Elon Musk, universal basic income, and rehashing some thoughts of the nature of wealth and work.

A friend of mine directed me to an article about Elon Musk and his comments about a universal income. The question has to do with technology and innovation that eliminates the need for humans to do the jobs. Musk suggested that a universal basic income or something like it might be the answer. “There’s a pretty good chance we end up with a universal basic income, or something like that, due to automation,” said Musk. “I’m not sure what else one would do. That’s what I think would happen.”

Earlier this year, Brian Howey asked Mitch Daniels about the shift from manufacturing to a knowledge based economy. He said:

“Every time human ingenuity has created one of these transformations, people have worried,” Daniels said. “They see what is being lost. It won’t take a third of us to grow food. What’s everybody going to do? Every time up to now, the new economy produced more opportunities than the old one did.”

But the change gripping the United States today is worrisome to Daniels.

“It’s not yet clear to me that it will create sufficient categories of new high-paying jobs,” Daniels said. “Whether there will be enough of them to support a growing population and a middle class like we’ve known, that’s what is bothering me.”

There are, as I see it, two related but wrongfully conflated issues: 1) designing an economy that continues to be productive; and 2) the notion that moral worth and economic success are more closely correlated than they really are. The first demands a lot of respect. The second is an anachronism we should try to get past.

I think we bear some cultural scars from the Cold War wherein we are overly fearful of communism and socialism. That said, the systems implemented in the Soviet Union and eastern Europe are not ones we want to live in. You don’t want a system where an oligarchy lives large, snuffs out economic innovation, and leaves people with no incentive to work and create. If you appropriate 100% of the value a person creates, why would he or she bother? On the other hand, I’m willing to bet that most individuals would do the same work for $500 million as they would do for $1 billion. At a certain level, the incentive structures provide diminishing returns. Historically in this country, taxes — even very high taxes on upper incomes — have not shut down the economy. In any case, I think there is some evidence that you have maneuverability for gathering golden eggs without killing the goose that lays them.

On the functionality argument, there seems to be room for negotiation. But the moral argument is so often a show stopper. (See, e.g. taxation = theft!) Beyond that battle cry of some libertarians, there is the more pervasive Puritan work ethic sensibility in the American electorate. If you are poor, it’s because of a moral failing. If you are rich, it’s because you worked harder or smarter. But the economy isn’t a morality play. It rewards leverage more than merit. Even so, back in the olden days, there was survival value for the community in making sure everyone was busting their ass. If you had people sitting around, the village might starve. Now, the resource situation is a little different. I posted some thoughts in response to that Mitch Daniels conversation linked above:

As I view it, we’ll be economically productive enough to create what we need to support everyone as well or better than we ever had. The problem is that our current means of allocating the benefits of that productivity doesn’t distribute those benefits in a manner that will support everyone as well or better than we have in recent memory. Traditionally, there has been some justification in telling someone that, if they weren’t producing and acquiring what they needed to support themselves, it was because they were lazy, and we ought not reward laziness. More and more, it seems to me, there are people who are perfectly willing to work; but the economy has shifted in ways that requires labor less and less. If labor isn’t something the economy needs very much, how do we go about allocating our resources in a way that doesn’t rely on labor as a proxy for merit?

This is a theme I’ve touched on from time to time (it seems to have been very much on my mind in 2012):

Fred Clark: Unemployed in the Affluent Society (10/25/11):

Galbraith discusses the Puritan origins of a moral imperative to work. Goods were vitally necessary; the loss of available labor to produce those goods was extremely detrimental to society; and, therefore, the penalty – deprivation of all or most of an individual’s income – was appropriate. The penalty was so justified that there was no moral obligation to help someone who wasn’t helping themselves by working.

Now, in a world awash with goods, the loss of an individual’s productive capacity is incidental but the penalty remains almost equally severe – even where the failure to work isn’t through sloth but through lack of obvious opportunities. And, yet, the quest continues for a moral justification to allow the affluent to settle into a comfortable disregard for those not sharing in society’s affluence.

Technology and the Future of Work (4/18/12):

This has me noodling about the nature of wealth, the nature of money, and the nature of work. I think there is an underlying premise that we can’t sustain a middle class society if we all just go around giving each other haircuts or whatever? The government can’t just give away money. Sounds reasonable, but why not? Because we have to eat and have shelter; we need someone to make the stuff. Who is going to do the hard work to farm and make stuff when they can just get free money from the government? People will stop working, you’ll have more demand than supply, money will be worthless.

But, I wonder. Automation suggests to me that these goods are easier to make. What happens if government is essentially printing money to pay for these non-tradable goods (healthcare and education, for example) and the money supply enters the economy that way instead of through the Federal Reserve?

Posner, Clark, Efficiency, and Economic Hematoma (4/23/12):

The problem is that we may not be diverting workers from more to less productive work. The workers themselves may not be engaged in any work at all. If we made a subsidy contingent on increased employment, we may well be requiring that the manufacturing be performed in a less efficient way. But, we’d be doing this to give the individual worker a basis for staking a claim to some of the value created by the production. This is less efficient, but it may be necessary so long as: a) we know of no more productive work that the individual worker can do; and b) we require work as a basis for making a claim for income.

. . .

You get an economy that’s working very efficiently. But, because the world’s necessities can be created by a relatively small percentage of the population, the vast income generated pools in relatively few places; sort of a hematoma of the economic circulatory system. To remain healthy, the body politic needs good circulation, else part of it becomes gangrenous and poisons everything else. If possible, we need to find more productive work for our citizens. Otherwise, we need to figure out some other way for allocating some part of the economic flow to idle citizens.

Liberty, Laws, and Property (8/30/12):

The libertarians I have read don’t seem to bother much with this sort of calculus when it comes to property rights. They take it as an article of faith that property rights always outweigh the corresponding restrictions on liberty. This is so, I think, because of the tendency to regard property rights as “natural rights” — something that comes not from the rational acts of humans but from the ether or something. I’ve never heard a convincing explanation of “natural rights” — mainly just hand waving references to a Creator whose mind is apparently known to those who divine the natural rights. Fact is, in the absence of law, there are no rights; just unenforceable opinions about how things ought to be.

But, I think in the coming years as the nature of work evolves, we’ll have to be more aware of the calculus underpinning our assessment of property rights and the corresponding burdens imposed thereby.

I’ll keep thinking about this. I think it plays into all kinds of major concerns: jobs, debt, taxes, the shrinking middle class, etc.

Ruminations on Labor (9/3/12):

The problem I see, this Labor Day, is that compared to recent centuries, wealth is fairly abundant, but the amount of labor necessary to create that wealth is very much diminished. And, yet, because of the history of how wealth was traditionally created, we generally tie the legitimacy of one’s claim to property to some sort of labor that goes into creating that wealth. Then, we allow (even encourage) the laborer to contract away much of that claim to an employer – someone with specialized access to tools needed to create wealth (large machines, in many cases) or maybe specialized access to the demand or markets for certain types of labor.

But, now, with the demand for labor at very low levels, the individual has very little leverage when negotiating away their claim to property (e.g. the employment contract). This leverage is further reduced by the fact that the person has certain basic needs – food, shelter, health care, etc; and, by and large, can’t simply walk away from the table in most cases. (If demand for labor is high, then you can simply go on to the next employer; if not, you have to take what you can get.)

Meanwhile, employers (those with specialized access to tools or markets) can accumulate great wealth because they can bundle together the shares of access to property traded away by the laborers (value created by labor but not retained by the laborer) and pocket that value for themselves. They’re able to do this because they are operating in an environment featuring a cocoon of infrastructure and property laws; among other things. Absent this environment, their deals with laborers (and with makers of the specialized tools and with the markets they have specialized access to) would be worth precisely nothing. Without this cocoon, you get Somalia.

If you’ve read this far, I suppose you get the idea.