Homo Oeconomicus 31(1(2): 181-199 •(2014) 181 www.accedo verlag.de Basic Income in Mixed Economies Richard Sturn Institute of Public Economics, University of Graz, Austria. (eMail: [email protected]) Abstract: In this paper the institutional circumstances implied by the implementation of an Unconditional Basic Income (UBI) based on the normative principle of Leximin Real Freedom (LRF) (as suggested in Ph. Van Parijs’s Real Freedom for All) are examined. Summarizing earlier literature, it is argued that its implementation is likely to imply a market economy with a mixed institutional framework (“mixed economy”): while UBI crucially relies on the market in certain respects, non-market institutions and practices may be justified (1) by their tendency of boosting UBI and/or (2) because they provide superior public substitutes of private goods or (3) because people may prefer them to marketmediated interaction. Given (1) – (3), the implementation of UBI is shown to be a demanding task where socio-economic expertise plays a specific and important role, but contested ethical-political issues remain on the agenda for three reasons. First, certain distributive issues are bound to re-occur in such a mixed economy scenario despite the constitutional adoption of LRF-UBI as the overarching mechanism of distributive regulation. Second, the problem of merit goods will keep playing a role. Third, systemic effects and thresholds may trigger nonneutralities at the macro level (which are in part correlated to the starkly different political visions put forward as a motivation for UBI in popular discussions). Finally, it is suggested that one could steer clear of such implementation difficulties (but not solve the underlying social problems) by subscribing to a version of a basic income/negative income tax with less demanding normative foundations than LRF, while a Republican Basic Income would be confronted with them in a somewhat similar fashion. JEL Codes: D30, H 20, I38 Keywords: Unconditional basic income, leximin real freedom, negative income tax, distribution policy, republican basic income. © 2014 Accedo Verlagsgesellschaft, München. ISBN 978-3-89265-114-7 ISSN 0943-0180 182 Homo Oeconomicus 31(1/2) 1. Introduction This note is about justice-based redistribution according to Philippe Van Parijs’s conception of an unconditional basic income (UBI). The normative core of this conception is real freedom (RF henceforth), defined as “the whole set of external means that affect people‘s capacity to pursue their conception of the good life, irrespective of whether they are natural or produced” (Van Parijs 1991: 113). According to Van Parijs, fairness requires a set of policies maximizing the real freedom of the worst-off (i.e., maximin/leximin RF, henceforth LRF). Given suitable conditions, this set of policies is shown to boil down to the simple design of the maximum monetary UBI that is sustainable in the long run. By and large, those conditions resemble some idealized Walrasian equilibrium model of a competitive market economy with money as the medium of exchange. As Van Parijs is well aware of, those conditions are not likely to be met in the real world. Hence LRF will eventually require various types of subsidiary institutions, policies and practices in combination with UBI. In an extremely circumspect manner, Van Parijs (1995; 2001) shows how it may be possible to take on board many of the arguments motivating such subsidiary elements while preserving the pivotal status of UBI in the context of the overall design of policies implementing LRF. Van Parijs addresses the issues motivating such subsidiary elements on a case-by-case basis. Considerations related to the systemic level of UBI primarily come to the fore in his disquisition comparing capitalism and socialism in Real Freedom for All (1995). By focusing the implications of specific constraints ruling out private property of the means of production (and of concomitant constraints ruling out capitalistic labour markets), the capitalism-socialism dichotomy is useful for highlighting important aspects of economic governance. But focusing on this dichotomy amounts to picking out one of perhaps several important aspects of institutional arrangements, and it does so in a highly specific manner. For instance, having in mind some versions of a mixed economy which are commonly regarded as relatively attractive, we may wish to consider some kinds of regulations of labour and capital markets, limits of private property rights, and insurance mechanisms which are better assessed without reference to the comparison between capitalism and socialism. In that context, this note aims at a dual purpose. First, it will discuss some problems of combining LRF-UBI with subsidiary elements occasioned by the complexities of real-world environments. While none of these problems implies knockout arguments against considering UBI as a serious candidate for promoting real freedom, some of those problems are “difficult”: they cannot be solved once and for all and will pose a constant challenge, thus frustrating hopes according to which no difficult and R. Sturn, Basic Income in Mixed Economies 183 demanding political issues and cumbersome tasks of welfare bureaucracies remain in the sphere of distribution once UBI is in place. Some minimalistic version of basic monetary income or negative income taxation, but not LRF-UBI is consistent with a theoretical framework implying minimalistic politics, which may be motivated by a sceptical stance towards politics as a sphere which is inevitably distorted by rentseeking. By contrast, LRF-UBI is not in general a framework for minimalist politics. It does not provide an algorithm for settling all difficult questions in a quasi-technical manner, even though the framework sets the stage for an important role of technical-economic considerations. Second, this note will shed some light on the status of debates on some controversial issues such as: will UBI have market-constraining or rather market-enhancing effects? Will UBI turn out to be a core element of a progrowth or rather of a post-growth regime? Etc. Be that as it may, and irrespective of whether UBI is endorsed as the pivotal element of the distributive mechanism of a modern market economy or not, the conception of UBI based on the principle of Leximin Real Freedom (LRFUBI) will be shown to be useful for thinking through foundational problems of distributive regulation under conditions of a modern pluralistic market society. Perhaps that concept is, in a certain respect, even indispensable for this purpose: its relative simplicity and the specific way in which it is associated with the logic of the market allows for addressing intricate issues which are not easily grasped when considering either more multi-faceted distributive principles, or principles whose implementation presupposes demanding informational requirements (such as interpersonally comparable utility information). The discussion in the last two sections (4 and 5) of the present note will be framed as an answer to the question: given that LRF-UBI has been constitutionally enacted, which kinds of problems must be dealt with, and how, on the level of implementation? Referring to an article entitled Basic Income in Complex Worlds (Sturn and Dujmovits 2000) and to Van Parijs’s (2001) rejoinder, I will argue that the nature of some of those implementation problems precludes their technocratic solution. Hence a fictitious “UBI-board” in charge with determining the level of UBI would have to be a hybrid institution, combining political elements and socioeconomic expertise. Van Parijs’s LRF-UBI offers useful discursive infrastructure, disambiguating a rich variety of pertinent arguments and levels of argument. But difficult issues remain, and those cannot be readily solved once and for all by the clever design of rules. As a prelude to that discussion, section 2 provides general observations on the issue of (re)distribution in market societies. Section 3 summarizes implications of basic income in complex worlds, thus motivating the conjecture that a LRF-UBI society is likely to go along with a mixed economy. 184 Homo Oeconomicus 31(1/2) 2. Distribution and market economies The general background of the relevant “circumstances of justice” (cf. Rawls 1971) is related to the fact that the society-wide distributive issues of modern market societies only superficially resemble the division of a given homogenous cake whose size and quality is known to everybody. Apart from epistemic problems regarding the valuation of commodities caused by the sheer complexity of market interdependences and dynamism, the cake in question is heterogeneous, and its size is endogenous, depending on the distributional rules in place. Moreover, distributional rules and mechanisms operate in a society which can be conceived of as a wide-spread web of anonymous exchanges between individuals, who are “bound” to each other primarily in the form of interaction mediated by market prices. Hence those distributive problems are intertwined with the complexities of market interdependences, as was already recognized in Scholastic debates on pretium justum. In the Scholastic context they triggered the first examples of systematic reasoning regarding marketmediated “natural” forces of price determination. In the case of LRF-UBI, specific problems are related to the ambivalent relation of a distributional regime such as LRF-UBI vis-à-vis market-mediated interaction. Put somewhat superficially in public finance terms, a pro-market tendency on the expenditure side (LRF-UBI in general is presumed to require maximization of the monetary UBI which is sustainable in the long run, unless it can be demonstrated that one of the below-specified reasons for in-kind distribution applies) co-exists with an anti-market tendency on the revenue side of the public budget (LRF-UBI requires revenue maximizing taxation primarily imposing a tax burden on market-mediated activities, unless certain specific conditions apply which are also touched upon below). LRF-UBI hence depends on a money-mediated market regime, but at the same time it constrains the market as a distributive mechanism and as an incentive/disciplinary mechanism. This is summarized in Van Parijs’s (2001: 108) Reply to Seven Critics, where he approvingly refers to our paper Basic Income in Complex Worlds: “as noted by Sturn and Dujmovits (199), a conception of justice such as mine, which relies so crucially on the market, is paradoxically also one which ends up in an institutional setup that grants to a maximal extent ‘the real freedom to say no to market interaction as far as factor markets are concerned.’” This ambivalence does not imply incoherence. Nonetheless, the ambivalence is reflected in starkly divergent political visions associated with UBI: UBI is sometimes advertised as a distributive regime for a postgrowth society, whereas others are suggesting that it would unleash currently dormant potentials of dynamic efficiency implying an expansion R. Sturn, Basic Income in Mixed Economies 185 of market-mediated activities, as it would go along with an attenuation of regulation, bureaucracy, and psychological restraints to entrepreneurial spirit. As will be explained in section 5, such effects (either intended or unintended) may be related to systemic interdependences, hinging upon contingent properties of the prevailing social structure. Anyway, LRF-UBI would bring about a major transformation regarding the way in which private property rights function as a starting point of market exchange. The market would fully keep its role as a coordination mechanism. Yet an UBI-augmented market mechanism could change the working of the price system as an incentive or disciplinary mechanism. The distinction between coordination and incentive aspects is factorizing a big regime change into sub-aspects, which may be more readily accessible to empirical reasoning. 3. Basic income, empirical contingencies, and the institutional environment of a mixed economy 3.1. Real Freedom beyond markets: three kinds of arguments As indicated in the subtitle of Van Parijs’s (1995) seminal monograph (What, if anything, can justify capitalism?), the argumentation supporting LRF-UBI entails the possible justification of an entire socio-economic regime, including private property, the price system, and a distributive mechanism (i.e. LRF-UBI). As put forward in great detail by Van Parijs (1995, ch. 6), the justificatory exercise is framed by the comparison between “optimal feasible capitalism” and “optimal feasible socialism”. This is not the frame of reference of the following discussion. It rather starts with the observation that Van Parijs’s (1995, 2001) optimal capitalism cum LRF-UBI will resemble a mixed economy – notwithstanding a certain pro-market and pro-money presumption which is necessary to get a monetary UBI off the ground. Within that regime, various kinds of subsidiary non-market institutions, incentive mechanisms, policies (perhaps including policies aiming at the regulation of reproduction and immigration), practices, norms (e.g., efficiency enhancing labour market regulations) and dispositions such as an ethos of solidarity (cf. Van Parijs 2003 III.E), or entrepreneurial spirit may be included in the overall justification in an “indirect” fashion: the justification of all those subsidiary policies (eventually including policies of motivational engineering), institutional designs, etc. is contingent upon their long-run UBI-boosting tendency. Hence indirect UBI-boosting motivates a certain role for subsidiary non-market features of an LRF-UBI society, representing a first level of argument. Yet there are two further levels of argument supporting a role for non-market institutions, practices and ways of living. At a second level of argument, the activities of public 186 Homo Oeconomicus 31(1/2) institutions regarding the provision of specific goods in-kind (instead of including them in monetary UBI-transfers, which is the general presumption implied by the principles of LRF-UBI) may be justified if it can be shown that they are clearly superior to their tradable substitutes, or if in-kind provision saves transaction costs. Let us call this the superior substitute argument. (Notice that some basic parts of the regulatory framework of a market economy and its enforcement may be construed as a higher order-pure public good directly benefitting everybody. Hence both the superior substitute argument and the indirect UBI-boosting argument may apply. But in other cases there is no such overlap: some more specific regulations may be efficiency-enhancing and UBI-boosting, even though they directly benefit only a certain group of people. And some provisions could be justified even if they are found to distort overall efficiency and thereby lead to a lower UBI, provided they are directly benefiting the worst-off more than the latter lose in terms of a lower UBI.) A third level of arguments invokes the preferences of individuals. Nonmarket institutions and ways of living may flourish in a LRF-UBI world (some of them indeed may flourish even more than in societies characterized by the traditional varieties of capitalism), simply because individuals prefer them and can afford them. In Sturn and Dujmovits (2000), we discussed some problems implied by the idea that non-market patterns of interaction (such as families or households) might be (re)discovered as institutions of production beyond their present role within the system of reproduction. Such tendencies could be exacerbated when the value created in market-mediated interaction is taxed in a revenue-maximizing fashion (as is required by LRF-UBI) while value created in non-market productive interaction escapes taxation. The core of the first two levels of argument is brought to the fore already in Van Parijs (1995). The scope and some specific implications of the first level of argument (indirect UBI-boosting) are spelt out in a particularly clear fashion in his Reply to Seven Critics (2001). Some pertinent points were raised in the piece co-authored by myself (Sturn/Dujmovits 2000). In the same Reply (in a section entitled Does the family unjustly escape taxation?) Van Parijs also addresses issues related to the third level. Part of his reaction reaches beyond it, as he discusses some implications with a potentially systemic dimension. This is to be discussed below in the context of the “difficult” political problems remaining for the UBI-board. 3.2. Complex and ideal worlds Before discussing those problems, a few remarks on the theoretical background of UBI in mixed economies are in order. As some of the R. Sturn, Basic Income in Mixed Economies 187 reasons motivating this mixed institutional setting were put forward in Sturn/Dujmovits (2000), let me briefly explain our strategy in this paper. We were confronting LRF-UBI with a number of circumstances which are likely to play a role in a complex world as the one we live in, such as the role of non-market institutions, non-money mediated access to goods, issues of determining the just and efficient tax base when asset specificity or efficiency-enhancing rents matter, or economies which cannot straightforwardly be interpreted as a scheme of co-operation as they factually are divided into two or more sub-economies. The ideal world of pure and unproblematic LRF-UBI would be quite different and much simpler. It would closely resemble a Walrasian private good-private ownership economy with a competitive market equilibrium. In such a world, no problems of asymmetric information and agency, and no public-good problems occur. The two theorems of welfare economics hold good. Hence issues of just distribution and issues of efficient allocation can be dealt with separately. In such a world, the implementation of LRF-UBI would pose no major difficulties. There would be no need for various kinds of subsidiary institutions and indirect policies which in a more complex world may be justified, inter alia by their tendency of boosting UBI. At the level of normative visions, the society emerging from the combination of competitive Walrasian markets and LRF-UBI seems to come close to what Leon Walras and other liberal economists (including John Stuart Mill and Knut Wicksell) had in mind. LRF-UBI can be considered as a more concrete version of their vision for social reform curing the ills of 19th century capitalism: freeing the system which combines private property and the market mechanism from its traditional links to the asymmetries of power and privilege, thereby creating a thoroughly competitive, radically open and rigorously forwardlooking system of social interaction with the market as the core institution bringing about coordination without hierarchy and coercion, and powerinduced rents leading to excessive inequality. Even though Van Parijs (1995) uses competitive Walrasian market prices for a quite important step in the line of arguments by which LRFUBI is derived, he is acutely aware of the fact that modern capitalist market societies are non-Walrasian and that it is not wise to steer clear of its non-Walrasian aspects when defending LRF-UBI. Authors such as Kaushik Basu (2011), Samuel Bowles and Herbert Gintis (e.g., 1993) are among those who have pointed out most clearly some far-reaching differences of a non-Walrasian world. Van Parijs is aware of this highly relevant literature. (Indeed, Bowles is quoted rather frequently by him.) But spelling out the consequences of certain non-Walrasian aspects and integrating them in the overall picture is a demanding task which will require more research at the conceptual as well as on the empirical level. 188 Homo Oeconomicus 31(1/2) 4. The UBI-board and its challenges 4.1. Implementation, efficiency and sustainability: the UBI-board as a board of experts Here are two examples illustrating the scope of indirect UBI-boosting occasioned by non-ideal circumstances. The first is derived from the theory of efficiency wages (Van Parijs 1995, 2001; Sturn and Dujmovits 2000). Efficiency rents needed to support UBI-enhancing efficiency-wage mechanisms should not be taxed away. By contrast, non-functional scarcity rents are, of course, included in the tax-base of redistributive taxation. The second example implies a perhaps more difficult task for politics (or the UBI-board): “it must not shy away from resolutely designing institutions that foster an ethos of solidarity, of work, indeed of patriotism, not of course because of the intrinsic goodness of a life inspired by such an ethos, but because of its instrumental value in the service of boosting the lifelong prospects of the incumbents of society’s worst position.” Such policies are discussed by Van Parijs (2003 III.E) under the title “Motivation-conscious social engineering.” More generally, Van Parijs (1995) provides multifarious considerations regarding various aspects of the institutional environment that may affect LRF-UBI, depending on empirical contingencies. While starting with a scheme of distribution based on liberal-egalitarian principles, LRF-UBI leaves ample room for empirical considerations on the likely impact of measures on the level of implementation. In keeping with the approach of modern economics, the role of public institutions is mainly assessed on efficiency grounds. LRFUBI does not impose a rigid normative standard which would impose huge efficiency costs on the economy, given the actual workings of the economy. Just to give a very simple example: its responsiveness to empirical circumstances and its efficiency-respecting flexibility clearly imply that LRF-UBI is not vulnerable vis-à-vis the common criticism according to which a basic income would destroy necessary incentives for labour market participation. The possibility of adverse incentive effects on the expenditure side as well as on the revenue (taxation) side and of its repercussions on economic performance is taken into account when calculating revenue-maximizing tax rates and determining the level of UBI. As indicated above, approaching problems along the lines sketched here (i.e. starting from a simple principle and taking on board the complexities of the real world at the level of implementation, thus preparing the ground for subsidiary institutions and other features which can be shown to be R. Sturn, Basic Income in Mixed Economies 189 conducive to a high UBI sustainable in the long run) has many advantages. It sets the stage for a thorough discussion of relevant problems as problems of implementation which can be discussed using concepts of economics and the tools of empirical social sciences including econometrics. Indeed, LRF-UBI provides a normative framework implying a crucial role of socio-economic expertise in those fields, comparable to Pigou’s (1932) programme of a kind of Welfare Economics suitable to implement utilitarianism under the contingencies and problems of real-world economies. Once the principle of LRF-UBI is accepted and once the basic mechanism required for its implementation is in place, the level of the latter is in principle determined by socio-economic forces and the logic of market interaction. 4.2. Persistently contested issues: the UBI-board as a political body Is, consequently, the implementation of LRF-UBI an affair which can be safely put in the hand of experts, once the general principles (LRF-UBI) have been constitutionally adopted? The answer is no. To see why, suppose for a moment that the level of UBI would be determined by a UBI-board of expert economists. Along the lines argued in the above, this is not prima facie implausible. As the constitutional decision in favour of LRF-UBI is binding for the UBI-board, the board seemingly is not concerned with distributive conflict: it is in charge with optimal sustainable implementation. Many aspects of the issues referring to indirect UBI-boosting and the extent of in-kind provision (as sketched above) can indeed be discussed at an expert level. Yet it soon would become clear that certain aspects include far-reaching interdependences, reaching beyond the economic sphere. Hence economic reasoning must be complemented by multi-disciplinary discussions, including sociology and ecology. Combining those different strands of reasoning will introduce a discursive element, as it is unlikely that they can be integrated by some multi-disciplinary super-model. But this is not the only reason why the UBI-board would not merely be concerned with technicalities. Why will an entirely non-political agency not be sufficient? Consider an analogous case: the interest rate may in principle be determined by “natural” economic forces, given that the human-made conditions required for the market system are in place. In practice, monetary policy is a domain which clearly is part of public sector decision making. It can hardly be regarded as completely non-political. A certain constitutional “independence” of the central bank underlines the role of long-run considerations and expert judgements in monetary policy. Decisions on monetary policy entail a specific mixture of judgment aggregation and mediation of conflicting interests in a domain vulnerable to uncertainty as 190 Homo Oeconomicus 31(1/2) well as short-sighted opportunism. The latter motivates specific safeguards and a specific overall design of the public institution in charge with the conduct of monetary policy. The collective agency or board in charge with determining the level of UBI would be in a somewhat similar position. Apart from various kinds of uncertainties and issues that could be dealt with in a relatively uncontroversial manner (on the basis of the conceptual infrastructures provided by Van Parijs and the tools of economics and other social sciences as sketched above), three kinds of difficult problems with potential political implications remain: (1) non-neutral distributive effects and (2) merit want-aspects of policy alternatives at the implementation level of LRF-UBI and (3) systemic effects related inter alia to the possibility of thresholds, possibly triggering big questions as to the kind of world we would wish to live in. Before I discuss (1) – (3), two remarks and a caveat are in order: First, the difficulties related to (1) – (3) are exacerbated by cultural pluralism, the existence of sub-cultures, etc. Normative issues such as neutrality will increasingly come to the fore. Cultural pluralism may enhance the complexity characterizing the co-existence of LRF-UBI’s pro-money biases and its tax-burden induced anti-market biases. This may increase the probability of problematic unintended effects in terms of favouring one way of living over the other. Second, (1) – (3) often will be somehow interrelated. Neither this interdependence nor the way in which cultural pluralism may play a role will be discussed in a systematic way here, as the main thrust of the argument (“the UBI-board will in a sense be a political institution”) does not hinge on that. Third, a general caveat deserves to be re-emphasized: we can imagine versions of UBI or of a negative income tax which get rid of (or rather circumnavigate) the problems sketched below – at least in the specific manner they crop up in the context of LRFUBI. By basing UBI not on a demanding conception of LRF, but on a less demanding pragmatic or minimalist approach, we could steer clear of those problems, even though they probably would re-appear at unexpected levels. But this is a different topic. (1) Non-neutral distributive effects: in a world in which circumstances require many subsidiary UBI-enhancing policies and institutions, issues of allocation and those of distribution will, in general, be thoroughly interdependent. For instance, the demand for various kinds of public goods does not only depend on aggregate monetary income, but also on its distribution. Spending less on public security may help boosting UBI, but shifting to the private substitutes of public security may have complex distributive effects, inter alia because not all people may be in a symmetric position for making use of the market-mediated private substitutes of public security. For this and other reasons, the choice between monetary UBI and in-kind provision of “superior” public R. Sturn, Basic Income in Mixed Economies 191 substitutes remains complexly intertwined with distributive issues. It requires a careful handling of neutrality problems. Those problems require a political forum to be adequately dealt with. (2) Merit wants, in-kind provision, and regulation: Van Parijs (1995: 26), mentions compulsory primary education as an example for justified cases of overruling individual preferences. Consumer sovereignty may be challenged on the grounds of the implausibility of exogenous sovereign preferences regarding the demand for primary education. In general, in cases of complex “experience goods” or goods/services requiring nontrivial inter-temporal optimization it may be challenged on the grounds of bounded rationality (Munro 2009; cf. also Basu 1975/76). All of these levels of the discussion are related to the concept of merit wants (or merit goods) introduced by the German-US economist Richard Musgrave (1956/57; 1959; 1987). More generally, various kinds of knowledge making accessible hitherto unknown or not fully known opportunities could be provided by merit-want based policies. Sturn and Dujmovits’s (2000) pushpin-poetry story provides an illustration for that: under certain assumptions it might be better to offer individuals who as yet have no taste for the resource-saving activity of “poetry” opportunities for learning, rather than taxing the poets so heavily that they are forced to give up poetry. But notice that the merit argument does not necessarily apply to any kind of learning process: think of learning processes which can be fully captured by modelling them as investment in human capital with a publicly known market value. In reality we must expect mixed cases where it is difficult to draw the line. But the problem of merit goods has further dimensions. Van Parijs (1995: 6.8.) endorses educational approaches fostering an UBI-enhancing ethos of solidarity (see also Van Parijs 2003: III.E). Such merit goods can be seen as cases of irreducibly public goods for which there are no private substitutes (cf. Taylor 1995). Yet this does not imply technocratic framings. As another German-US economist, Gerhard Colm (1965) and, more recently, Geoff Brennan and Loren Lomasky (1983) have made clear, preferences with regard to irreducibly public goods are profoundly related to the sphere of political decision making. Sturn (2014) explains in some detail why problems related to what Musgrave called merit wants were brought to the fore by liberal theorists such as John Locke (1690) and John Stuart Mill (1848, esp. bk. V and 1859), why those problems cannot be adequately discussed if reduced to the co-ordinates of “paternalism”, and at which levels they are related to issues which call for a systematic comparison of collective (political) choice and market choice. These brief remarks should be taken as a kind of warning that the question “Cash transfers or in-kind benefits?” may be tricky and complex and cannot be solved once and for all at the level of expert judgement. One 192 Homo Oeconomicus 31(1/2) could steer clear of those problems only by a much more minimalistic version of basic income, which would hinge upon a much more robust promoney presumption1 as compared to the carefully specified pro-money presumption as put forward by Van Parijs. By contrast, the Republican version of UBI based on freedom as non-domination instead of LRF (as suggested by Philip Pettit 2007) would also be confronted with the problems sketched here for LRF, even though one may speculate on whether the Republican version is superior to LRF regarding its resources to disambiguate tricky issues related to merit wants2. But here is not the place to pursue that speculation. 5. The systemic dimension: Which kind of mixed economy? I now come to the third level at which a UBI-Board will face political challenges – perhaps the most far-reaching ones. Let us call it the systemic level3. First we briefly summarize what has been argued so far: taking the 1 For instance, the pro-money and the pro market presumption could be based on Robert Sugden’s (2004) opportunity criterion, implying a defense of consumer sovereignty which is robust as well as far-reaching in scope. 2 Freedom as non-domination is loosely appealed to in many discourses on basic income. It seems to be implicit in the often-used formula that UBI enhances “the freedom to say no”. Notice that non-domination does not entail more demanding forms of self-determination as being one’s own master, which is scrutinized in Berlin (1969). 3 In this paper I will not explicitly discuss a systemic dimension for which the comparison between capitalism and socialism can be taken as a starting point. Notice that along the lines of LRF and taking on board Van Parijs (1995; concluding chapter) well-crafted arguments rejecting the hypothesis that “optimal feasible socialism” is likely to outperform UBI-capitalism in terms of real freedom (which I find convincing with negligible qualifications) one may ask in which sense UBI can be regarded as a barometer of goodness for a given society: a good society is a society with a high UBI. LRF-UBI would be more easily observable than per capita GDP and it would not be vulnerable to some of the objections raised against the latter, notably that it ignores distribution. The possible role of non-market institutions and practices for people’s wellbeing could, in principle, be taken into consideration in a way fully consistent with that: Insofar as they are justified by their instrumental effects boosting UBI (first level), there is no problem whatsoever. Neither does a problem occur insofar non-market patterns of activity and interaction are based on the preferences of the individuals who spend their UBI to make them possible (third level). Insofar some non-markets mode of providing certain goods and services (“in-kind provision”) is a superior substitute to market provision (second level), some kind of shadow price-valuation will be required in order to make comparable a purely monetary UBI with an UBI complemented by in-kind provisions. (Notice that the economic rationales for in- R. Sturn, Basic Income in Mixed Economies 193 “non-Walrasian” issues on board helps explaining why particular subsidiary institutions and practices of a mixed economy should be expected to be in place in an LRF-UBI regime, and what their functions are. This offers a better understanding of the nature of economic problems (co-ordination problems, defection problems, etc.) and helps predicting the effects and repercussions of alternatives at the level of LRF-UBI implementation more accurately. Hence it is the foundation of a rational discourse about more technical specificities of a LRF-UBI tax-and-transfer system. It moreover allows for more precise reasoning regarding foundational questions inspiring many discussions related to the issue of distribution in capitalist economies in general and/or to UBI in particular: To which extent is it possible to treat issues of distribution and issues of resource allocation separately? To which extent and for which reasons is a pure market society and a pure market economy an unlikely utopia? Which aspects or versions of a mixed economy can be understood as attempts of a superior implementation of liberal-egalitarian principles (and which cannot be explained in this manner)? Does the variety of possibly UBI-boosting or UBI-compatible non-market institutions, practices, etc., pose some important neutrality problems, and how should they be dealt with? How can the pro-market and pro-money presumption be maintained in a meaningful way without giving way to a naïve or perhaps destructive stance of everything-for-sale? As emphasized, Real Freedom for All (1995) already offers useful resources for the discussion of such problems. Van Parijs’s (e.g., 2001) reactions to challenges (including some of the challenges just mentioned) further clarify some ambiguous points and further improve the discursive infrastructure available to an UBI-board, with the aim of better disambiguating politically contested issues from what can be known on the basis of scientific reasoning. More specifically, it was argued in section 4 that making explicit the distributive problems lurking in the background of decisions on alternatives which prima facie kind provision may change according to empirical circumstances.) But as long as we limit the comparison to a given society there should be no insurmountable obstacles preventing the measurements of in-kind benefits in monetary terms and, in general, imputing shadow prices to resources which are not traded as they play a role only in the context of non-market-mediated activities. As Van Parijs (1995: ch. 2.8) correctly emphasizes, things become more difficult when we make comparisons across economies/societies. It is not prima facie obvious whether those difficulties are more or less severe than in the case of the usual comparisons of per capita GDP. LRF-UBI comparisons presuppose taking into account distributive mechanisms operating in the non-market-mediated sphere beyond the official public sector (which is taking care of the official tax-and-transfer schemes), along with non-market mechanisms of the provision of goods. 194 Homo Oeconomicus 31(1/2) do not connote distribution as well as the tricky sphere of merit wants also contributes to a more rational process of political decision-making. Put another way, constitutional consent on an LRF-UBI regime leaves open certain “political” problems which may be labelled as “merit wants issues” and “distributional issues”. They ought to be clearly identified. Otherwise those issues remain in a twilight from which they emerge now and then, perhaps in a critical situation and without a conceptual framework to discuss them properly. For those reasons, the implementation process should not be conceived of as a merely technical affair settled by experts, even though the architecture of LRF-UBI sets the stage for a prominent role of economic and social science expertise in the process. Now there is a third type of problems which may occur in the context of determining the level of monetary UBI and the architecture of subsidiary institutions. It is a problem related to systemic interdependences occasioned by the possible role of non-market institutions (“noncapitalistic cooperation”) and overarching social structures in an LRF-UBI regime. Such non-market institutions and structures may be part of the historic heritage, or they may be part of the subsidiary institutions either justified by their UBI-enhancing effect or on the grounds of the superior substitute argument, or they may prevail as a result of individual tastes. In a passage thoroughly discussed by Van Parijs (2001: 115-7), Sturn and Dujmovits (2000: 215) had pointed out that UBI may be threatened by justice-infringing asymmetries, given the “way in which … different lifestyles are embedded in the market mechanism” and on whether “different comprehensive concepts of the good are linked to different views about the appropriate scope of markets and, hence, to a different scope and depth of the price mechanism in the mediation of social interdependences.” One of the possible sources of asymmetries are various kinds of difficulties to include the surplus generated in non-capitalist cooperation in the tax-base as required by LRF (an aspect of what was called revenue-side anti-market bias of UBI in the above). Another problem is related to the question: how egalitarian are the internal distributive mechanisms of those non-capitalist forms of cooperation? We then speculated about the conditions under which this kind of tax-exemption could be acceptable under an LRF-UBI regime and suggested that the answer may be related to whether internal distribution mechanisms are sufficiently egalitarian. In his rejoinder, Van Parijs (2001: 116) rightly pointed out that this is not “quite the equivalent” of society-wide redistribution, but this does not solve the problem. His (contingent) solution (Van Parijs 2001: 117) is a different one, and it will be quoted at length, as it brings to the fore the systemic dimension of the problem. R. Sturn, Basic Income in Mixed Economies 195 “… it supports a prima facie presumption in favour of working on the internal distribution of benefits and burdens through the strengthening of the real freedom of exit from any sort of relationship—which is achieved in the most comprehensive workable way through a UBI funded out of market income. Consequently, the strength of the pragmatic justification for exempting the family, and more generally non-market interaction, from redistributive taxation and the shadow pricing exercise it presupposes, is dependent on the existence of a sufficiently high UBI, itself funded by the yield-maximising taxation of market income. Only in a society in which the market already plays a central role can this reasonably be expected. In societies whose economy still works to a large extent in a non-market way, this non-market sector could not be legitimately exempted from redistributive concerns…..Yes, surfers and mothers should be fed out of market earnings rather than taxed …., but only because their world is not a surfers’ and mothers’ world, but one largely dominated by the market.” The implications of these observations are far-reaching. Setting the level of UBI is not confined to making incremental changes now and then. There may be thresholds connoting systemic effects, perhaps including cumulative causation: if LRF-UBI does not reach a certain threshold, the UBI-board will come to the conclusion that the exit option offered by UBI is no credible regulatory mechanism which can be relied upon as far as internal distribution in the non-market sector is concerned. Hence it has to discuss alternative strategies of addressing the problem. The above passage suggests that LRF-UBI should be thought of not merely as a scheme of redistribution, but as a mechanism of regulation which needs to be considered in a macro-context and in relation to the coordination and disciplinary functions of the price system. As a scheme of redistribution, UBI may be sometimes lower, sometimes higher according to the relevant contingencies. But as a regulatory mechanism (as is explained by the passage quoted in the above), it crucially depends on a certain minimum level of UBI. If it fails to reach that threshold, it may have altogether different effects. Hence difficult discussions as to what should be done are unavoidable. The theoretical solution (imputing shadow prices on non-capitalistic cooperation and including the surplus thus valuated in the tax-base) might not work. Is the solution perhaps a kind of distributive regulation directly connected to the non-market institutions in which value is created? But if this approach becomes pervasive, the rationale of UBI as a society-wide distributive mechanism 196 Homo Oeconomicus 31(1/2) abstracting from all such institutions (with the exception of the market as overarching mechanism mediating interdependences) gets out of sight. By way of conclusion, here is a sketch of some situations in which those systemic effects may matter: the first one concerns the introductory phase of UBI-implementation. At a pragmatic level which ignores the systemic dimension, no problem would occur if a cautious UBI-Board were to start with a rather low UBI (well below the subsistence level) in the introductory phase. It may wish to address concerns related to detrimental incentive effects, and it may find it unwise to dismantle the old welfare systems overnight. Such an incremental approach could be desirable for a number of reasons, given that LRF-UBI implies a far-reaching regime change and it may be difficult to model or simulate various kinds of reaction and their interdependence; hence it seems plausible to rely on the kind of learning throughout the implementation process which is facilitated by a gradualist approach. Moreover, an abrupt regime change may be accompanied by fairness-problems (Sturn and Dujmovits 2000: 207-211). Unfortunately, given the systemic dimension, the gradualist approach could be problematic as well: the start-UBI may not be sufficient to get the liberating potential of UBI as a regulatory mechanism off the ground. This will largely depend on the actual socio-economic structure, the pattern of institutions, and culture and habits which are currently in place. So one could easily imagine a model society/economy in which the most important effect of a certain UBI (compared to the status-quo) is a kind of implicit extra subsidy for low-wage employment. One also could imagine a different society in which the most important effect is an implicit subsidy of the traditional male-breadwinner model of the family (this is emphasized in the feminist critique of UBI). Of course, I do not claim that those two models are the most realistic ones under currently prevailing circumstances. One also can imagine a model where UBI functions as superior form of implicit insurance mechanism enabling more people to engage in entrepreneurial risk-taking within the market seen as a discovery process. And, to mention a last example, one could imagine a model society in which UBI gives effect to the latent desire of people for liberating social innovation outside the market sphere. Here is not the place to discuss to which extent those tendencies will occur, given the concrete circumstances of a particular society and certain implementation regimes. Those possible systemic tendencies just illustrate some contested issues which the UBI-board faces, as they may imply significant nonneutralities at a systemic level, even though LRF-UBI may be regarded as impeccably neutral at a micro-level. And all this is not limited to the introductory phase. Imagine for instance a crisis scenario emerging in a well-ordered capitalist economy, which in normal times could afford a sufficiently high LRF-UBI for R. Sturn, Basic Income in Mixed Economies 197 justice-enhancing systemic effects (in the sense of the above-quoted passage from Van Parijs). Now such a crisis scenario includes epidemic contagion: the general pattern of that contagion process amounts to the step-wise withdrawal of agents from the vast network of market-mediated risk allocation and division of labour, due to expectations in which one’s vulnerability becomes more and more salient. An UBI (like other welfare systems) will function to a certain extent as an automatic stabilizer in such a situation. The effectiveness of this stabilization again depends on its level and on other empirical circumstances. In such a situation, the UBIboard again will face a difficult decision. When in a severe crisis significantly lower tax revenues are predicted, the present level of UBI may be no longer regarded sustainable. But reducing UBI not only may have pro-cyclical effects of the usual kind, but may also lead to diminishing UBI below some critical thresholds with systemic relevance in terms of its regulatory function. This may alter the systemic properties of UBI as sketched above, and trigger other pro-cyclical effects in a wider sense of the general tendency of disintegration of the wide-spread marketmediated society which is characteristic of a crisis. Hence there will not only be the discussion on whether the policy should be guided by macroeconomic rather than by microeconomic considerations (as it is the case in the present discussion about the proper recipe for countries like Greece), but also whether and how those systemic effects need to be dealt with. Notice that the situation in this respect is importantly different from conventional arguments related to certain kinds of incentive problems triggered by UBI: if the UBI-board has collected empirical evidence, say, that a significant number of people “become more lazy” as a consequence of some level of UBI, or that certain people with scarce skills have become more greedy and deliver their effort only when offered a high rent, or that Van Parijs’s surfers become even more attached to leisure, it simply will have to set the level of LRF-UBI at a lower level (as the highest sustainable level is now lower). To be sure, this unescapable consequence of LRF-UBI also may provoke political/philosophical debates: for instance, Elizabeth Anderson (1999, 312) criticizes that “the fate of nonwage earning caretakers will thus (under UBI, R. St.) depend on the labor/leisure trade-offs of beach-bums rather than on their own needs. The more attached to leisure the beach-bum is, the lower must the unconditional income be.” This is true4, but once we have accepted LRF, 4 This objection would not apply to the amended version of the Rawlsian difference principle applied to basic goods including leisure (Rawls 1971) – which is criticized in extenso by Van Parijs in order to motivate the choice of money as the currency of equality. Yet very similar effects would occur in a Rawlsian 198 Homo Oeconomicus 31(1/2) we have to bite the bullet, even though it should be pointed out that in an LRF-UBI mixed economy caretaking may belong to the activities commanding an extra remuneration beyond UBI, depending on whether the efficient level cannot be reached in absence of such remunerationbased incentives. Moreover, and despite our resentment against the beachbums’ tastes, we may point out that in a modern market economy with its wide-spread interdependences any kind of remuneration, wage or transfer payment ultimately will anyway be influenced by many more or less remote circumstances which are hard to control. Hence as far as those kinds of incentive problems and concomitant interdependences are concerned, we find answers which are guiding us through analogous situations in the future, whereas the problems discussed in this section may bring about political challenges which are not easily coped with: the basic principles leading to LRF-UBI including the economic and social-theoretic underpinning provided so far only provides a fragmentary basis for dealing with them. 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