Final Reply to Dolan on the UBI, For Now
By Bryan Caplan
Here’s one last reply to Ed Dolan on the UBI:
…As for more recent evidence, the CBO working paper
that I cited is the most comprehensive literature review I have been
able to find. The CBO review reaches the following conclusions regarding
labor supply elasticities:
- Among men and single women, substitution elasticities appear to
have increased and now range from 0.1 to 0.3. Income elasticities still
appear to be smaller in absolute value than substitution elasticities
and remain in the range of -0.1 to zero.
- Labor supply elasticities of married women–historically much
higher than the elasticities of men and unmarried women–have fallen
substantially in the last three decades, although they are still higher
than elasticities of men and unmarried women. The substitution
elasticity of married women appears to range from 0.2 to 0.4, and their
income elasticity appears to range from -0.1 to zero.
This is news to me. I’d have to spend a week or so reading to evaluate this, but thanks for alerting me to this evidence.
My other big concern is that behavioral economics is highly relevant here. The disincentives you get after removing all inconvenience and most stigma will probably be larger than we get under the current regime.
Caplan: Even if you’re right, you’re ignoring my central point:
The UBI unambiguously hurts incentives for the vast population that’s
currently ineligible for most government benefits.
Sorry if I’ve ignored this point, because it is a sound one. Isaac Schapiro makes
a similar point in a report from the Center for Budget and Policy
Priorities, to which I replied at length in an earlier post. To both you
and Schapiro, I say, yes, the elasticities argument for a UBI is
stronger for households that face high effective marginal tax rates than
for those who face lower EMTRs because they receive no benefits. In the
extreme case, they are exposed to the full income effect and get no
help at all from the substitution effect.
I would make two points here. The first is empirical. I’d like to see
a count of how many poor households or individuals get no benefits. Is
it a “vast” number, or a relatively small one? And what kind of people
I deliberately said “ineligible for most benefits,” not all. What kind of people do I have in mind? Healthy, childless (or non-custodial) adults, aged 18-64. Labor force participation for this group is already shockingly low for people without college degrees. I can easily see it going far lower under a UBI.
Caplan: Even if we followed your proposal to the letter, the
highest income floor you say we can afford is far lower than almost any
non-libertarian would accept. This isn’t surprising, because you waste
so much money on the able-bodied.
First, I agree, there are some non-libertarians who want a UBI high
enough to let everyone live a comfortable middle-class life without
working at all. That is particularly the case with some who write about
the UBI in the context of an imagined automated utopia in which no one
at all has to work. I say, pie in the sky. But let’s not get off topic.
This is a debate about why libertarians might take a UBI seriously. I
don’t have to worry that my $4,500 UBI is too stingy. I have to make the
case that it is not too high.
My point: If the UBI you propose is lower than most people would accept, then you, too, should be worried that if we get a UBI, it will be fiscally disastrous. My challenge: Instead of coming up with a bold, new idea that could easily end very badly, why not join me in simply pushing for austerity within the current system?
Second, I think when you write that my version of the UBI “wastes so
much money on the able bodied,” you haven’t really thought through the
whole program. Again and again, I have emphasized that in order not to
“waste money on the able bodied,” a viable UBI I must replace not just
welfare for the poor, but “middle-class welfare” as well–much of which
comes in the form of tax expenditures.
Both the status quo and your proposed reform waste hundreds of billions on the able-bodied. But given the massive cuts you propose, it’s not clear that you’re wasting more money on the able-bodied than the status quo does. My point, again: If we’re going to be reformists, why push a bold, new idea that retains the basic flaws of the status quo, instead of just calling for less wasteful spending?
Caplan: But where do you see “excessive” conditions in the U.S. welfare state?
Example: Subjecting welfare recipients to drug tests. Example:
Conditions that restrict interstate mobility, as is often the case with
programs administered at the state or municipal level, and which would
be intensified with some GOP proposals for “block granting” everything.
Example: Provisions that unnecessarily add to the red tape of getting
benefits, as with disability programs (see below).
Each of these has an obvious rationale.
a. Drug tests. If people want taxpayer help, they should be trying to make themselves employable, not getting high.
b. Residency requirements. These reduce incentives for welfare tourism, a classic perverse incentive of redistribution.
c. Red tape. If moderate inconvenience deters you from seeking benefits, you probably don’t really need them.
Caplan: The American disability system’s whole problem is that
it’s gradually moved away from the principle I suggest. It used to be
hard to go on disability; now it’s easy. We should blame the unintended
consequences not on standards, but lack of standards. Reformist
libertarians should be pushing to restrict benefits to the truly
disabled, not extending them to everyone regardless of need.
I know I have been remiss in not dealing with disability at length,
and I keep promising to do so. Be patient. Meanwhile, just one point:
The real problem, as analyzed by Autor and others, is not that it is too easy to get on disability, but that it is too hard to get off.
A fair point, but it’s fully consistent with my claim that the problem is lack of standards. People with conditions that occasionally get better should have to periodically prove continuing disability. They should be subject to audits. There should be credible penalties for fraud. And so on. If you were running a voluntary charity to help the disabled, these measures would be common sense. Involuntary charity should be held to at least as high a standard.