16 Reasons Matt Yglesias is Wrong about the Job Guarantee vs. Basic Income

By Pavlina Tcherneva

Slate’s Matt Yglesias is out with another caricature of post on the Job Guarantee (JG) and, guess what?  He still doesn’t like what he sees. He’s all for guaranteeing income to people who can’t find jobs, but he’s opposed to making receipt of that money “conditional on performing make-work labor for the government.”  As one of the leading proponents of the JG, let me say this for the nth time: THE JOB GUARANTEE IS NOT ‘MAKE-WORK.’  This is not a reaction to Yglesias but a core principle of the earliest literature on the Job Guarantee (e.g., here, here and here).  There is no way that anyone familiar with even a sliver of the vast collection of books, articles, essays, working papers, policy briefs and blog posts on the JG could, in good faith, continue to claim that the JG is “make-work.”

After straw manning the JG, Yglesias expresses his enthusiasm for a Basic Income Guarantee (BIG). He prefers simply handing out money to the jobless because it’s not as “messy” as the JG.  (I’ve already argued why such objections should not be taken seriously). But more importantly, like many BIG advocates, he assumes that the BIG will magically solve the fundamental problem of economic insecurity.

Here are sixteen reasons why this assumption is wrong.

MACRO ISSUES

1. Yglesias may not realize it, but all serious academic support for BIG is based on the idea that many people will quit working (this is considered desirable in order to eliminate bad jobs and ultimately ‘decommodify’ labor; e.g. here and here ). So the goal is to reduce the supply of labor and reduce production.

2. JG provides a “good job” alternative to people who work in “bad jobs”. When private employers want them back, they have to provide at least the same or better living wage-benefit package and work conditions offered in the JG.  JG sets the labor standard.

3. Under BIG, production drops, consumption rises, and so do prices. Suddenly, the value of the BIG grant has been eroded. Great success: the poor are still poor.

4. Under JG, employment rises, socially useful production rises, and (as we have argued many times) some of that production is dedicated to the benefit of the poor, providing goods and services at the local level that the private sector has not provided, and thus it absorbs part of the wage. In other words, both supply and demand rise.

5. Coupled with its countercyclical mechanism, JG is an inflation stabilizer (not an inflation generator, like BIG). We’ve modeled this many times (see here, here, here). Inflation from other sources is, of course, possible (runaway bank lending, speculation, oil shocks etc.—all are separate issues.)

6. BIG is not countercyclical. It’s universal, unconditional, but does not fluctuate with the business cycle. JG is a direct response to recessions and expansions.

7. There is no mechanism by which BIG can ensure full employment over the short or long run. Only the JG can.

8. In short, BIG doesn’t deal with price (or currency) stability, useful output, or any of the negative externalities from unemployment.

POVERTY

9. As Amartya Sen taught us, poverty is not just a function of lack of adequate income.  Providing income alone does not eliminate poverty.

10. The poor and the unemployed want to work (here, here). And as my work on Argentina showed (9m14s), receiving income is the fifth reason why the poor wanted to work! Why do BIG advocates presume to know what’s better for the poor than the poor themselves?  BIG does little for those who want to work.

11. There is almost a ‘neoclassical market equilibrating assumption’ behind most BIG analysis that says: “as long as people have cash, the market will magically provide the goods for them, allow them to acquire assets, provide them with the freedom to do what they please, etc. etc.” If the market hasn’t solved these problems now, why would it do so just because people get cash? All structures that marginalize, reduce opportunities, and discriminate remain. JG is not a panacea for all these problems, but it deals with one crucial and systemic aspect of marginalization – the absence of guaranteed decent work.

12. Amartya Sen also taught us that what matters is not just freedom, but substantive freedom. That is, policy has to 1) recognize what individuals themselves want and value; 2) it must provide these opportunities; and 3) it must remove obstacles from taking advantage of these opportunities.

13. The JG does precisely that: recognizes many people want paid work, provides the job opportunity, and removes obstacles from taking the opportunity by targeting the jobs to the communities, and providing the very services that one might need in order to take care of these opportunities (education, transportation, care etc., etc.).

14. BIG may lull the recipients into a false sense of security. Once the BIG grant proves inadequate to liberate the poor from their poverty, and the poor decide to search for better paying jobs and opportunities, they will not be there. Just like they aren’t now.  As research has shown the mark of unemployment is devastating and unemployment breeds unemployability.

15. Again, many BIG bloggers are not familiar with even the basic BIG literature. There is such a thing called ‘participation income’ and ‘civic minimum’ in serious scholarly work (Atkison 1995 and White 2003, respectively)—an idea that society is built on the principle of reciprocation.  Society provides you with a basic income; you reciprocate by participating in socially-productive activities. This is exactly what the JG does. No matter what Yglesias says, it is not based on the coercion principle of workfare, but rather on the principle of participation.

16. I find it ironic that we have to debate each other. BIG and JG stand on much the same principles. Let policy provide an opportunity to all to perform socially useful activities on the ‘participation principle’ through the JG, while supporting those who cannot (the young, retired, disabled, with onerous care burden) and we have a stronger, more stable economy that creates socially useful activities that serve the public purpose.

Yes, sending a check to people is not as “messy,” but let’s stop pretending that its a panacea for the fundamental problem of economic insecurity.

43 Responses to 16 Reasons Matt Yglesias is Wrong about the Job Guarantee vs. Basic Income

  1. Under the historical regime, BIG would lead to inflation due to increased consumption without increased production. However, I believe that there is good reason to believe this is barely the case today, and irrelevant in the near future.

    We are at the dawning of an Artificial Intelligence fueled production revolution. But let us peer into the near future some 10 years from now where cars drive themselves, AI manages business operations at local and corporate levels. Manual labor is replaced by cheaper machines that can navigate a business or factory, provide assistance, tirelessly work 24 hours per day. In this world, human labor is almost always less efficient and more costly than AI powered labor.
    In an AI powered world the limit to production is not human labor, but natural resources and political agendas. BIG is necessary in that world, and JG might prove to be a trap because no business is hiring at any wage.

    • Perhaps this AI powered world exists in the minds of some science fiction writers, but in the real world in which I live there is an enormous amount of labor that is currently hands on human and will remain so for many decades if not forever. A newly invented machine may take over some of this work, but who will invent that machine? Will it simply self-invent?

      • Yes for now.
        However, you will see the first major change with coming of AI powered shipping and delivery made possible with self-driving cars and trucks. Whole industries are hard to replace, and those will be the first.

        And it is not sci-fi fantasy. It is happening.

    • Porn. The Web’s killer app. (Yeah, that was a smutty comment, but it is economic activity. I read somewhere that there are something like 5000 webcams for it in Britain alone.) When some activities reach levels of productivity that have little need for labour, other activities see opportunities to expand to satisfy the wants that aren’t being easily met.

  2. Yglesias:

    “Now obviously none of this is to dispute the uncontroversial view that at any given time a certain number of people should be working for the government (teachers, cops, bus drivers, etc.) or that short-term surges of public sector employment (in, for example, construction) should be on the table as a counter-cyclical measure.”

    File under: even a blind squirrel …

  3. Matt and we want more generous treatment of jobless people.

  4. Erick Borling

    Thank you for the throrough series of articles about the jobs guarantee. I wonder if you could point me to the specific Amartya Sen litereature you reference. Also, there is a recurring MMT claim that needs much more elucidation; that poverty and unemployment are created by fiscal policy… or… what. I would like to understand the cause of poverty and unemplyment. I’m no economist but I’ve been consuming NEP blog articles to the best of my ability for over a year now. It’s the most interesting writing being done in our nation, period. Thanks again.

    • If the government of a brand new nation start taxing everybody 100 squidos but hasn’t issued any squidos everybody turns around and says “I will work for a wage paid in squidos” -EVERYBODY is unemployed because the govt tries to run a surplus. Monetary policy cannot fix it – you can lower rates all you want, the problem remains. Now if the govt issues 100 per head by spending still some people will capture a surplus and save it, so there will still be some unfortunate enough to look for work to earn more squidos. The government has to issue enough to cover the tax bill + the savings desire of the private sector. Then you get full employment. Issue more and you get inflation.

      Watch Mosler and Kelton on this:

      Youtube “mosler soft currency” and “modern money public purpose 2″

    • I’ll take a shot.

      Imagine a closed economy with no government, but money. There are factories and workers. If the workers spend all their income, they can buy all the output.

      But if the workers save some of their income, then some of the output will go unsold. The factory owners will cut back production, and some workers will be unemployed, until production is reduced to the level of spending, and the market clears.

      Now add a government and a foreign sector. They might buy some of the output, restoring full employment. Or the foreign sector might sell more products than they buy, effectively becoming another saver of the currency, resulting in more unemployment. Government might run a balanced budget, being neutral, or a surplus, also acting as a saver and causing unemployment. Or it might run a deficit, and consume the otherwise unsold output, and eliminate the unemployment.

      As sponsor of the monetary system, and issuer of the currency, the government is morally obligated to make sure that there is enough demand to consume all the output the economy can produce, so that there is no unemployment. If they fail to do so, then the unemployment is their fault. Unemployment is the evidence that the government deficit is too small. Said another way, that taxes are too high for the size government we have.

    • One of my favorite MMT meme’s comes from either Wray or Billy Mitchell.
      The government is responsible for unemployment, so it should fix the problem it has created.
      I always thought that summed it up nicely, after I figured out what it meant of course.

  5. Participation matters.

    One of the fundamentals of human psychology is that humans will only share their resources with those that they perceive as ‘pulling on the same rope’. It’s one of the things that makes us special as a species and it is wired in at a very low level. (Three year olds exhibit the behaviour).

    And that means that what I think about what you’re doing matters. If I don’t like it, and enough of me don’t like it then we will politically agitate to stop it.

    Income guarantee can have no longevity, in the same way that unemployment benefit has no longevity. We can’t even get universal Child Benefit to stick here in the UK (rich people “don’t need it” apparently. Next stop on the attack list the universal state pension).

    And that’s because people resent those they see as slacking off.

    Whether you like it or not, you have to be seen to be doing something that enough of your peers consider ‘useful’. And what that is depends upon the social maturity of the society you live in. Work cannot be anything you want, because your peers will not permit it.

    There is a reason that recent polls support providing jobs for all, but not income for all. It’s entirely human to do so.

    I find it amazing that progressive individuals cannot stand the idea that ‘individual freedom’ has limits in a society. Three year olds can work that out, so I don’t understand where this burning desire to revert to toddler behaviour comes from.

    • This. What Neil said. Yes. This is IMHO the biggest obstacle to BIG. Even when we overcome the inflationary bias of BIG, we still need to deal with reciprocity as one of the most important forces of social cohesion. Yglesias and academics can promote BIG all they want, and even if they convinced a significant number of people that it worked, even if it could work, the “productive” members of society will still resent the “slackers” and will vote accordingly. We have a hard enough time as it is convincing the “productive” that poor on welfare aren’t all slackers who “deserve” their station. BIG has the same problem magnified.

      The cynical part of me wonders if this is why the beltway elite (Yglesias as exemplar) are proposing BIG > JG. Because they know it is not remotely politically viable but it serves to take the wind out of the sails of the JG.

      • “You might think so, but I couldn’t possibly agree with (comment on) that.”

      • It is a quintessentially a Progressive idea that such things as food, shelter, health care are human rights, and as such those of us who have the means also have an obligation to provide them to those without the means. And to provide them as a right, not as compensation for anything they do. That is BIG, not JG. Only if the Progressive is trained in economics would they prefer JG. I think your cynicism is misplaced.

        “The poor will be with you always” is a 2000-year-old quote. JC couldn’t change that, and JG won’t do it either. In recognition of that, many in society have long had compassion for those who are unable to help themselves. Only since that function was subsumed by government has there been resentment about that help, and even now that resentment is grounded in the lack of understanding of monetary sovereignty and the nature of fiat currency.

        • You’re assuming that monetary compensation accurately reflects the worth of the things we do.
          Hazel Henderson, among others, has argued that the “love economy” consisting of spouses, child/parent caretakers, volunteers, and many other examples of unpaid work which would nevertheless cost a lot to replace, is actually much larger than the paid economy. A B.I.G. would just be one way of recognizing this under-appreciated contribution.
          There is not, and never was, such a thing as a free market. In reality, we have always had some degree of crony capitalism, wherein those at the top economically, game the rules even more so they garner…even more money. This shows up in the de facto regressive tax system that has the middle class paying a higher percentage in taxes than the elite, in subsidies from undertaxed land to wage subsidies for the working poor that end up subsidizing big rich corporations who don’t pay a living wage, etc.

          • It’s true, it would cost a lot to outsource all the things we do in house, even for a single person taking care of nobody but himself. It’s a tradeoff. If I can make $100 an hour by doing something for someone else, then I can afford to pay outsiders for services I would normally perform for myself, like housekeeping and cooking. OTOH, if my own labor is only worth $10 an hour, it makes no sense for me to pay $15 an hour to free up that time for my own work. When people take care of family members, it is the same tradeoff. When you provide care for your parents or children, you’re saying that you can’t use that same time to make more money than you would have to pay an outsider to do that work. (Some of the reasons for the higher cost of outside help, and the lower cost of doing it yourself, is not the work itself but taxes and regulations that apply only to the outsider.)

            And there are non-economic considerations, too, what economists call “utility”. Spending time with your kids is a lot more fun than what most people do at work.

            We live in a monetary economy. The currency is the unit of account. What anything is “worth” in that system, including a person’s time and skills, is the amount that a willing buyer would pay for it.

            • Many of the things we do that are unpaid are not really “fun.” I was the primary caretaker for my father in the last year of his life. It was not always “fun,” though I’m glad I did it. The point is though, that that kind of necessary work would cost a lot more on the open market, probably not be done as well, or at least not as caringly, and that society needs to prioritize this too.
              The fact is that those with the money make the rules (The Golden rule: “He who has the most gold…rules”). That doesn’t make these things the most beneficial to society – what, after all, is the benefit to society of John Paulson making billions shorting the housing market, or of the top 25 hedge fund managers in a year, who typically earn more than a billion, each (even though, as a whole, they under-perform the S&P)? There may be value in entrepreneurs, but multi-decade patents? Not so much. Stock returns that are only taxed at 15%? Even less – the internet was born during Clinton’s time, when stock returns were taxed at 20-25%. That didn’t hold anyone back, and never has. In fact, wealth inequity, like we have now, decreases opportunity.

          • You’re right, there are very few examples of perfectly competitive markets, none of which occur on the scale of an entire economy. The very notion of “rules” in the market implies the reduction of freedom, and participants in markets always try to accumulate market power. Only if government enforces rules to prohibit accumulation of market power can markets remain mostly competitive. Corruption is always a threat, and corrupt government officials will never promote free markets.

        • ““The poor will be with you always” is a 2000-year-old quote. JC couldn’t change that, and JG won’t do it either”
          Since income distribution is a bell curve with some kind of tail, there will always be a portion of the tail that will qualify as poverty no matter where the center of the curve falls. Improving the average income, either with a JG or BIG will still leave some at the end of the tail. The only “solution” would be to fix the poverty level at some arbitrary figure and insure everyone is above that figure.

        • You are right that BIG is quintessentially progressive, no cynicism required. “The poor will be with you always” was paraphrasing an already 800-600 year old quote (Deuteronomy 5:11). In both instances they were meant not so much as a prediction, as prelude to an exhortation: “You shall freely open your hand to your brother, to your needy and poor in your land,” or “whenever you wish you can do good to them, but you do not always have me.” Which is to say, I agree with you.

          I didn’t mean that reciprocity is the only thing going. But BIG is not that different from other forms of welfare (other than as new channel for inflation) and it’ll be subject to the same political venom from people who resent any form of “wealth redistribution” and other misinformed rhetoric about the idle “deserving poor”. I’m already convinced our current welfare system is less generous than it ought to be, but convincing a plurality of the population and their voted representatives to increase welfare will be rancorous. On the other hand, I firmly believe that some sort of JG proposal really can be sold to “the 99%” of both progressives and conservatives.

          I think this is simply a rephrasing of Ms Tchenerva’s points #15 and #16: There is such a thing called ‘participation income’ and ‘civic minimum’… an idea that society is built on the principle of reciprocation. Society provides you with a basic income; you reciprocate by participating in socially-productive activities… Let policy provide an opportunity to all to perform socially useful activities on the ‘participation principle’ through the JG, while supporting those who cannot (the young, retired, disabled, with onerous care burden).

      • If 1/3 of the economy is “economic rent,” we can easily give BIG to everyone without disturbing the peace of “productive members” of the society.

        • As long as BIG is not greater than the idle capacity, or we also tax somebody to reduce their spending until it no longer exceeds the productive capacity.

          And if it’s a “guarantee”, why does it have to be paid to those who already have more than the basic level of income? That’s like asking for your money-back guarantee when you’re totally satisfied with the product.

    • “One of the fundamentals of human psychology is that humans will only share their resources with those that they perceive as ‘pulling on the same rope’.”

      And yet we live in a society where slacking off is perfectly viable as long as you’ve been born into the right circumstances, i.e: through inheritance, while most others are naturally burdened by having to pay rent, which accounts for over 50% of their living expenses (either that or mobility).
      Worse still there are plenty of people around pursuing careers that seemingly destroy production and get rewarded heavily.
      Following through with these basic human sentiments I doubt that a JG would pass as anything more than a make-work program. I think we’d instead all be working out in the fields as ordered by our khmer rouge style dictators.
      Basing economic policy on human principles of “fairness” is not such a smart idea.

      “It’s one of the things that makes us special as a species and it is wired in at a very low level.”
      No, afaik this behaviour has been shown atleast in chimps.

      Is really the “academic support for BIG based on the idea that many people will quit working” really the serious one? I’ve heard arguments in defense of BIG of why it would not lead to a reduction of production, and that’s exactly in line with “10. The poor and the unemployed want to work”.

      Don’t get me wrong. I don’t think introducing a BIG is anywhere viable anywhere in the near future or that the “unconditionality” aspect of it may be attainable at all.

      • Yes, I agree, sharing scarce resources reciprocally is not special to humans, fundamental to much more than human or even primate psychology. More or less common to the “psychology” of all living things. Focusing on perception, rather than reality, is misguided. This is so universal, biologically universal because it works. The universe out there can be unfriendly. A BIG (lots of money for everyone for nothing) is a sham. It won’t work because it can’t work – universal parasitism. Of course a restricted BIG, a NIT, is another matter, especially if there is a JG.

        Following through with these basic human sentiments I doubt that a JG would pass as anything more than a make-work program. I think we’d instead all be working out in the fields as ordered by our khmer rouge style dictators. I don’t follow at all. Where are the Khmer Rouge dictators? As I have said, focusing on perceptions of unfairness is the wrong thing. The JG is right because not having it is obscenely unfair, unjust, not because people merely perceive not working as unjust.

        A JG is a very simple tried and true idea, essentially tested worldwide for decades in the Keynesian full employment era, tested during the New Deal as the WPA etc. Tested everywhere before that, really – unemployment helps nobody, no nation in the long run, so we should decide not to have it, and nations which have decided to not have unemployment tend to get rich. I would characterize the JG as “not running your monetary production economy in an insane way.” No Khmer Rouge dictators arose back then or were necessary to enforce people working – at jobs they by and large were happy to have.

        Basing economic policy on human principles of “fairness” is not such a smart idea. Maybe, but it is the only idea. The only way that humans ever have organized economies. Do we have much of an alternative to human principles? Seems like a better idea than insect colony principles..

        • I don’t follow at all. Where are the Khmer Rouge dictators? As I have said, focusing on perceptions of unfairness is the wrong thing. The JG is right because not having it is obscenely unfair, unjust, not because people merely perceive not working as unjust.
          Because people do not only perceive freeloading as unjust, but also jobs which are seemingly counterproductive or not productive at all (and the JG would create a lot of jobs in the latter category). the radical left and right each have their very own idea of what these unproductive types work constitute and are determined to eliminate them. the khmer rouge tried to narrow in what type of work really was really of subsistence. I don’t think there is really any objective measurement of what someones contribution to society is, not even if they are unemployed. Even trying to establish a general consensus of what type of contributions to society are desired is difficult. (even piracy under the right circumstances can be seen as a valid and productive enterprise)

          • “jobs which are seemingly counterproductive or not productive at all (and the JG would create a lot of jobs in the latter category)”

            Not if it’s done right. JG should focus on jobs that are done today by volunteers. They are productive and worthwhile, and often go begging for lack of workers willing to do them for nothing.

          • Because people do not only perceive freeloading as unjust, but also jobs which are seemingly counterproductive or not productive at all (and the JG would create a lot of jobs in the latter category). No, it wouldn’t. It wouldn’t create any such jobs. Why? – because the JG presumes the society has gotten its act together, gotten together to decide to to jobs that everyone thinks is a good idea. There are a colossal number of such jobs, an enormous amount of such work to do. Yes, a bad JG would have Khmer Rouge (or Nazi) commandants doing Bad Things, and would be worse than nothing, worse than unemployment. But there is a social consensus that death camps are a bad thing, so they won’t be part of the JG.

            the radical left and right each have their very own idea of what these unproductive types work constitute and are determined to eliminate them. the khmer rouge tried to narrow in what type of work really was really of subsistence. I don’t think there is really any objective measurement of what someones contribution to society is, not even if they are unemployed. Even trying to establish a general consensus of what type of contributions to society are desired is difficult. (even piracy under the right circumstances can be seen as a valid and productive enterprise)

            That there isn’t “really any objective measurement of what someone’s contribution to society is” is true, but so what? And there may be cases where everybody doesn’t agree, but so what? – there is an enormous area of consensus, which is what is important. Government spending in general and the JG in particular determines and measures what someone’s contribution to society is. You can call the fact that the jobs to do are arrived at by democratic decision-making “merely” “subjective” and not a holy “objective”, but so what?

            A JG with goals outlined by an average 12 year old would be infinitely superior to the disgusting crimes and lunacies and welfare for the rich that the US public money now mainly goes to – and which bear far more resemblance to the Khmer Rouge than a modern WPA / PWA / CETA – a JG would. There is an enormous, society-wide consensus that the things which have been proposed as JG jobs do things which are good in their own right. The arguments against it are always about completely imaginary side-effects, nobody argues that more and cleaner parks, housing the homeless, food banks, better elder care, a better environment, “green New Deals” etc are Bad Things in and of themselves.

        • “Basing economic policy on human principles of “fairness” is not such a smart idea. Maybe, but it is the only idea. The only way that humans ever have organized economies. ”

          I think mostly free economies are based more on the biologic principals of evolution. The successful changes survive and flourish and are widely imitated, while unsuccessful efforts fail. “Fairness” is the watchword of the planned economy.

          • The concept of “fairness” or “justice” is universal and implicit in any human society, in human cognition. In societies where the state has “intervened” to create money and the type of “planned economy” called a “free market”, this is usually expressed in commercial exchanges, exchanges of goods and services and labor for money, whose driving and ultimate source and sink are the money-issuing and destroying activities of the state, which directly express the society’s ideas of “fairness”. True, it is “based on” biological principles of evolution, but so is everything.

            The idea that modern “capitalism” is more natural, more evolutionary, than modern “socialism”, and that that would make one better or worse than the other is just silly. Both are natural and neither are natural. Basically, they’re Tweedledum and Tweedledee, if Lewis Carroll had made them Siamese twins.

  6. “BIG is not countercyclical.”

    It is if accompanied by the necessary vast hike in taxation rates (UK calculations suggest that the rate would need to be about 50% of any additional earnings).

    Which of course does nothing more than increase the resentment from those working of those merely BIGging it up.

    There are always attempts to get around this – trying to make the tax rate more progressive, etc. But it is all lipstick on a pig.

    If you strip out half of your automatic stabiliser system, then something else has to take the strain.

  7. Mrs. Tcherneva,

    What are your thoughts on establishing both a BIG and a JG which would allow each individual a choice? As a self-employed person/life long student, I’d prefer a BIG which would allow me to invest the transfer on myself at my discretion. This would not only greatly reduce my risk of failure leading to financial hardship while also providing me the opportunity to train myself in the skills I want to master.

    Secondly, students, stay at home parents, etc are all performing unpaid work. I’d imagine a BIG would improve their situation where a JG would not (if they can’t find the time to both work as students/parents and at the guaranteed job).

    Understandably not everyone would prefer this and would want to work (#10 in your list) through the JG program instead. They would have the ability to chose the JG route over a BIG.

    Both the BIG and JG make assumptions having to do with human behavior. Human behavior isn’t homogeneous though seeing as preferences and circumstances vary.

    Clearly, I am bias considering a JG would not be helpful to me as I want to make it as a self employed person (unless the JG would 100% allow me to continue to do what I’m currently doing, but pay me an additional guaranteed income).

    • I think JG should support training for a job or a degree – GED, at least – but the idea is for people to become productive members of society so they can support themselves, not to support learning as a career or “self-employment” that generates no income. It would be nice if we could all pursue the finer things and be supported, but then who would produce the real goods and services we need if we were all life-long students?

      Maybe in the year 2525, when AI machines do everything we need, we can all have that luxury.

      • golfer1john,

        Those that strive to master their craft are always learning and therefore are lifetime students. Furthermore receiving nominal incomes in a monetary economy like ours is incredibly important not only for the well being of individuals, but to sustain the incentives to produce and innovate. That goes without saying. However on the whole (aggregate level), we as a group/society surely don’t strive to generate nominal income. What matters is that the system works in a way where real living standards rise over time. Isn’t the point of having a monetary, financial, legal, and political system to facilitate this goal of improving the living standards of the members of the society?

        From an individual level, I don’t only work and master my skills in order to support myself. I surely could think that way and probably work half as hard. However, I see an individual’s life as having the potential to vastly improve the lives of those around them. Some will go on to change the world in fundamental ways. In this light, the idea isn’t to develop individuals for the sake of having them only support themselves, but to hopefully give them the ability to improve the lives of others.

        Thus, for our sake I hope there are enough life-long students working diligently on problems that once solved will revolutionize the world we live in.

        “Maybe in the year 2525, when AI machines do everything we need, we can all have that luxury.”

        Real GDP per capita has surpassed its peak of 2007 and yet we have 2 million fewer people employed and the population has grown by over 14 million. The employment to population ratio sits at 30 year lows.

        A restrain in the real economy’s ability to produce isn’t the problem we face today. The problem is that we as a group are squandering human potential by having individuals sit unemployed when they want to work, have people underemployed doing jobs that don’t allow them to fulfill their potential, and have people (some paid really well) that must stay in their jobs which they understand to be socially unproductive.

        Fundamentally, I see the situation today as a being a problem of poor social organization due to some bad policies (corrupt institutions) and unimaginative minds not a problem that results from our inability to produce (especially material things). Hopefully some highly educated and intelligent individuals are taking the time to study the problems we face today. If so, they have the potential of doing a lot more than just supporting themselves by generating an income.

        • It’s hard to disagree with any of those platitudes, but if someone does something useful, then usually, even today, there is somebody who will pay him for the product of his efforts. And in case there is not, if the market won’t do it, then it is a “public purpose” that government will pay for. There are lots of clever people getting paid for doing things not very useful. Getting paid is the easy part, if the demand is there.

          And, as you can see at this web site, there is no shortage of “highly educated and intelligent individuals … taking the time to study the problems we face today”.

          We have no shortage of people willing and able to do useful things. The problem today is that government is not willing to make up for the leakages of demand in the economy, and so a large number of people can find no buyers for their talents. JG is that missing buyer. BIG, if allowed to increase the deficit, would also provide additional demand, but with BIG and no JG there would still be leakages and unemployment, with all its inherent miseries. The myriad of poverty programs are, in effect, a BIG, though probably not at the level advocates would desire. I don’t see that simply increasing the stipend would “revolutionize the world we live in”. And I see no reason to think that the people who will come up with the ideas to revolutionize the world are now constrained from having those ideas by the need to make a living. If that were the case, then why have the vast majority, if not all, of the previous revolutionary ideas come from people in their working lives, and not in their retirement?

          • golfer1john,

            I agree with your first paragraph. If one views children as human capital then parenting can be seen as the act of developing that capital. Parents, along with the institutions which aid parents (schools etc.), provide a work whose ultimate productive output is unquantifiable or at least very difficult to measure. Yet, many stay at home parents would not directly benefit from a JG, but would a BIG (financed through t-security issuance). A parenting wage is not something that market provides. Mosler speaks to his in one of his videos.

            On the other hand, there are not only clever people getting paid for doing things that objectively are not very useful, but are potentially destructive. This can occur when the benefits to the individual or the supplier of the income (business/corp) are larger than the social costs. Society as a whole my suffer, but the wage is paid based on the individual’s ability to make their employer better off regardless.

            “And I see no reason to think that the people who will come up with the ideas to revolutionize the world are now constrained from having those ideas by the need to make a living.”

            Some people work at jobs solely because they need an income to live even if the job stagnates their development. This is time lost which could have been spent more productively. Time lost is unrecoverable, this is forever lost potential which is unseen and difficult to quantify. All jobs, whether menial or advanced, leads to mental and sometimes physical exertion which constrains the individuals ability to develop ideas as this takes time and energy. In some (hopefully many) cases, individuals are working in jobs which allow them to develop in a way that is consistent with their desires. From the Steve Jobs, to the MMTers who teach economics, to parents, some are fortunate to find themselves being very productive while exerting themselves to accomplish goals which they so desire.

            Can we really say this is true for everyone especially those working sometimes more than full time in the lowest paying jobs that require few skills? Especially after the recession, some are stuck because they cannot realistically take the risk of leaving work and foregoing an income in order to transition themselves into other fields by developing their skill set. I saw this when working in the hotel business after college as well as when working in the mutual fund industry. In the latter, individuals stayed in jobs which they hated and understood to be unproductive because they were constrained by responsibilities that required them to always draw a high income.

            “If that were the case, then why have the vast majority, if not all, of the previous revolutionary ideas come from people in their working lives, and not in their retirement?”

            Working in which jobs? Menial ones? Ones they knew wouldn’t help their development and resulted in a huge time suck or ones which allowed their ideas to flourish? Were some of them really working solely for an income? Were some successful, but took on enormous personal risks? What about those that took risk and failed? Furthermore, what does it mean to be “retired?” As #10 states on the list, people want to work. I would go further. I think a mentally developed individual wants to not only work, but work in a job which they believe adds value.

            I bet taking risk, luck, and path dependence among many factors played a crucial role in the creation of revolutionary ideas. A JG and a BIG together can help mitigate the risks of failure (financial instability/destitution) associated with really taking the time to develop potentially revolutionary ideas. A JG+BIG also reduces the role of luck which comes from being at the right place at the right time. This includes birth in that who you are born to and the social conditions both play a hugely important role. A JG and a BIG together can equalize the opportunity by allowing choice. Why should those only born to supportive parents deserve a “BIG?” From personal experience, having very supportive parents was hugely beneficial and a competitive advantage for me when transitioning in my career development.

            • “Some people work at jobs solely because they need an income to live even if the job stagnates their development. This is time lost which could have been spent more productively.”

              Yes, but if the job is to be done at all, then someone is doing it. Whoever that is might have been doing something more productive. If Bill Gates had not been busy with Windows, he might have invented an OS with some security, which would have been a great benefit to society. Whoever takes care of your kids while you’re pursuing your dreams also might have been doing something more useful to society than what you did instead.

              We do have a BIG already. It is not in the form of a cash payment to each person, but in the nature of a guarantee, paid only to those who do not already have it, and paid in kind for the most part. It may not be enough, but it is there. Giving Bill Gates another $1000 a month in addition to his millions probably would not have resulted in any better code, or any other more useful accomplishment.

              If you want to say the BIG should be increased, and be more cash, that’s a whole different point. I would argue that it should always be means-tested, as it is today. There is certainly enough slack in the current economy for a significant increase, if that is the way we choose to address the problem, but doing it in unnecessary and excessive ways today – such as $1000 a month for everyone, $4T a year – would surely cause unacceptable inflation.

              • “Yes, but if the job is to be done at all, then someone is doing it.”

                Yes. Now the reason is why are they choosing to do it. If they are solely making this choice based on the need for income in order to survive, then this is the freedom to chose, but not really freedom of choice. The individual has limited control over the alternatives when one of the choices exposes them to a high risk of financial instability/poverty (if they chose to forgo an income in order to pursuit self-directed work/development which they deem to be most productive).

                Some can’t not work as their subsistence is dependent on drawing an income from it. As long as this is the case and they aren’t lucky enough to be born into better situations, then they will be forced to work in jobs that they otherwise would not voluntarily chose to. This is a loss of control over their own life which some are fortunate enough to never have to experience.

                This makes your example concerning Bill Gates fundamentally different. Mr. Gates, the person able to pursue their dream, and possibly the child caretaker have all been able to chose how they decide to spend their finite and valuable time. In your example, if the child caretaker is doing work solely for income then a basic BIG provides them with an improved choice set. The person who is voluntarily choosing to go for their dreams will have to better compensate the caretaker if they wish for them to take care of their children.

                This is why I would be supportive of a BIG and JG together. A JG alone does not solve the problem described above having to do with a loss of control over how one spends their time. Again this loss of control isn’t felt by everyone as not all are born into or find themselves in such a circumstance. On the other hand, a BIG may not solve the problem of an economy that isn’t creating enough jobs. As technological advancements continue to increase productivity, humanity may be trending on a path that creates material abundance with fewer individuals employed relative to the size of the population. If this is the case and our productive capacity is improving immensely over time, then deficit financed BIG or JG are more likely to result in increased real output and not price inflation.

                Some would leverage a BIG in order to create productive work for themselves and others which could very well add a lot of value to society (and in doing so increasing productivity and capacity even more which would reduce inflationary pressures by increasing potential real GDP). However, this isn’t true for everyone. Some my very well desire to go the JG route especially if the jobs offered are of high quality and productive (which they should be, right?). Either way, the option is open to the individual.

                If some opt out of the workforce in order to live off a BIG, this should tighten the labor market which puts upward pressure on nominal wages. This would cause a widening in the divergence between the set nominal BIG transfers and wages that potential earners can attain. Although a universal BIG wouldn’t go away, its size relative to the prevailing wages offered would not remain stable. Therefore, I think it is logical to assume that as wages rise, those that left the workforce my desire to reenter. They wouldn’t lose the BIG upon reentering, but by not reentering they lose the possibility of earning additional income.

                Since the future is unknowable, it just isn’t possible to know how large the deficit would need to be in any given year in the future. Thus, it could be advisable to transfer smaller amounts than $1000 a month at least initially. Start with small deficit financed transfers to all individuals and see how the economy responds. The size of the distributions could be tied to real output targets, nominal GDP, and/or inflation. If real output continues with minimal inflation, increase the distributed amounts whether through a JG and/or BIG. A JG is essentially a BIG with a job attached.

                ” if that is the way we choose to address the problem, but doing it in unnecessary and excessive ways today – such as $1000 a month for everyone, $4T a year – would surely cause unacceptable inflation.”

                It is hard to determine ex ante what “excessive” fiscal deficits are in today’s incredibly productive global economy. After the financial crisis, it was touted that multi year trillion dollar deficits would surely lead to hyperinflation (which now seems laughable). Yet, the CPI barely ever broke above 3% and sits at an annual change of 1.5%. Given this downward trend in inflation, excessively high unemployment globally, idle resources, and monetary policy that is fighting to keep the policy rate from permanently being pinned to the zero lower bound, if anything the fiscal deficits are much much too small. Given fiscal policy has been tightened in the last few years, the policy stance is trending in the wrong direction. Unfortunately, as time passes this represents a permanent loss of potential productivity and innovation (unless someone has a time machine).

                “Giving Bill Gates another $1000 a month in addition to his millions probably would not have resulted in any better code, or any other more useful accomplishment.”

                I think Matt Bruenig of http://www.demos.org/ made the point that the universality of BIG even to the very wealth is important because it prevents the programs (including JG) from being framed as redistribution which it isn’t. Everyone has the choice of participating and as long as they are deficit financed via treasury issuance no one is taxed to directly pay for the programs. This is especially true if real GDP increases from here on.

                The treasury securities which remain in the hands of the private sector and Fed represents a national form of equity. T-securities in the hands of the private sector represent a net asset to them which increases their financial net worth. This clearly wouldn’t be unique to deficit increases attributable to a BIG/JG considering there currently exists trillions of dollars worth of treasuries outstanding which are the residual of past deficits. Realistically, the “debt” never gets paid off but will exist in perpetuity. Yet, past deficits and their present residuals in the form of t-securities have not lead to inflation. On the contrary I’d argue that without those past deficits and the current treasury securities outstanding, the economy would never have been able to produce the way it has.

                Mr. Gates in receiving a BIG today would probably not all of a sudden change the way he uses his time. This is partially because he was born in the right place at the right time when the internet and economy were taking off and he had the mental capacity and support to leverage this trend. A BIG may have been useful to him then, maybe not. However, it would have helped to make sure that he would never have had to choose between his productive passion or working at a menial job for poor wages just to survive. If he had, we would probably all have been a little worse off. Maybe not! We can’t know what would have happened.

                Besides, if he gets a BIG, my educated guess is that a huge percentage of it (if not all) will just exist as a bank deposit never to get spent into the real economy*. Really a modest BIG to someone with a high net worth is probably much much smaller then what would occur relative to if their tax rate had been cut by a percent.

                *Making an educated guess on his marginal propensity to consume.

            • “As #10 states on the list, people want to work.”

              Well, I don’t want to work any more. There are a few jobs I might take, but I don’t want them enough to try to get them. I want to spend what I saved while I was working. I think most people my age feel the same way. Of course, there are some who will willingly work until they can’t do it anymore, regardless of their finances, and good for them. Many more who are still working would prefer to be retired. A bigger BIG could help get them out of the work force.

              #10 says some people, the poor and unemployed, want to work. The unemployed, by definition, want to work. #10 goes on to say

              “… receiving income is the fifth reason why the poor wanted to work! Why do BIG advocates presume to know what’s better for the poor than the poor themselves? BIG does little for those who want to work.”

              I would object to the last sentence, I think BIG would do as much as any other spending increase to raise (traditional) employment. The point is that if the BIG recipient is still unemployed, and many would be, without JG, then their main problem is still unsolved.

              Even with the currently large output gap, the available policy space is still finite. BIG for everyone in a substantial amount would more than consume the available space, leading to tax increases or inflation or both.

  8. Hi Rafael,

    My JG-type proposals (admittedly still hasn’t been published except in my PhD thesis but hopefully the book will be out soon) would allow many of the groups you mention to be able to partake in the activities you mention. This is because I suggest the JG alongside a work-time based earning subsidy regime, but other activities could be counted as work.

    Self-employment clearly counts as work, presuming that the company meets the required criteria. Similarly, carers and students would also be eligible for what I refer to as ‘hour credits’ for their activities.

    The strict limits on this might exclude you for all I know, but the aim of politics isn’t to provide what you and I (as a fellow eternal student/writer) would prefer, but rather what is fairest overall. I don’t think the BIG is very fair to people who (mad as I might think they are) want to work and consume a lot but don’t have the kind of family background and natural which would make this easy for them.

    I can’t say whether this would be the case with all JG proposals but these things certainly aren’t mutually exclusive. (You could also have a JG and BIG together though this would then be expensive on both counts)

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  10. What does this article mean? That BIG ja JG are exclusive? If so, how can JG be anything else than a workfare program.