare system that had been in place since the New Deal, which was failing to eliminate poverty either for workers or for people unable to work, and which was causing significant poverty traps. Many people on the left and right began to see the guaranteed income as a simpler and more effective system for both the working poor and those on social assistance. Nixon’s modified guaranteed income was overwhelmingly passed by the House of Representatives, but failed narrowly in the Senate thanks to opposition from both left and right and to lukewarm support from Nixon himself.

One offshoot of the guaranteed income movement was that five NIT experiments were conducted in the United States and Canada during the 1970s. These experiments divided a group of subjects into two groups. One group was part of a negative income tax plan; the other group was a control group that was subject to the regular United States income tax. The experiments were designed to measure the impact of NIT on labor force participation and marital dissolution in a rigorous scientific manner. These experiments were not only important for the basic income guarantee, but they were also the first large scale social experiments and had farreaching influence on policy research in a number of different areas. Some of the original scholars from the negative tax experiments reunite in chapter 5 to discuss their importance after 30 years. The panel members discuss the political reasons for setting up the experiments and their results. Although the results were largely positive, showing small workdisincentive effects and important effects on health, educational attainment, and well being, some politicians and pundits used the experimental findings to help quash the NIT.

Part Two examines the philosophical debate over BIG. The papers in this section of the book discuss various justifications for a BIG and compare the case for a BIG to the case for other types of income support plans.

In chapter 6, political theorist Almaz Zelleke examines political rights and BIG. Her concern is that social thinkers on both the right and left tend to agree that income policies should have work or social contribution requirements attached to them. After discussing and criticizing the arguments of thinkers such as Laurence Mead, Mickey Kaus, Anthony Atkinson and others who hold this view, she puts forth an alternative—the market should be regarded as a sphere of citizenship no less important than the polity. That is, the liberty that we grant to United States citizens is tied to the right to partake in the market as much as it is tied to the right to partake in politics. Thus, we should view income that lets people participate in the market as analogous to voting rights that let people take part in the political process. We grant people the right to vote and, likewise, the basic income should be viewed as a right to “vote” in the marketplace.

Philosopher Michael Howard’s article (chapter 7) is largely a discussion of the liberal neutrality principle associated with the philosopher John Rawls, and its relevance to the basic income debate. The neutrality principle roughly stipulates that an acceptable theory of justice cannot be biased toward any particular substantive conception of the good life. Howard’s thesis, presented with the argumentative and analytic skills philosophers are known for, is that any income policy that requires some contribution to society is biased toward those whose conception of the good life involves such contribution; a basic income isn’t biased in this way, rendering it the more just policy.

Michael A. Lewis

In chapter 8, Karl Widerquist defends basic income against the “exploitation objection,” which asserts that a basic income allows individuals to benefit from social cooperation without contributing to society, thereby exploiting those who do work. He specifically addresses Gijs van Donselaar’s version of this objection, and argues this objection has three critical flaws. First, the conclusion that a basic income is exploitive relies on holding the poor responsible for the level of scarcity in the world. Second, van Donselaar treats work rents differently than other rents. Third, van Donselaar’s definition of exploitation is unworkable in practice, and the connection between it and a case against basic income is weak.

In chapter 9, Michael A. Lewis enters the debate between basic income and the basic stake proposal put forth by Bruce Ackerman and Anne Alstot. This proposal stipulates that a lump some of $80,000 be provided to each high school graduate at age 18 if the recipient plans to attend college or age 21 if she does not plan to do so. Lewis addresses the question of whether basic income or the stake is better at promoting freedom. He suggests that if one makes assumptions associated with rational choice theory it would seem that the stake is more freedom promoting. However, he goes on to argue that there appear to be pervasive patterns in decision making that might result in people allocating their stakes in ways they might later regret, and that a basic income might be more freedom promoting because it would constrain people’s ability to make such decisions.

While Part Two is philosophical in its orientation, Part Three is empirical. The papers in this section address questions concerning the real world impact of a BIG and its alternatives.

Steven Pressman, in chapter 10, addresses one of the key tradeoffs faced in a BIG plan—the lack of incentives to work hard and make more money that are likely to occur as a result of giving people a sum of money with no strings attached. Generating greater equity with a BIG will therefore also reduce economic efficiency. If these efficiency losses are large enough, reduced efficiency would constitute a good case against BIG. Using an international dataset that stretches back over 20 years (the Luxembourg Income Study), Pressman examines the tradeoff between equity and efficiency empirically. He finds negligible efficiency losses due to government redistribution efforts, and concludes that any efficiency-equity tradeoff is likely to be small (as long as redistribution efforts remain in their current range).

In chapter 11, economist James Bryan focuses on poverty reduction as a central goal of any income policy, but also attends to the effect such policies have on work incentives. Bryan looks at the extent to which the mid-1990s welfare reforms reduced poverty by focusing on trends in poverty before the reforms, from

1993–1995, and trends afterwards, from 1995–1996. He arrives at three conclusions: (1) poverty among families with children declined in the post-reform period but the rate of decrease was slower than during the pre-reform period, (2) among poor single-mother families there were reductions in disposable income, and (3) these reductions in disposable income were only partially offset by cash and in-kind programs such as the earned income tax credit (EITC) and food stamps. Bryan argues that a basic income guarantee could decrease poverty to a larger extent while creating smaller work disincentives than the current package of the Temporary Assistance for Needy Families (TANF), workfare, food stamps, and EITC programs. He attributes this to the high benefit reduction rate in current programs compared to the lower reduction rates that would obtain in basic income plans. From an economic point of view Bryan sees two arguments against the basic income. First, the volume of transfers needed to achieve an acceptable minimum income guarantee may be very high compared to more highly targeted programs. Second, to maintain work incentives for beneficiaries, the benefit reduction rate must be low. This would, in turn, create a small net donor population, thus requiring a high marginal tax rate and generating a larger work disincentive for this group.

In chapter 12, Thierry Laurent and Yannick L’Horty examine the work incentive problems of a basic income guarantee. They argue that most previous studies of the work incentive problem take a static approach. People are thought to balance just the income from working now against the income received now from a guaranteed income plan. However, Laurent and L’Horty note that there are also dynamic considerations. People with jobs today are likely to get promotions and higher pay in the future. So the real choice is a dynamic one, where individuals must balance both the short- and long-term benefits of work against the BIG. The authors then model labor force participation in an intertemporal framework, and use data from French labor market surveys to test their model. Their results show that there are differences between short-run back to work incentives and long-term problems. They also show that there is no obvious link between short- and long-run incentive problems. Finally, their results explain why some workers may have an incentive to accept jobs that do not pay, while others do not.

In chapter 13, Stephen Bouquin presents research results on the effects of tax-credit systems in Europe that use “in-work benefits,” which are meant to be combined with the wages of the working poor. He examines the labor market policies of three European countries that have been increasingly relying on inwork benefits, including the United Kingdom (Working Tax Credit, Income Support), France (Tax Credit), and Belgium (several policies). He finds evidence of what he calls the “Speenhamland effect” on wages. That is, in-work benefits can reduce real wages, as employers capture some or all of the benefits (intended for workers) by reducing the wages they pay. Through these effects, expenditures intended to benefit poor workers end up benefiting their employers. The existence of Speenhamland effects raises serious doubt for any policy based on forcing individuals into the paid labor market.

BIG also raises practical questions. How much would a BIG cost? How can it be financed? What is the optimal level of BIG, given tradeoffs between poverty reduction on the one hand, and costs and work disincentives on the other hand? Part Four, the final section of the book, contains chapters that examine the political prospects of BIG and chapters with nuts and bolts proposals for making basic income work in various countries around the world.

In chapter 14, Nicoli Nattrass and Jeremy Seeking discuss the possibility of implementing a BIG in South Africa. South Africa is the only country in the world with a major grassroots movement pushing for BIG, and it has a unique political and economic situation that make BIG politically feasible. The authors argue that BIG has been on the agenda because of the coincidence of four main factors. First, the country already has a system of public welfare that is unusually extensive in its coverage, unusually generous in its benefits and unusually redistributive in its effects. Second, poverty persists due to unemployment and the absence of subsistence agriculture, and there is little prospect of reducing poverty through job creation or land reform in the short- or medium-term. Third, the existence of an extensive system of private welfare, through remittances sent by employed workers to rural kin, means that it is in the interests of the powerful trade union movement to support a BIG. Fourth, the extent of inequality, paradoxically, makes it easier to finance a BIG based on redistribution from the rich to the poor.

Karl Widerquist, credit: Enno Schmidt

In chapter 15, Brazilian Senator Eduardo Suplicy discusses the movement for a BIG in Brazil. Suplicy and others have been pressing for BIG at the federal, state, and municipal level since the late 1980s. The measure was twice approved by the Brazilian Senate but languished until the Workers’ Party (of which both Suplicy and President Lula are members) took control of the presidency. Success was finally achieved in January 2004 when President Lula signed a basic income bill into law. The new law gives the executive wide authority to determine the timing of the phase-in, but it authorizes the gradual introduction of a small basic income guarantee within the next eight years.

In chapter 16, political scientist Yannick Vanderborght discusses recent debates over BIG in Belgium and the Netherlands. Reviewing the various arguments both for and against the basic income, he concludes that the supporters of a basic income have an uphill battle. Vanderborght views the main obstacle to the basic income in these two countries as the widely held belief that able-bodied recipients of income assistance should make some social contribution in return for assistance. He concludes with a discussion of the so-called “participation grant,” a policy that would provide a universal grant to all citizens or residents as long as they engaged in some socially beneficial pursuit. Such a pursuit does not necessarily mean one has to sell her or his labor. Thus, providing uncompensated (by the market) care for children, or for other friends or relatives, and a host of other “outside the market” activities would qualify. Vanderborght argues that such a policy might have a more promising future than the “pure” basic income.

In chapter 17, Derek Hum and Wayne Simpson provide some cost estimates for several possible Canadian BIG programs. Employing two different definitions of poverty, Hum and Simpson estimate that a BIG to eliminate poverty in Canada would cost between $141 billion and $176 billion (or around 15 percent of Canadian GDP). This, they believe, is too costly and would not be politically acceptable in Canada. They also provide estimates of alternative BIG plans that provide income guarantees below the Canadian poverty line. These programs would cost little more than current income transfer programs because they include a negative tax or claw back of the income guarantee. Hum and Simpson find that these programs would do much less to reduce poverty and the income shortfall facing the poor. They conclude by noting that there are many possibilities between these two extremes; these plans would not be very expensive, yet would be relatively effective in reducing poverty in Canada.

In chapter 18, Randall Bartlett, James Davies and Michael Hoy explore how to set up a negative income tax in the United Kingdom. Their goal was to formulate a set of programs with a guaranteed income and a single flat tax rate that collects the same amount of money as the existing United Kingdom progressive tax system. They then test whether their negative income tax is as progressive as the current United Kingdom tax and transfer system. Their findings are that it would be relatively easy to structure a negative income tax for the United Kingdom that is more equitable than the current system and that does not require high marginal tax rates.

The chapters in this book bring the debate over basic incomes into a contemporary and eclectic context. They provide many different perspectives to the BIG proposal in specific and to antipoverty policy in general. And they show that BIG is a feasible policy alternative.

The Ethics and Economics of the Basic Income Guarantee (2005) edited by Karl Widerquist, Michael Anthony Lewis, and Steven Pressman, published by Ashgate

A free version is available at this link.