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June 08, 2005

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Blimpish

Thanks for replying. As I said in my post, it's not that I see the attractions of CBI, and I agree that it deserves attention (which, let's face it, I've given!). As I also said there, I can fully see why some people might support it, given the policy goals they might wish to advance - my point was (and remains) that if you're a conservative, then this case is not good. On the specifics:

1. James Buchanan might've said that, but Gordon Tullock might be more circumspect, and suggest that the political system would lever excessive redistribution. More specifically though, points in objection:

(a) I disagree with the notion of redistribution on the basis of citizenship. I have no objection at all to redistribution to rectify specific issues, but turning out poor is not one of them. The idea of some 'social dividend' is purely egalitarian, and conservatives should have no part of it.

(b) It is not from defeatism that I take this view on CBI - but in fact the opposite. The reason why many on the Right like CBI is because they want to put the egalitarian stuff to bed, so they can get on with building inequalities otherwise(!). For me, I think ideological egalitarianism is a historical fashion, and that we shouldn't surrender to it but defeat it. I would rather lose some battles than surrender on the war. (Obviously, you'll be dead against me here - but that's because we differ on priors.)

(c) Notwithstanding my objection in principle, briefly on Buchanan's suggestion on a constitution: (i) this is yet another bolt-on to the proposal, which is becoming quite cumbersome to implement; (ii) by settling the degree of redistribution through a constitutional amendment, you make the degree and mode of redistribution a meta-policy issue, which I'm not sure it should be; (iii) and more generally, it runs up to the normal objections to contractarian solutions (cf. Hume, but for another time).

2. As to the first bit, I do reject it. When I read some Nozick years ago, I bought into a lot of it, but not now. But (and not to get into big dispute on the point, just to explain priors) while I fully accept the historical argument about property claims being the result of theft, I don't accept the notion that they therefore come with a covenant-of-guilt attached in this way. As a conservative, I accept (welcome, in fact) hierarchy and privilege, and find levelling for its own sake as the enemy of all things good and right.

I know at the end of your (2) you suggest it's not necessary to agree with you on all this stuff, and that you could instead view CBI as a way of policing obligations. Indeed you could, but that's a prudential judgement, and I'd suggest there are other, better, ways of policing obligations that don't come with nearly so much baggage.

3. Granted, Jerry Springer rather than Trisha (don't you work at home..?!). In reply to your points:

(a) Lower marginal rates of withdrawal: I agree, but there are income effects as well as substitution effects. Even assuming that benefit rates are the same on CBI as now, an unemployed person at the moment bears significant costs (even if only in evading benefit officers' attentions) which add to the disincentive. Under CBI, this will not be the case. The evidence from SIME/DIME suggests that among those people receiving welfare (and those are the ones we Righties are most concerned with - spongers, leg-swingers, scroungers, peasants, etc) respond heavily to income effects.

(b) I see your point about marginal workers, but I don't think CBI believers on the Right would take too kindly to it. What you're saying is that you're happy for people with marginal productivity to live primarily on their CBI payment, rather than earn money for themselves. This is a large deadweight cost, unless you rationalise the idea (as I know you do) on social justice grounds. (Furthermore, we have enough issues getting low-skilled labour supply now - this will make it worse.)

(c) Just as with the Buchanan constitutional amendment - it's another part of the deal. It's CBI and this and that and the other thing - and that's what raises an eyebrow for me. If you can guarantee me the TUC won't agitate for re-regulating the labour market, that's great - but you can't.

(d) "Jobs... are scarce assets" - ouch, skirting the edges of the lump of labour fallacy here! Obviously, I've not read the book so I don't know the argument, but how many free-market Righties have you met who will accept rewarding people for withholding their labour? None for me!

4. Doubtless, you're correct that many women will be freed economically from abusive relationships. Myself, I don't view the marital home as normally a "comfortable concentration camp" (Friedan?), and it remains unclear as to the balance of the effect between freeing abused women and breaking up couples facing otherwise-normal relationship difficulties, often at significant cost to the children involved. We might say that breaking up 10 good couples to help 1 battered woman is worthwhile, but 100? 1000? These are trade-offs to at least take our time over.

Insofar as there are women in such relationships, it's dangerous to suggest money is the only barrier. In 1955, perhaps. But now, money is a contributory factor (women can get benefits or can get jobs, already), but there are much bigger and nastier psychological and sociological factors at work.

Which brings me to another objection to CBI: its ideological nature - it is sometimes invested all kinds of 'magic bullet' hopes, as a mechanism to resolve all of our injustices. But all it would do is anaesthetise us to them for a while. Sorry to end on a glum note, but the problems of alienation, shattered lives, and broken homes, will not be solved by any simple mechanism of financial redistribution; and indeed, it might simply distract us from them.

Let me finish my reiterating - I can see why you support CBI, and I don't think it's unworthy of consideration. But I think people on the Right should be more than a little cautious.

dearieme

It seemed to do a lot of damage to Ancient Rome, didn't it?

Rob

So, a leftwing attack on the idea as well. I think that a citizen's basic income is fine as a political manoeuvre, because you can make a fairly good argument for it without having to bring in a whole host of egalitarian(ish) claims which, to their discredit, the public don't accept. However, it's no more than that, because it suffers from the problem that sufficiency as the sole goal of distributive justice does: either it would be low, and so while we could see the importance of having it, but not why it should be the limit of our obligations, or it'd be high, and we'd not understand why more urgent help shouldn't be directed to those below the level it was set at (this needs perhaps some restating to be made against a basic income, but think of it like this, maybe: say the basic income is comparatively high, something like the median income now, it'd be hard to see what was motivating it, other than some more radical egalitarian principle, because such an income isn't really basic in sense I assume basic is meant, as in to cover basic needs).

Clearly, I think the first case - it's too low - is likely to be more important: I simply find it very hard to understand, above a certain general level of wealth, why anyone would think that significant income differentials were justified (this point could be made in anti-consequentialist terms: the idea that no-one should be forced to sacrifice their interests (excessively) in order that others should have more seems to point directly towards a roughly egalitarian distribution, because substanial sacrifices would be required by those left worst-off by any distribution).

One could make a claim about freedom in market relations, but I find it hard to see what the justification of that freedom, when it is solely a freedom to accumulate goods to the disadvantage of others, could be (i.e., it is not freedom of or in occupational choice, or to decide how much to work, etc... this does assume that it is possible to secure freedom of or in occupational choice, and to decide how much to work within a highly redistributive economy, but I don't think that's in principle impossible). I'd also be wary of the Nozickean claim of rectificatory justice, simply because there surely must come a point where rectificatory justice runs out, where we've exhausted our obligations to others following from unjust appropriations.

Monjo

There's already a lot of worklessness in the UK: http://www.statistics.gov.uk/cci/nugget.asp?id=409
The problem is for many people it doesn't pay to work unless they work full-time. Yet if you work full-time you may not be much better off (short term) and you are away from your children or doing something for money when you could be off out fishing or something. With CBI, even if you only work 5-10h a week, those 5-10h will ALWAYS be of economic benefit.

"In giving women a guaranteed income, it increases their ability to leave abusive relationships" - and abused husbands!!

Andy Cooke

I’m personally on the fence with CBI.
One area that I would like looked at is the demand side for it – how much per week per adult is an acceptable subsistence income? Obviously, “the poverty line” is a very poor guide – it’s a measure of inequality, not hardship through destitution. How much is needed for basic shelter, clothing, utilities, food and transportation? With differences in rent and house prices across the country, that cost will vary hugely dependent on location.

On the supply side, I am not convinced of the feasibility of pushing the CBI to £100/week by scrapping the VAT exemptions and tax deductions – and without them, we’re struggling to get to £140 billion – or £60/week/adult. To get up to £230 billion, we’d have to effectively hike the prices of food, children’s clothing, domestic rents, public transport, water and sewerage, drugs and prescriptions, insurance and finance and new houses by 17.5%. And then hit pensions to the tune of nearly £20bn more per annum. The effects on the housing markets and the pensions system would probably not be good.

To counter that is the fact that a lot of those receiving CBI would be effectively paying income tax on it – receiving an extra £5k per year would push me into the upper tax bracket, so I’d only get £3k of it to spend (not that I’d be complaining! That’s a nice amount of money – and my wife would be receiving it too!).
Looking at a BBC news story from April 2004 (quickest return I could get from google), there are around 3.5 million higher rate tax payers, amounting to about 10% of all tax payers. Assuming that to be right, and that around 1.5 million more would be knocked over the upper rate (Wild-assed guess), 5 million would give back 2k per year (£10bn total) and 30 million would give back about 1.1k each (£33 bn total) leading to over £40 billion of the CBI being returned in tax – so to get to £230 billion, we’d only have to raise £190 billion.

If the James report is valid, then we can get from the £136.6 billion from scrapping social security and tax credits to over £170 billion – nearly there. Getting rid of CAP payments to farmers and the DTI and Department of Culture, Media and Sport would get us to over £180 billion which would give an effective rate of about £95/week/adult (when tax returns of CBI are taken into account) – without flattening pension schemes or hitting food, childrens clothes, rents, insurance etc. with VAT.

As I have mentioned in the comments of Blimpish’s “Once More” piece, the fact that the best ways of gaming the system seem to promote families and work appeals to me. The housing side does seem to be an issue. You could argue that people will just have to move to wherever they can afford (as someone commented – they’ll be able to buy a train ticket to Hull) – but won’t this cause further ghettoization as people on just CBI flee to the cheaper areas (which tend to be in the North, further exacerbating the North-South divide)?

So, without reference to what we can afford, what do people think is a minimum acceptable subsistence income per adult (and yes, requiring people to live in pairs in order to manage without undue discomfort may be posited).

As an aside, I’d like to see the government publish advice on eating healthily on a low income – it can be done, but many (myself included when I was at university) have no clue on how to do it.

Katie

Andy - Live in France. Open markets, selling only fresh produce, drop their prices to clear towards the end of the day. And bread is subsidised. Oh, and wine (good for you) is cheap, while vodka (lots of empty calories) is not.

David Wildgoose

I've long liked the idea of a basic CBI. However, I also still clearly remember an increasingly drunken discussion in a pub with Peter Bowler, my predecessor as Liberal Democrat candidate for Rotherham. He made the valid point that a CBI would be inherently inflationary for basic goods and services.

I have yet to encounter a valid refutation of this point, and I would appreciate it if people with more economics understanding than my armchair variety could address it.

Blimpish

David: not that I like the CBI, but there's no reason why it would be inflationary, unless for some reason it began to increase the velocity of money (or triggered a collapse of productivity, maybe).

In terms of basic goods and services - if it increased their prices, then that's a change in relative prices, so the overall price level would remain the same. I guess this is potentially possible, but I don't see why it should - and it's an argument against any redistribution of income, not just CBI. So... you can happily support it, I guess (score one for the other team, dammit!).

Monjo

The CBI will allow me to open my 365/24/7 Ibiza-style hotels all around the UK! £70/wk/person, room, TV, free meals, and maybe for a few pounds more free alcohol.
Another small supplement to have a second person per room (say £20/wk/person) and I'm laughing. The hotel can have a swimming pool, gym and other services such as launderette (£2 to wash, £1 to dry)

If we want to know how cheaply people can live we need to study those all-inclusive ClubMed holidays!

A nation of people partying at the Gvt's expense and my own profit.

Rob Read

I would welcome a CBI, IF AND ONLY IF, it was only funded via rights to extract resources by auctioning the rights to fishing grounds, mine-coal/oil, airwave space etc.

A CBI funded by taxes on Income would be akin to slavery, and imply state ownership of people.

David Wildgoose

Thanks Blimpish.

The basic premise to the argument started from "the price you pay is what the market will bear". Giving everyone money for the basics means that on the whole there is more money available for them, and so therefore the prices of basic goods and services would tend to rise.

But of course the very fact they are basics implies that they are readily serviced and thus there are a large number of operators to keep the market honest.

Always look at the whole picture as Henry Hazlitt's "Economics in One Lesson" would have it...

Blimpish

David: a Lib Dem candidate citing Henry Hazlitt. Never thought I'd see the day!

David B. Wildgoose

Make that ex-Lib Dem (and founder member) seeing as I resigned from the party last year at what I saw as a lack in basic principles. But that's another story...

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