Rejoinder on UBI
By Bryan Caplan
Here’s my reply to Ed Dolan, point-by-point. He’s in blockquotes, I’m not.
First of all, thank you, Bryan, for the civil, cogent,
and detailed response.
1. You say that I acknowledge elsewhere that the incentives are
theoretically ambiguous,income effect vs.substitution effect and all
that. Fine, but you give the wrong link. The place where I discuss that
issue in detail is in the two-part series that starts here.
Part 1 of that post deals with theory, and shows that although there is
some ambiguity, it requires very special and implausible assumptions
for the income effect to outweigh the substition effect. Part 2 looks at
the empirical literature, and concludes that the overwhelming weight of
evidence suggests that a UBI improves work incentives relative to any
means tested program.
My apologies for neglecting your Part 2. Well-done; I encourage everyone interested to read it. But I’m puzzled that you describe the evidence you summarize as “overwhelming.” It seems fairly weak overall to me. And my understanding of the empirical consensus is that, in general, income effects are at least as large as substitution effects. I’d put more weight on that standard finding than experiments from decades ago.
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.
2. You are very right to zero in on the “done properly” proviso as
critical. I completely agree that tacking a UBI onto the existing system
would not work. I also strenuously object to the line you get
from some conservatives that a UBI should replace welfare for the poor,
but leave all tax and transfer goodies intact for the rent-seeking
middle and upper classes. What is sauce for the goose is sauce for the
gander. Does that make a UBI a hard sell politically? Maybe. I’m a lowly
economist. As the song says, “If the rocket goes up/who cares where it
comes down?/That’s not my department/says Werner von Braun.”
My point is stronger: 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.
3. Taxpayers have right to attach conditions to public charity. I
don’t dispute that. Whether pragmatic considerations might lead them to
avoid excessive or silly conditions is another matter.
I’m against “silly,” too. But where do you see “excessive” conditions in the U.S. welfare state? Wherever I look, I see only profligacy.
4. “You shouldn’t get aid unless you are poor through absolutely no
fault of your own.” Yes, that argument has some moral force. However,
pragmatically, it is hard to pull off since it requires a huge welfare
bureaucracy to decide who qualifies, and the very effort to decide has a
Heisenberger-like way of changing the nature of the phenomenon you are
trying to evaluate. Exhibit A is our disability system, which tries to
follow the principle you suggest, but ends up with massive unintended
consequences (UBI vs. disability is subject of a forthcoming post.)
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.
Update: Dolan responds in the comments.