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: richard.sturn@uni-graz.at)
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
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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
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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.
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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
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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
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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
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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.
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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
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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
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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
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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
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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.
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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
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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
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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. Anyway, we are well-advised to
take seriously the irreducible political element constantly remaining part of
them: the UBI-Board will need to accommodate enlightened expert
discussions as well as political processes “contaminated” by differences in
interests.
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