 Hi, I'm James. And I'm Anthony. And this is Words and Numbers. Hey, Ed, how's it going? James, things are going well. Believe it or not, one of our viewers has left a comment for us. This comes from Trent Goldsmith, who's a high school teacher at Waverly High School in Waverly, Nebraska. And he's asking us if we would say something about UBI, Universal Basic Income. Yeah, no, and Trent stumbles across one of the few things here that you and I have had a bit of a disagreement over, you know, over what the past year or so. Usually Antony are pretty much on the same page when it comes to economic things. But every now and then, we part company and the Universal Basic Income is one of those things, at least when all the details are fleshed out, that I think we might have an insignificant disagreement over. Yeah, yeah, yeah, that's correct. Generally speaking, I like the idea of Universal Basic Income provided it's done well. And having said that, I don't think there's any chance it's going to be done well if it's done at all. Yeah, but let's take a couple of steps backwards and figure out at least in broad terms how we got here, right? This has kind of come into the news over what I would say the past year, year and a half, and it's been fueled by the kind of the tech guys out in California, and I'm thinking specifically of Mark Zuckerberg and Elon Musk, who, you know, sit on top of incredible fortunes. And I don't know, maybe they're feeling a little guilty about that or whatever, but they seem to be of a mind that what we need to do collectively is to provide an income for human beings that would remove the vagaries of making a living and allow people to live better lives, right? So that's putting the best spin possible on this. In that sense, it's not much difference from the living wage argument, right? It's that with universal basic income, you're not necessarily working. You're just receiving it, whether you work or not, it's irrelevant. You receive some check for a base living amount from the government, right? And how much that is, you know, that's going to be up for grabs with all kinds of debates and this sort of thing. So you know, we probably do well here to keep this in the broader context of a theoretical UBI and would that, in fact, be a good idea if we could, in fact, figure out how to pull that off? And then we'll get into the weeds. I suspect a little bit, a few minutes down the road. So why on earth, Ant, would you think that a UBI is a good idea at all when we start in basic economic theory by saying something a lot like if you want more of something subsidize it, well, what are you going to get more of here, idleness and sloth, right? I think we should probably describe in a little more detail what the UBI is. Now, understand that Congress can take a good idea and make it a horrible monster, right? So I have no idea what would come out of Congress attempting to craft a UBI, but in its most basic form, it looks something like the following. Every household or every person, depending on how you want to do it, pays a certain percentage of his income. So this is an extra tax we're talking about. It goes into a pot. Everybody pays the same percentage. It goes into a pot. And at the end of the year, this money in the pot gets divided up. Everybody gets a check for the same amount. So you can imagine people who earn little pay a percentage of their small income. So they pay a little bit into the pot and they get a check that's larger than that. So they're net benefit. Then other people who earn a lot of money, they earn a lot of money, they pay the same percentage of that, but ends up being a very large amount that's larger than the size the check they get back. So they end up being net payers, low income people end up being net recipients. That's the general idea. All right. Well, maybe I'm just a crazy person here and maybe I don't see the obvious thing in front of my face. But isn't this just a very clever way to redistribute money yet again? Absolutely. And in fact, in that, in that sense, it's not overly different, except it's more simple than what Social Security does now. It takes a set percentage from everybody's paycheck and it gives you back money when you retire. Right. And this, this is the same general idea, except it wouldn't apply only to retirees. It would have replied everybody. But correct me if I'm wrong. Every single time we look at a scheme of redistribution, you, you come out swinging against that saying that this is not the smart thing to do. What we need to do is let the market forces prevail, etc., etc. And yet here, this one time, apparently, you're willing to consider it. Yeah, there's all sorts of reasons not to do this, right? It's going to be distortionary. It's going to cause people to remove their incentive to work, all the kinds of arguments you hear economists making. So in that sense, my argument is not that the UBI is a good idea, but rather it's a better idea than the way we currently go about trying to help the poor. And what we have is this hodgepodge of programs, both the federal state and federal level and the state level, things like housing subsidies, food stamps, earned income tax, credit, right? Some states give you energy credits towards your electric bill if you're low income, minimum wage, all of these things together are probably tens or hundreds of programs we have in place to help the poor. UBI replaces all of that in theory. All right, so now it actually gets a little more interesting, doesn't it? Because we do waste a lot of time, effort and money on various programs that all interact with each other in strange and wondrous ways, right? Because it was built as a patchwork, a hodgepodge over time, not a rational coherent plan that was designed to address a specific problem. Maybe we would be better off throwing every single thing that we now do in the trash and starting over. And this would be a really interesting way to start over. Is this your perspective? Is this what I'm hearing? It certainly would be. I think the thing we have to keep in mind is that economic policies, like the policies we use to help the poor, are not dissimilar from drugs that a physician might prescribe to someone. And you have to be very careful when you're taking drugs. You have to tell the physician if you're going to get a drug to address some malady you have, make sure the physician knows that you're also taking other drugs because they'll interact. And the drugs may interact in ways that the physician never intended and causes bad things to happen. The same exact thing happens with economic policies. You impose one policy to solve one facet of poverty, and you impose some other policy to address some other facet of poverty, and these two things can interact. And they can interact and cause bad outcomes. Good case in point, Clifford Thies, who's an economist, did a study of a hypothetical family of three living in Virginia, and he asked the question, is this household starts off earning very little money? And as it starts to earn more and more money, what happens to the household's net income after you account not only for additional taxes the household may have to pay, but also for various poverty programs that phase out as you earn more money? And what he found was these poverty programs interact in such a way that this hypothetical family of three, once it hits $20,000, it should not try to earn any more money because it will actually be worse off after all the dust settles. This is a horrible thing. If you ask any reasonable person, they say there's no way we should have a poverty program that penalizes you for earning more, and yet that's what we've ended up with. And the interesting thing here is that you became an economist again real quick, as you often do, and you started making efficiency arguments, that this would simply be more efficient than any other thing we could do, indeed, more efficient than anything we do right now. And if you think about it for a second, that actually is undoubtedly correct, right? Because what would we be able to get rid of if we adopted this wholesale on the provision that everything else has to go? And that's always the tricky bit, right, while doing things politically. And do I think Congress will ever be able to do something like this? No, not really. So it's probably just an interesting conversation. But it is an interesting conversation, right? Because there would be incredible efficiencies if we walked this road instead of the road we currently walk. Do you have any numbers to indicate just how much more efficient this sort of thing could in fact be? Yeah. So I don't know the answer to that, right? Because there's all kinds of things going on. Now I can tell you no question it would be more efficient. The only question is to what degree? The reason we know this is because you would take all of the people who are employed by the federal government in administering poverty welfare programs and all of the people in the private sector who are contracted to the government to help administer these programs, all of those jobs would go away. Now people get upset when you say, oh my God, jobs are going away. But keep in mind what's going on here. These are productive, intelligent people. When we say the jobs will go away, what we mean is these productive, intelligent people will be freed up from doing jobs that currently aren't contributing much to the economy. They'll be able to turn around, start doing other things that do contribute more to the economy without us losing any of the benefits to poverty, to poor people that we currently have. Yeah, it would have the net effect of slicing off an entire level of bureaucracy and putting it to bed. It would just be gone. And generally speaking, that sort of thinking makes me kind of happy, generally speaking. Now curiously, notice what we haven't talked about here. And we haven't talked about the very thing that brings the Silicon Valley types to the universal basic income in the first place. And that's the core belief, and I think it is an absolute core belief, that any number of jobs are going to be lost, irretrievably lost to automation over time. That's how these guys get here in the first place. And we really, we don't really put a lot of stock in that sort of argument, right? The economies don't behave that way. Yes, jobs will be lost. New jobs will be created in the bargain. And somewhere down the road equilibrium happens, right? Right. Yeah, this is correct. As long as it is the case that automation replaces jobs, but you get interesting effects. For example, when the ATM came along, people said, well, this is going to be the death of human bank tellers. And the interesting thing that happened is that the number of tellers per bank on average dropped 40%. And people said, see, this is exactly what automation does. It destroys human jobs. But the other interesting thing that happened is because the number of tellers per bank dropped 40%, it was now cheaper to open bank branches. And so banks found it profitable to open branches in places that were underserved, that branches never existed before. And in total, the number of branches increased by a large amount so that the number of human tellers actually went up after the ATM, not down. Yeah, no, and for this argument to hold, ultimately, you'd have to go back in time and explain to people why Henry Ford's new modes of production were going ultimately to put all people out of work. And, you know, we all know looking back on it that the burgeoning automotive industry employed far more people in the end than did the horse and buggy industry. And yet, you know, there was there were some short term problems when it came to employment with automation and factories that people, you know, prior to that just never experienced. So these sort of convulsions in the labor market are simply going to happen. But it's long been our point of view that they pass. Yeah. And I think what's very instructive is to take just two data points. United States in the 1700s versus United States today. And what's the difference? Well, in today, we have somewhere in the neighborhood of 100 times the number of jobs that existed in the 1700s. And yet we have gone through two automation revolutions, the industrial revolution and the information revolution. And despite those two revolutions that are creating all this automation, it didn't exist. We have 100 times the number of jobs today that we had prior. Right. Last word on the UBI for for the week. Well, I think I think the final word is this, the UBI in theory is a great idea provided that you use it to replace the entire suite of poverty slash welfare programs, everything from stuff we associate with traditional welfare to things that we tend not to associate with welfare as much like minimum wage, like Social Security. If you replace all of that with a UBI, you actually gain. The economy, in my opinion, will become more efficient. The worst case scenario is that you impose the UBI on top of the welfare system we have now. And that's a recipe for disaster, which probably makes it most likely. Anyway, that's all we've got time for this week on Words and Numbers. Come on back next Wednesday around about noon Eastern time for another episode. Until then, check out all the great content at fee.org and at fee online and social media. We'll see you next week. Take care, Ian. See you next week, James.