Intro. [Recording date: December 16, 2016.]
Russ Roberts: I want to remind listeners about EconTalk.org and in the upper left-hand corner please click on the link to the Survey to let us know your favorite episodes of 2016 and give us some other feedback. Thank you so much.
Russ Roberts: Mike, welcome back.
Michael Munger: Always a pleasure, Russ.
Russ Roberts: Our topic for today is BIG, the Basic Income Guarantee. What is it and how does it work?
Michael Munger: The Basic Income Guarantee is a substitute for all other welfare programs. And the one argument for it--well, there's really two arguments for it and three arguments against; and we'll probably get into it. But the two arguments for are: This is a kind of social insurance, and in an uncertain, maybe increasingly uncertainty society where markets benefit most of us but harm some people, often through no fault of their own because we're not very good at forecasting the future, we're better off if we can provide a certain minimum level of income for everyone, both politically and just on the merits. The other argument is: We're doing this already and we're doing it inefficiently. So, if we start from where we are, then if we consolidate all of the different dogs' breakfast of welfare programs that we have into one, and instead of hectoring people to do what we want we just give them the cash and say, 'Here's what you've got, do your best,' some people will make good choices; some people will make bad choices; but overall it will be cheaper for those of us that are making these contributions into the welfare system through taxes. And, the people that we care about will get more of it.
Russ Roberts: And, was that two arguments in favor? What were they?
Michael Munger: Yeah. Right. To make it clearer--it was a bunch of words: One argument in favor is that we should do this on the merits because there's a lot of uncertainty in the system. And as you've talked about on some EconTalks recently, when we say, 'Trade benefits everyone,' that's not exactly true. A globalized system of capitalism does benefit many people, but it harms others because they lose their jobs; there's these movements of different industries; and so we'd like to have a sort of level of insurance that makes all of us--not almost all, but all of us benefit from the surplus that's created by having an efficient global system. Full stop. Second argument is: Look, we're doing this already; we're just doing it badly. So, BIG would be more efficient.
Russ Roberts: Okay, yeah, we're going to get into how badly we're doing, because I think some of the badness of that is misunderstood. But let's talk about some practical implementation. How would this literally work? I don't mean who would literally send out the check. I mean: What are people talking about in terms of magnitudes across the spectrum here?
Michael Munger: Well, it's hard to keep the two issues separate, on those grounds, if you are going to ask how it's going to work. Because one of the things that I want to advocate is that we eliminate all of the other welfare programs. And this could range from anything from aid to families with dependent children to minimum wages. So, we would eliminate all of the other forms of welfare that go to income insurance. Not health care. Health care is a separate thing. But all the things that go to income support. And we would have to have some way of providing a monthly or quarterly check. Now, I have argued that we already have an infrastructure for doing that; and that is the income tax. The income tax of the United States is handled by the Internal Revenue Service (IRS); and every year on your tax return you have to declare a personal exemption--a standard deduction. And that amounts, I think right now it's about $1200--all that Basic Income would do would be to change that to about $15,000--$15 thousand--dollars. And make it a credit. So, if you don't earn enough income to have to pay taxes, you would receive a check rather than having to send in a check. So it would be administered through the existing Internal Revenue Service. And all it would really involve, a change in the standard deduction.
Russ Roberts: So, every American of a certain age perhaps, or every American--different ways you could do it--would get a fixed, the same, fixed amount. Let's say $15,000.
Michael Munger: Yes. That's very--that's a lot of money.
Michael Munger: It would. And for many of us, we'd have to change the tax rate so as to make it revenue-neutral. So, we'd have to do some changing in the tax rates or the levels where the new margins come in to make it revenue-neutral. So, there'd be no net effect on me--I'd just get a larger standard deduction and then my taxes would go up to offset that. But for people who don't have jobs or don't have enough income where they are paying taxes, there would be a credit; and they would receive a check, rather than paying in a check.
Russ Roberts: So, for me and you, we're going to raise taxes--because we are fortunate enough to be gainfully employed, make a lot of money. And therefore, we would still get the $15,000; it's just that our tax rates would go up to offset that? Is that the idea?
Michael Munger: That's it. And so for most people, there would be no net effect.
Russ Roberts: Well, there'd be no net effect on, maybe, the amount sent back and forth; but there is a marginal effect of those higher tax rates, right? So, our tax rates would have to go up quite a bit to generate the amount--
Michael Munger: Not that much. Not that much, because, remember that much of the revenue would come--I said it was hard to separate--much of the revenue is going to come from eliminating the other programs.
Russ Roberts: Yeah. But that's much smaller than what we currently spend.
Michael Munger: No--we currently spend--that's fair enough. There are two questions. The question you are asking: In order to make it revenue-neutral for the rest of us, marginal tax rates have to go up to offset the move from $1200 to $15,000. That's right.
Russ Roberts: So, to make that clear, just to talk about what people worry about--and I'm not going to argue that this is a central problem with it. I don't think this is the central--I think there are other problems with it. But let's just talk about this one for a moment, because this one gets talked about it a lot--is the so-called disincentive effect of higher marginal tax rates. So, let's say your marginal tax rate is something like, let's say it's 35%, because when you combine state and local, etc., whatever income level, it gets you to 35%. That means if you earn an extra dollar you only get to keep 65 cents of it--the 35 cents goes to the government. Then the issue would be, it already discouraged you from finding a little extra work or working a little harder or working extra hours; and if you raise that to, say, 50, it would get discouraged even more, so there would be some--
Michael Munger: Well, we're talking 3 or 4%. The amount that would be required would be about 3 or 4%. So it would go from 35% to 39 or 40%.
Russ Roberts: I don't think so. That's not what I see, when I look at discussions of this. Maybe it's a question of how it's structured. Critics have suggested it's much larger than that. But we can put that to the side at the moment.
Michael Munger: There's no question it's an increase, and at the margin there's a disincentive for people who already have jobs to work more. The advantage is that right now the marginal tax rate on the very poor is well over 100%. And it would be reduced to the marginal tax rate, which for most of them is very close to zero.
Russ Roberts: So, let's talk about that, about the 100%, because I think that's confusing to most people. Explain why.
Michael Munger: Well, suppose I live in Section 8 housing that's subsidized, and I get welfare benefits of various types. So, I get money for my children; I get unemployment; I get subsidies for heat. I lose all of those things if I get a job. Or in the case of, if I'm female, if I get married. So, I am being paid by the state not to work and not to get married. And the first dollar that I earn maybe doesn't have much of an effect. The first few thousand that I earn, I actually lose at least that much in benefits. So, the marginal effect that I'm worried about right now is, very poor people have no way of getting jobs or getting married, starting a family, doing the things that we associate with responsible behavior without losing all of their benefits. And the reason that basic income, which is actually a head tax--economists always say that head taxes are the most efficient because there's no distortion effects--
Russ Roberts: Or small.
Michael Munger: Yeah, they are much smaller. So, BIG is a negative income tax. Forgive me--a negative head tax. Which means that I don't lose it no matter how much money I earn. And so, the incentive effects that I'm worried about more than you working less from a 3% or maybe even 10% increase in taxes is the effective marginal tax rates on the very poor--more than 100%. And if we reduce that, a lot of poor people will start working more. And it matters that they become part of society and comport themselves and see themselves as having a stake in society because they have jobs. Instead of being paid not to work.
Russ Roberts: So, I have a lot of issues with this. Some of them are conceptual, some philosophical. And you might be able to convince me. We'll see. But I want to get a couple of things straight because I think there's some confusion in most of the discussions I read about this. So, when you say the tax rates are over 100%, it's not strictly true that--which would be a polite way of saying I disagree with you--I don't think it's true that when you get a job your lose huge parts of your aid package. There are some aid, some aid programs, that are contingent on work versus not-work. But most of them have implicit marginal tax rates: that is, as you earn more, as you work, as you get a raise, your benefits go down. But they don't disappear. They don't disappear for a long time. Meaning, a long--you have to earn a lot of money before they go away totally. And those are put in place for a variety of reasons that we'll talk about. But the point is, I think you are exaggerating the idea that somehow we are paying people enormous sums of money not to work. We are paying people a little bit not to work. And then we are paying some more to discourage them from working. But there's still an incentive to work. And your claim, I think to be more honest about it, is that this would make the incentive to work larger, in some sense--that is, at the margin. That is, if you earn more, you would still get to keep your $15,000 in the example we're using. But it also, of course, discourages you from working because it pays you $15,000. So there's an income effect there.
Michael Munger: There is an income effect. And I'm not as worried about that income effect as I am about the substitution effect of forcing people to--forcing--encouraging people to substitute leisure because the price, the amount that they get, particularly for very poor people. And the thing that we might disagree about is how to measure the effects that are more qualitative. Like, do I qualify or not for Section 8 Housing, for subsidized housing? And the other is just the cut-off: If I earn more than a certain amount, I'm done. If I earn more than a certain amount, I'm not eligible for reduced-price lunches for my child. So it's a--it's called a 'cliff effect.' So it's--for the very poor, the cliff effect means that if I earn a certain amount, I just lose those qualitative benefits. Now, I'm trying to treat that as if we can think of it at the margin. And you may be right: Maybe we shouldn't do that. But one thing that you said I think we can agree on: My claim, right or wrong, is that a BIG would have fewer disincentives to work than the current program. That's the heart of the claim.
Russ Roberts: Yeah; that's true if income effects are relatively small.
Michael Munger: No, the substitution effect. The income effect, I'm just not that concerned about. I think that many people want to work and just can't, or can't get started. So, what we might disagree about is how lazy the poor are. I don't think they are lazy--
Russ Roberts: I don't want to disagree about that at all. And I don't think that's the issue. I think--
Michael Munger: Of course, I'm being tendentious.
Russ Roberts: Yes, you are. It's a cheap shot, actually, I would say.
Michael Munger: Yeah.
Russ Roberts: A really ugly cheap shot. But the point I want to stress is that--let me say it in a different way.
Russ Roberts: I think it's really important to remember what the actual current programs to help the poor are like. And in discussions I've read of BIG--of the Basic Income Guarantee--those programs are, I think either exaggerated or mis-described. So let me make a couple of points, and you can agree or disagree. Number One, most people don't get much money if they don't work in America right now. There's not this raft of welfare programs for non-workers. If you are woman with a child, you have some opportunities. But a single man doesn't have a great life in America right now unless that person has a job. You are eligible for Food Stamps. You can get Medicaid. But you don't have a stipend.
Michael Munger: No.
Russ Roberts: And it's very tough. So, we distinguish between types of people, right now. And the other thing that's really important that I think is grossly misunderstood is that we transfer a lot of money to people who are technically not poor. That is: Food Stamps and many other programs--lunch programs, etc.--explicitly give money to people who are above the poverty line or above what you would call--to say it more conceptually--they transfer money to people who are well above the level we'd like to transfer money to. We do that because we have to phase the benefits out slowly as income rises, because otherwise there will be these cliff effects that you are talking about. So there are cliff effects. But they are diminished by the fact that they are phased out slowly over the income range. And they therefore give lots of money to non-poor people. So, when people say the current programs are very ineffective in helping the poor, that's because they are designed that way. And they are designed that way for a reason. It's not just an ineptitude on the part of the government. It's a very reasonable idea, that you don't want to discourage work effort--not just to save money, though that's part of the reason--but also just to--well, for a whole bunch of reasons. And so lots of non-poor people benefit from programs that are designed for the poor. And to try to suggest that we can save all this money because we'll only give money to the poor, now--I think is--excuse me, because if we give money to everybody and then we'll save all that money that we used to the poor and therefore the poor can be a lot better off then before, I think is a--is bad accounting.
Michael Munger: As you know, the usual and overly simplistic form of the argument is we add up everything that we spend on welfare programs--programs for the poor--divide it by the number of poor people, and say, 'There shouldn't be any poor people. All we have to do is give them cash.'
Russ Roberts: Exactly. That's what Milton Friedman argued, by the way.
Michael Munger: And Charles Murray. And all of the many people who have argued for a negative income tax or basic income. That may not do that. Why not say--and then--I realize we are getting into what you said we are going to hold constant. But we're going to leave aside. But we're spending an awful lot of money that doesn't get there. So, we have the leaky bucket problem: If we could reduce the cost of administration. And many of those costs of administration are to make sure people spend things the right way. Instead of giving the cash, we give things in vouchers. Or, we give things in forms to make sure that they spend it the right way. And, you can see the argument for that, because we are worried that we want poor people to spend it on what we want--and by "we" I mean experts who are concerned about their objective welfare--thinking that, if you give them the cash, they'll spend it on something else. Now, that sort of paternalism I think is problematic; but it's not obviously false. So, one problem with this the idea: We'll give them the cash instead of the services. The other is, if you add up all the costs of the services, can you really recover that and convert it into a check?
Russ Roberts: Yeah. Well, my point is, is that, what I think, when you say 'administrative costs,' I think people just think of the costs of paying the bureaucrats who move the money around. And that cost, as I understand it, is trivial. It's not zero; it's not irrelevant. But it's not going to generate a lot of--these inefficiencies of having multiple programs and multiple bureaucracies, those so-called inefficiencies are relatively small. The other point I'd make is that it's not just what the experts want. It's a Public Choice program, in my view--it's a public choice effect. Taxpayers don't want to subsidize certain types of things. And that's just straightforward.
Michael Munger: Yeah. The Welfare Queen is an important trope. So, the person on welfare pulls up in the Cadillac, buys steak and cigarettes. Doesn't happen very often. But it is an important Public Choice argument, that you have this deal, where maybe some people on the Left, let's say honestly care about making sure that the poor get something. But others are concerned that, 'Well, we need to have them spend it the right way. I don't want my money wasted.' And so we impose all these restrictions.
Russ Roberts: Well, the bottom line is, let's go back now to the logistics of the budget problem. The bottom line is: You are going to transfer $15,000, $10,000, $20,000 dollars per person to people who are not poor. I think you have to raise people's taxes a lot more than you think. But that's not the most interesting aspect of this. Let's put that to the side. Just to make it clear why people are suggesting this, one answer would be: Well, yeah, it's silly to transfer money to everybody. Let's just transfer it to poor people. So, why is this argument put in this framework of, 'Well, everybody would get the check?'
Michael Munger: There's two reasons. One is to try to control the Public Choice problem, which you have already raised. And that is, if we take money from some and give it to others, we're creating a kind of rent-seeking contest to make sure that you are in the Receive group and not in the Take-from group. Whereas, if everybody gets it, then we've--the incentives for rent-seeking are much reduced, because if we increase it, we have to increase it for everyone. And Friedrich Hayek made this observation about the universalism principle. There's a very nice book by Buchanan and Congleton on Politics by Principle, Not Interest, where they follow up Hayek's idea that almost any transfer we make, as long as it goes to everyone can be justified because this is something that we are not using to discriminate. Now, you might or might not accept that argument. But it is a limit, both on the Public Choice problem of rent seeking and on the--it helps solve the ethical problem of redistribution.
Russ Roberts: But that's not the only reason people want to give it to everybody. And I think the main reason people want to give it to everybody is that, if you only give it to "poor people," you have this immense cliff[?] problem. So, if you say, 'Well, anybody who earns less than $25,000 a year gets $25,000,' then you've--basically people who earn $30,000, or $27,000, they are working a huge amount to get $2000.
Michael Munger: Yeah, but we could smooth that, if you want to. If we were going to discriminate, we could have--once you get to the poverty level, then you wouldn't get dollar-for-dollar; and maybe we could smooth it out, all the way up to $100,000. We could smooth it.
Russ Roberts: Yeah. I don't know why that isn't the more common proposal. Because, most people--just talking about marketability now: If you say to people, 'We need a new government program that gives everybody $20,000,' most people would say, 'Well, why would rich people need to get $20,000?' And I think they have a point.
Michael Munger: Yeah, right. And then my response is, 'Well, we'll fiddle with tax rates.' And then you say, 'But wait, there's incentive problems there, and why not smooth it out?'
Russ Roberts: Yeah; I'm not sure that fiddle-with-tax thing [?] works as easily as you do. But let's
Michael Munger: That's a separate problem, yeah. I'm conceding that it's a problem.
Russ Roberts: So, let's summarize. We're talking about this idea that every single person would get a fixed amount--it might be $10,000, it might be $15,000, it might be $20,000. Could I--I've never heard this talked about--could I refuse my check, if I don't want it?
Michael Munger: Of course. All you have to do is not cash it.
Russ Roberts: Yeah, or I guess not claim the standard deduction. It would be weird--in your version of it. It's a weird thing to--one of the stranger things I find about Social Security is that we have this solution--I've mentioned this many times but it bears repeating: There's this illusion that it's a program for me: They take my money, my paycheck, and it gets put aside for me. And of course that's not true: it goes out the door to pay for not just retirement benefits of retirees but also government spending right now because there's a surplus. That may change; we expect that to change soon, as baby boomers get older and retire and become more numerous. But the point is, is that Social Security for me--it's a welfare program that I also get, I'm eligible for. So, when I get a little bit older--I think actually now because I'm 62 I could start getting it. And I don't really feel like I should. I didn't--I never had the illusion when I was younger that I was putting aside money for my future retirement. And when I suggest to people that Social Security should be means-tested, they say, 'Well, I contributed.' And I say, 'Yeah, but you contributed to food stamps, too.' When you pay your taxes, you don't say, 'Where's my food stamp money?' because you understand the purpose of the program is to help poor people. Not to help everybody, because that's nuts.
Michael Munger: But everybody gets Social Security. You're right.
Russ Roberts: It's just nuts.
Michael Munger: So the point is: Everybody gets it. The fiction is that everybody gets it, and that somehow you are paying in to an account and then you get it. But it's a defined benefit program. There's some relationship, but not a very clear relationship between what you pay and what you take out.
Russ Roberts: There's a huge redistributive component, which is to help poorer people who didn't contribute much--who didn't contribute, hate that word--but weren't taxed as much when they were younger.
Michael Munger: Yeah.
Russ Roberts: But if you ask people, 'This is crazy; this is a mistake; the program's about to go broke; we need to do something. Isn't the obvious thing to means-test it?' and people say, 'No, we can't do that, because then it would reduce the support for the program: Then everybody wouldn't love it because it wouldn't be helping them.' But I'm thinking 'But it's an illusion.' So, I find that--I don't have a way out of that box.
Michael Munger: Well, it's already means-tested in a way, because there's a ceiling on the amount of taxes. So, once you pay a certain amount in--so it's actually means-tested kind of in the wrong direction.
Russ Roberts: But they have changed that over time--
Michael Munger: So instead of--
Russ Roberts: They have raised that.
Michael Munger: Yeah, they did. But for a long time the total amount that you paid was capped. And that meant that you still got Social Security but the amount that you paid in was capped. What you are saying is: There's a relatively small number of wealthy people--well, let me put it this way--wouldn't it be interesting if you could opt out of Social Security. What you are saying is, for most people, you get back more than you put in. Why not be able to opt out of Social Security? Why not be able to opt out of participating if there were a BIG, if there were a Basic Income grant--to say, 'I don't want to participate. I don't want to contribute; and I don't want to get the money.' And I think the concern would be that it would just devolve and that many people would not participate.
Russ Roberts: Yeah, I don't know. I like the better idea of saying you can participate but you don't have to accept the money. So, there are many, many people who are not poor, have a very small chance of being poor, who are happy to have some part of their taxes go to help poor people. They may have preferences about how that money is spent. But they certainly don't need to have it kept for themselves. So, the idea of having it, a program that everybody gets $10,000 or $20,000 seems to me to be a major tax, a marginal tax rate nightmare. You disagree: you think it's smaller than I think. But I just think--I think it's quite large.
Michael Munger: We agree it's big; we agree it's significant.
Russ Roberts: Well, I don't think 4 percentage points is significant. I think it's--
Michael Munger: Well, whatever it's going to be is going to be significant. We disagree on the amount. Even 4% is enough. And maybe it's 7%, 10%.
Russ Roberts: Or 20%. I mean, it's--there are a lot of people alive right now; and we're giving everyone $15,000, it seems to me government's going to have to get a lot bigger. And therefore the marginal tax rate is going to have to go up a lot. And this seems bizarre, that you would advocate, that anybody would advocate doing that. It seems to me the much better program would be what was originally proposed by Friedman in I think the late 1950s or early 1960s, and then he wrote about it in Capitalism and Freedom. I think Robert Lampman also proposed it at the University of Wisconsin. This idea that you would--not everybody gets $20,000--that's ridiculous. A person who has nothing might get $20,000. But it would slowly decline as you earn more and more per year, until, as you say, maybe after it's $100,000 dollars, you would then get zero. But why anyone who earns over $100,000 gets $20,000, it seems bizarro to me. I guess at that point it's such a small number of people maybe it's not so important. It's really that whole effect over the $50-$100,000 range that people are worried about, maybe. I don't know.
Michael Munger: And the reduction in the amount that you get also is a disincentive effect. It may be less than the marginal tax. Certainly, down in the weeds there's a bunch of problems with this. The main part of the argument that I want to advance is that the current system has bad incentive effects for the very poor. Having the amount not be immediately at least tied to--the amount that you receive is not immediately tied to the amount of outside income you get from other sources is the main thing that I'm worried about. The other details maybe we could work out. But what I'm worried about is to reduce the qualitative disincentives for people to take the first step up that stairway. And, you rightly said--that was a dirty, cheap shot--about the poor being lazy; but I want to raise it; and I want to raise it again. Because I worry that we don't give people enough credit. And we lose quite a few people now, that without these disincentives--minimum wages that prevent them from getting a job and getting experience for the very, very poor people that don't have much education--a big part of my argument is we could get rid of minimum wage laws. I don't know how you value that. But getting rid of minimum wages would have effects that are going to be hard to measure but that I think would be very positive.
Russ Roberts: I agree with that.
Russ Roberts: The question is--let's talk about this disincentive issue, because--and let's broaden the whole thing, because that's where I want to head. Which is the following. You've written about this in unpublished work, maybe even in published work; and certainly a lot of people are talking about it: which is this issue of it's possible that in the future a lot of people are going to struggle to find work. Right now we're pretending to take care of them through a program like Disability. So, as we've talked about on the program before, Disability has been made a lot more accessible to people. It's ironic--the workplace is much safer than it was 25, 50, 100 years ago; yet somehow more people are disabled. And that's just because we've changed the ease with which you can claim disability. We can debate how important that is. But the point is--there are a lot more--this is undeniable--there are a lot more people who are paid a check from the government who don't work. Who are not women with children. Who are typically men. In the case of disability, a good chunk of them are single men. And a lot of people would say, 'Let's just make this more open. Let's not worry about the disincentive effects of the minimum wage, if they are there.' I think they are there, but some people don't. But let's admit, let's assume that they are there. 'Let's not have to worry about the technological changes of artificial intelligence that are coming,' that we'll make, say, current cab drivers, truck drivers unemployable after--greatly unemployable--give them a very hard time to find a job after driverless cars and trucks come along. We're going to have massive social problem, is the claim. And the right way to do that is to just give these people money. And I think that's deeply appealing to a lot of people. And I want to ask you: Is that deeply appealing to you? Forget all this stuff about the current poverty programs. A lot people would agree with you--and I would, too--that they would be better structured to be just cash-based, not in kind. But we are talking about more than that. We are talking about expanding way beyond, say, women with children. We are talking way beyond, say, temporary Unemployment Insurance. We are talking way beyond relatively ungenerous Disability. We're talking about a--just--'Don't worry. This is the ultimate Safety Net. We're going to make sure that no one has a problem meeting basic needs; and if that comes out the government and the taxpayer, that's fine. As opposed to charity; as opposed to incentive to work.' That's what's on the table. What's your reaction to that?
Michael Munger: Well, I think the way you put is exactly the right way to put it. In fact, it's the way that I would have. There's two kinds of programs that we try to mitigate the impacts of globalization and the fast-moving changes in, maybe, the sharing economy. So, Marc Andreessen, who you've had on the show, wrote, in November 2011 an article in The Wall Street Journal, the title of which was 'Software Eats the World' ["Why Software Is Eating the World"--Econlib Ed.]. And the problem is that software is to service industries as robotics and automation is to industrial production. So, we used to say, 'Yes, we're losing all these production jobs; but there will still be work in service.' Well, no. Software can take over all these service jobs. So, truck drivers, cab drivers, people who work in restaurants--all of those things can potentially be done by software. The person at the desk, at the checkout counter at the Walmart--you may be able just to do self-checkout. So all of these jobs may very well be lost to software, just as we saw so many jobs lost to automation in factories. Well, so the question is how to handle that. You mention that there's two things that we do now. One of them is, we call Trade Adjustment Assistance, or, in an attempt to make places like Fort Payne, Alabama [?], where people used to make socks. Now we have Adjustment Assistance and we try to teach people, you know, some other kind of trade. A 50-year-old person that didn't graduate from college who worked in the sock factory for 20 years and assumed that that was what they were going to do forever--that's a pretty big arm to them. It's tempting to say, 'Well, we need trade protection.' And in fact, that's the direction we're going--is, we're going to have trade protection. Because all these people lost their jobs. They are made now abroad. We've shipped our jobs abroad. I don't think any of that's true. What we've done is lost our jobs to productivity, some of which comes from software. But the question is: How can we insulate people politically from that? So, one thing is Trade Adjustment Assistance. The other thing, and you mentioned it, is Disability. And Disability is probably the most pernicious kind of welfare program that I can think of that makes the best argument for a BIG. Disability has two really bad, corrosive aspects. One is, it's a rent-seeking contest. If I can hire a lawyer and pay that person $5000, I've got a pretty good shot. There's towns in Alabama where one-third of the people are on Social Security Disability, because they had skilled representation. A bunch of people are spending a lot of time winning this rent-seeking contest. But, suppose you win? Disability means that they are going to pay me for the rest of my life not to work. And if I work, not only do I lose my benefits; I get arrested. So, we're making sure that people can't possibly find any other kind of gainful employment. So it's the Hayekian nightmare. In Chapter 9 of Road to Serfdom, Hayek talks about security. And the two kinds of security that he talks about is: One, we're going to guarantee people's current income. Which is terrible. The other is, we're going to be guaranteed a certain level of living that means that they can survive, even if they are subject to forces which, through no real fault of their own, they have lost their jobs. And that's the way that creative destruction works. It's very difficult to predict. Now, we can say maybe they should have predicted better. But one of the Hayekian observations is it's hard to predict. In a dynamic economy, the people who are investing have a hard time predicting. You can't really expect line workers to be able to predict very well what sort of business should I go into and develop skills in. Disability prevents people from making any kind of adjustment. So, getting rid of Disability; getting rid of Trade Adjustment Assistance. And remember, we are talking about $15,000. $15,000, I really can't imagine trying to live on $15,000 a year. It's not that much. It just means that the $15,000, I wouldn't lose it if I get another job and make another $10,000 or $20,000 that I try to use to improve my life and the life of my family.
Russ Roberts: Yeah, well the--
Michael Munger: So, you're absolutely right about the Disability problem. That really is an important one. We're locking people in, though. And a BIG would not do that. And we would get rid of all the apparatus. We may disagree about this. We have a big apparatus for judging whether people qualify for these benefits. If you count Disability and some of the other Trade Adjustment Assistance.
Russ Roberts: Yeah, it's important to remember. Trade Adjustment Assistance is, for reasons that are not well-understood by me or maybe anyone--it's a very small program. In principle, we have a program to help people who lose their jobs because of globalization. Which--you can debate whether that should exist or whether it's a good idea. It does exist. And for reasons that I don't fully understand, it's very small.
Michael Munger: Yeah.
Russ Roberts: Many people who qualify for it either don't know about it or choose not to use it. So, it's not a very--it's not an effective cushion against the globalization effects that many people are worried about, and for reasons that I don't fully understand. But, if we talked about BIG as an alternative to that, plus, say, Disability, plus minimum wage, plus the Earned Income Tax Credit, plus food stamps, etc., etc., etc.--the other issue is: You just said, '$15,000 is a small amount of money.' That's why it's not going stay at $15,000. You really think that--you say this is not going to use as much rent-seeking? You don't think there is going to be rent-seeking by people trying to make it $20,000 and $25,000?
Michael Munger: Well, that is the argument for giving it to everyone. It would be too expensive to raise it much. Now, but this is generally a good argument, it's a good counterargument, and I think you could expand it. So let me--I'm interrupting you but you made the first step in this argument. So, remember, my idealized claim is, we get rid of all of these other programs. We combine all of them into a BIG, and we fix the BIG at the current poverty level; and we're done. We walk away and we never touch this again. Well, that's asinine. I don't think anyone actually believes that. Politicians cannot get re-elected by saying, 'I promise to do nothing.' And so, it's like the 1986 Tax Reform Act--there's a great book about the '86 Tax Reform Act called Showdown at Gucci Gulch, where a bunch of tax rates were cut; but even more revenue was created by getting rid of many loopholes and set-asides and little special tax treatment. So the result was revenue-neutral or maybe a slight revenue increase. The problem was that over time that Christmas tree of dispensations has been decorated again. And so you're right--there is a really big problem with my argument. And that is that, over time, we'd have a BIG; I don't think what would happen is we'd raise the BIG. I think what would happen is we'd get a bunch of other programs tacked back on top of it. And a lot of the beneficial effect that I'm claiming would disappear. Even if it exists--which is debatable.
Russ Roberts: Well, let's move to the philosophical question, and it's a little awkward--my view is, I prefer private efforts to help poor people, private efforts to help people who are out of work because of technology or trade. And by private efforts I mean things that we don't see right now because there's no reason for them to exist because we have such an extensive public effort. So, charities that give people money or take care of them or give them skills are very thin, and that's because there's a lot of government activity; and that's because people are not going to donate money to a charity that tries to do what the government already does: I'm already funding that through my taxes; I have no reason to fund it through private efforts. Now, when you say that, people say, 'Well, there's a free rider problem.' So, talk about that--why people make that argument.
Michael Munger: Well, I am deeply conflicted about this. So, as long ago as 1831, Alexis de Tocqueville in his book Democracy in America talked about the difference between France and the United States. He was worried that democracy in France--and this was his word--would enfeeble the impulses that people have to join private associations and to say, 'Here's a problem; we should do something about it.' In a democracy or at least the kind of democracy that Tocqueville saw in France, basically people just say, 'I gave at the office.' Or, 'I paid my taxes. Since I pay taxes I have no reason to participate in this.' There's a school; and somebody should work on this: 'Yeah, you are right, the state should do that.' I see someone getting beaten up in the street or someone is very poor: 'Well, the state should do something.' I have no obligation to do it. Well, Tocqueville thought that that wasn't happening in the United States. Suppose we really did institutionalize this in the way that I'm arguing that we should. There is the problem that then people would say, 'We have a lavish program. You get all this money. You must have wasted it. I don't feel any obligation to participate in giving to charity, in working on problems of homelessness, because it's your fault. We already paid our taxes.' I think that's a legitimate objection that I think that many people have the perception that the existing welfare programs are sufficiently large that that ship has already sailed.
Russ Roberts: I agree with that.
Michael Munger: But I do think that's a problem.
Russ Roberts: I agree with that. I think that ship has sailed. It sailed, oh, around 1933, 1935 actually. And one of the only interesting papers I ever wrote as an academic is that paper--we'll put a link up to it. Basically, private charity in the United States, while still a very healthy sector, no longer goes to help poor people. It goes toward education--people donate to their college. It goes toward medical things--the wing at the hospital. A membership at the art museum. So, people don't help poor people any more, because the government crowded all that out and did it long ago and [?]--
Michael Munger: But you also mentioned the free rider problem, and that is: Suppose that I think we should all contribute voluntarily to the provision of a public good. And charity is a public good. But I think you're not going to, so I'm not going to. Whereas, if I could be assured that you were going to contribute, I would be willing also. And that's the role of the state, is to enforce that agreement that we all have to pay our voluntary contributions, which become taxes and are no longer voluntary. I'm not so sure that that part of solving the free rider problem really works. I think what you just said about your paper which is interesting is, that has been attenuated over time anyway; and we have displaced our charitable impulses--not completely, but at the margin--from the poor to art museums, to operas. A lot of these are--we're just trying to make some contributions that wealthy or middle class people already care about. And that's not really charity in the traditional sense. That's not: Let's take care of those who can't help themselves. That's: Let's provide a voluntary local public good because it's good for the community I belong to.
Russ Roberts: Exactly. So, the claim I want to push, for a minute, is that, because we have gone through the state rather than voluntary--and people--let me make one point clear. People think we could never do it privately because of the free rider problem. And I agree that the free rider problem reduces the amount people would donate. But they would still donate a lot. And the question is whether that smaller amount than the public-coerced taxing would be structured differently. And I want to make--people say, 'Oh, that's ridiculous. No one would give. It would be so much smaller.' I just want to make the observation that currently there are millions of dollars donated to support scholarships to private schools for poor people--even though poor people can go to free schools right now. So, it really should have been crowded out. There's no reason--if you came to me and said, 'I'm collecting money to give charity to poor people so they can afford a good school, I'd say, 'Well, what do you mean? They already have a good school. It's free. You'll never be able to raise any money for that.' And yet, people donate, because they care; and they have a passion to see people get educated. And they give lots of money to get people out of the really bad public schools that they're in even though there's a free rider problem. So, there's an issue, then, of magnitude--which I certainly concede. And the question is how big--I'm not saying there's no free rider problem. But I'm saying a private charitable fund or a group of them is viable. The question is: How big would it be? The point I want to emphasize now is that it would be, I presume, different than the public aid, which is basically no strings attached--if you meet the criteria. Now, the criteria are weird and different and bizarre, and you can debate whether that's good or bad. But what you're advocating, and what many people advocate, and that's the part I want to turn to now, is: We need to go away from a world where we have all these weird bureaucracies and all these other things--to try to figure out if you are qualifying, you need a lawyer. And I agree: Let's get rid of all of that. But to get rid of it by saying, 'There's a new program where there's no rules--just that you're alive,' and you get a $15,000 check, might not work as well as a private solution--that would give less but would be structured in a more customized way for the individuals. That's my claim.
Michael Munger: If we're talking that you and I are able to persuade people to move people in that direction, I might very well go along. And what's sad about it is, in 1831 at least, that was what Tocqueville thought was the uniquely good feature of American society--was we mostly did kind of solve that problem. We didn't worry so much about the free rider problem. We said, 'As long as I make a contribution, others will, too.' And that is an equilibrium. In fact, if all of us think that others are also participating, we're willing to participate. And if those expectations are fulfilled, it works. The problem is that if a bunch of people cheat--don't participate: I cheat, don't participate--having the state step in as an alternative is not a very good substitute. So, if you and I and the others who think that could actually implement a program where private charities were able to solve this problem, I guess I would be much less supportive of a BIG. My concern about what we see, what we have at present, is the combination of programs that we have--minimum wage laws--and as you said, there are questions about minimum wage laws: do they create unemployment? I think they do have an impact on many young people who otherwise don't have many opportunities to get any kind of experience. You don't have the chance to say, 'I got up at 7:30 in the morning; I made it to work by 8; I've done it for 2 years, and if I work for you, you can rely on me.' And so you can actually pay something. So, in Europe, they solve their--they don't have minimum wage laws, for the most part. What they have is internship programs, or apprenticeship programs. So, the United States, in the particular way that we have said we're worried about people getting enough money to live on, 'Let's have minimum wages,' we have singled out a particular part of our population that's most vulnerable. That's the population that might be well-served by charity, also. I don't disagree with you. I just worry about being able to make that kind of wholesale shift, when even the shift I'm thinking about through a BIG is probably politically impossible.
Russ Roberts: Yeah; I'll concede that my view is not clear[?] in the data right now, for sure.
Russ Roberts: But I want to continue the philosophical point and conversation. And again, I want to tilt it toward this issue of not just people who are poor today--say, who are homeless, who are unemployable at the current, who have not been able to find work at the current level of the minimum wage. I'm worried about, say, 20 years from now, when it is possible that there may be very large numbers of the American workforce that can't find work at all because of the role of Artificial Intelligence (AI). And what I'm thinking about--I'm trying to get a little bit of a Veil of Ignorance here. So, Rawls asks us to consider this idea that you don't know your place in the income distribution: you don't know whether you'll have some of the skills that may be relatively rare that will allow you to have a very good job in 20 years despite the increase in artificial intelligence, robotics, etc. So, we are behind the Veil of Ignorance--we are thinking about--the way I like to think about it is: Let's take one's brother. So, your brother, let's say, a cab driver, a truck driver. And you know that in, say, 5-10 years, let's say, you are pretty confident that your brother is not going to be able to use those skills any more. And it may be that there's almost nothing else that's attractive. That's my worry. And it's possibly true. So, how would you prepare for that? What would you do for your brother, who you love? Not everybody loves their brother, but let's say you do. Would you just say, 'You know, I know you are having a tough time, so I'm going to give you $2000, I'm going to give you $1500 dollars a month--that's $18,000 a year. And that way you don't have to worry about it. I know it's coming; and I'm lucky; my skills are not devalued by technology; I'm doing fine; I'm healthy. $18,000 a year is not a big deal for me; I'm going to give you $18,000; that way I'm going to make sure that you're going to be okay. You're going to be less worried. In fact, I might make it $24,000. I'm going to give you $2000 a month. I can afford it. It's going to be okay. What do you think of that?
Michael Munger: Well, I think that many families probably have always operated that way. And it's only been in the last 50 years or so in the United States that we've seen government as a replacement for that. So, 100, 150, 200 years ago that's exactly how a family would have operated. I don't know if it's better or not. The point that you're raising is: Suppose that many people felt that way. Wouldn't it be more efficient to operate it through a government program called a Basic Income Guarantee? And we act on that impulse collectively and solve the free rider problem? The secret that I have--and so I think that you think that many of the claims that I've made so far are wrong. You're going to think this one is ridiculous, so I might as well go for the whole shebang.
Russ Roberts: Trifecta.
Michael Munger: Heh, heh.
Russ Roberts: You know I don't think they are ridiculous. The whole thing makes me uneasy.
Michael Munger: No, you think they are ridiculous. That's fair enough. It's okay. Let's own that, Russ.
Russ Roberts: No, and it's not--
Michael Munger: And it's okay.
Russ Roberts: No, it's not ridiculous, and I'm uneasy about the fact that--you know, it's very easy, I have a very good financial, monetary life, and my children probably will too. And it's--there's something a little bit repulsive about hearing me say, 'Oh, private charity will solve it.' So, I'm--
Michael Munger: Well, at least you are not a tenured professor.
Russ Roberts: Yeah, that's right.
Michael Munger: I'm used to a--you actually went out into the private sector.
Russ Roberts: Sort of.
Michael Munger: So it is particularly amazing to hear tenured professors talk about [?]--
Russ Roberts: Carry on. What else--give me your latest ridiculous idea.
Michael Munger: Okay. The most ridiculous claim is that the BIG won't have to go up. It will go down. And the reason is, that, I think that in the economy that we're heading towards, it is true that wages are going to fall; and for many people, they'll be near zero. But prices are going to fall by more. Which means that real wages may actually go up.
Russ Roberts: Lots [?]
Michael Munger: Let me say that again.
Russ Roberts: Yeah, for lots.
Michael Munger: Wages are going to fall by some. Prices are going to fall dramatically. And I know you disagree about this. But my claim is that being able to rent rather than own, have a more efficient use--I won't need to have a car; I'll be able to rent a car, a driverless Uber--I won't have to have garages. Our streets will be more efficient. There's all sorts of--but we're not just buying time but we're also buying space. So, we'll all be able to have smaller houses. The cities will be more efficient. The price of almost everything will fall. And we see this to some extent now. Facebook is nearly free. Twitter is nearly free. Google, Wikipedia--so many things that we used to have books for or servants, we now get essentially for free. If prices fall enough, then the amount of a BIG that will be required may not be so large. So I may then be able to have a smaller apartment. It may be possible for me to have food delivered much more cheaply and efficiently than we are able to do it now. So, my hope is, that if that's true and we can compensate for the fact that wages are going to fall by making sure that everyone is able to get access to a now-much-cheaper set of basic services, BIGs won't have to go up. They'll be able to fall. So, there: I said it.
Russ Roberts: Well, I don't disagree with any of that, actually. I think the real purchasing power argument, the standard of living argument, I think is true. I do think there's going to be--there's still an enormous Public Choice issue, which I know you are aware of, about how people who are living great, materially, but don't get to go to, say, their own island in the Caribbean because they are on the BIG, whether that's going to have some difficult societal issues. Right? So, somebody who makes a very, very low wage but it goes very far, compared to somebody who makes a very high wage that goes ridiculously far, might be troubling. There may be social issues.
Michael Munger: Absolutely. But a BIG makes that better than a system when we don't have some sort of easily available compensation if the form of cash. So, I think you are right. But a BIG--that's the argument--you just made the argument for the BIG.
Russ Roberts: Uh-oh--I didn't realize that. My mistake!
Michael Munger: Because without it, it would be even worse. You are absolutely right. Way to go.
Russ Roberts: So, let's go back to the--you took my Veil of Ignorance argument in a very clever--but not the direction I intended. So I'm going to come back to that. You made the point that the increase in government programs over the last century have destroyed--the way I would describe it--destroyed some of the bonds between us. I don't have to worry so much about my parents, I don't have to worry about my siblings, because there are government programs to take care of them. And other people would say the causation goes the other way: Because our connections to each other are not what they used to be, we need government programs to cushion the blow and to make those connections for us. Or, they'll argue it's--
Michael Munger: It's probably recursive. We partly dissolve the bond, and the dissolving bonds reduce the obligation.
Russ Roberts: Yup. But I was actually making a different point. Which is: I don't think I'd give my brother $24,000 in cash as a way to soften the blow if he lost his job to a driverless car. I think I'd want to help him try to find an alternative strategy for meaning in his life, than just say, 'Oh, don't worry. You can live off me.' Right? So the really ugly way to put the BIG argument is: 'Life is hard for some people; and so it's okay that they live off of the rest of us because we have good lives. Our lives are meaningful; they are great. So we just need to give them comfort through money.' My view--and this is my real problem with BIG--it's not so much whether taxes go up or it's inefficient or we should have criteria for who gets it or what. The question is: Is it really a good idea? To tell people that--I mean, I don't know which is worse. It just strikes me as--I lost my train of thought here. But I'm trying to make the point that the idea that giving people money will have solved the problems of what makes life difficult in the 22nd century, say, strikes me as the wrong way to go about thinking about the problem. The right way to think about it is: What gives life meaning? And, Adam Smith said, 'You want to be loved and lovely.' And giving people money is the last thing to do, to give people respect and dignity. Now, the question is: Is there any other alternative? I'm willing to face that. If there's not, then I'm all for giving money, because I don't think--I don't want to romanticize poverty. I'm not saying, 'Oh, everybody needs to struggle; and my brother lost a job. He needs to go through the soul-searing experience of trying to remake himself.' I'm not saying that. I'm saying that it would be very tragic. Anyone losing a job is a tragedy. The question is: What's the right way to cope with that, and saying, 'Oh, don't worry; here's a lollipop,' just strikes me as ugly. At the same time, saying, 'It's good for you. You'll come out better for it. I'm not going to give you anything.' That's also ugly. When I make the case for a private program to do this, whether it's through my family or a different set of civil-society institutions, I'm making the claim that those would have a different texture. It's not just that they would do the money more effectively. We don't disagree about the objective. What we disagree, perhaps, about, is the means. And I'm going to go with the jobs-are-overrated claim. It is true that for a relatively brief period of human history--at most about 150 years, really about only about 100 years--we have defined ourselves in terms of jobs and careers. Not family. Not organizations that we belong to. Not the sort of culture in which we are embedded locally. What we've done is define our jobs as being what we're about. In fact, you meet somebody at a party, one of the first questions you ask him is, 'What do you do?' And what you mean is: What is your job?
Russ Roberts: Yep.
Michael Munger: Well, I think, what do you do, question, could mean something else. And John Maynard Keynes famously predicted a 2-day workweek: As productivity increased and real wages rose, even though wages might fall, prices would fall by more. He said--and Karl Marx said this also--you know, you would have so much time that you'll define yourself by something else. And people will find meaning in communities--through Facebook. In fact you've done a couple of very nice podcasts recently about the ways that people are able to find each other through Instagram, through Flickr. We create these communities through hashtags. And, for a long time it's been sort of face-to-face, family--we meet for Thanksgiving, 'Oh, here's my brother and I don't really like him.' I might be able to construct communities of meaning through other kinds of online platforms. And become someone who is revered, respected, and lovely--because I have enough time and resources to do that. So, I think people are going to construct meaning if we reduce the constraints on them. We talk about jobs as being important. Most people don't like their jobs very much. I love my job. I'm grossly overpaid and underworked. I have a wonderful time. Many, many people--and I've certainly had jobs like this--it's not that great. They'd quit in a minute and find something else that was more meaningful if they could. The question is--and you have raised it well--is this something that having a sort of sterile, guaranteed stipend that comes from this impersonal entity, government, does that advance or retard that vision that I think we share about people constructing their own communities about meaning. Which might or might not involve jobs.
Russ Roberts: That was very well said. I don't get to read Franklin P. Adams very often on EconTalk. Franklin P. Adams is a poet who was famous for coining, making "Tinkers to Evers to Chance" famous, the double-play combination.
Michael Munger: Uh, huh.
Russ Roberts: But his other somewhat noted poem is called "The Rich Man," which I'm now going to read. It's short.
The rich man has his motor-car,
And that's your point about work. Work is--it's overrated. It's better to--there's this other story, it's probably apocryphal, where some steel worker says to Teddy Kennedy (Edward "Ted" Kennedy), 'You ever held a job? You ever worked in a steel mill? You ever--?' And Kennedy says, 'No.' And the worker says, 'You're lucky. It's overrated. It's not--,' I didn't tell that well. I forget. The actual wording is better. But you raise a great point, which is: There are other ways to get meaning in life. Perhaps. The idea that you support your family, used to be a male prerogative. It's no longer the case. Whether it's a good thing or bad thing doesn't matter. Our world has changed.
His country and his town estate.
He smokes a fifty-cent cigar
And jeers at Fate.
He frivols through the livelong day,
He knows not Poverty, her pinch.
His lot seems light, his heart seems gay;
He has a cinch.
Yet though my lamp burns low and dim,
Though I must slave for livelihood--
Think you that I would change with him?
You bet I would!
Michael Munger: Yeah, it's gone.
Russ Roberts: Men don't get the satisfaction that they used to from taking care of their family, because women can take care of their family now. Financially. And that's changed as culture. It evolves. I guess the question I have is that--and I take your point, both parts of it. One is that I'm underworked and overpaid and love my job; and I understand not everyone does. And not everyone needs to take care of their family or feel that they provide for their family any more. But I'm not so sure that that's gone to zero, for men or women. And I don't know that if intervening in that emergent phenomenon through a very large program is the right way to help us get to better world in the future. But, it's been a provocative conversation. And, do you want to say anything in closing?
Michael Munger: Well, the last point that you raise, I think may be the key one. And that is: Providing for my family is a combination of creating an environment of love and support and having time to do things together; and providing them the material things that my family needs. If we move a little bit more towards the first and away from the second, I think it will still be possible for people to provide for their families. My question is: What's the best way to accomplish this without suffering the admittedly corrosive effects of displacing these activities to an impersonal state? And getting away from the focus on families? I happen to think that a BIG will help. I certainly understand arguments to the contrary. I think this is something we are going to have to deal with.