On utilitarianism and moral hazards

[hudebnik]

siderea points to Scott Alexander's argument for Universal Basic Income over Universal Basic Jobs. Go read that.

As Alexander points out, UBI allows people who would rather stay home taking care of their kids or aging parents to stay home taking care of their kids or aging parents, and allows people who for whatever reason (physical, mental, emotional, educational) really aren't suited to the job market to not be in the job market, thus opening up jobs for people who are well suited to the job market. It allows people who have a neat entrepreneurial idea the security to try it out even if they weren't born to rich parents and don't have the gift of gab to attract investors. It allows people with the talent to be poets or philosophers or painters to be poets or philosophers or painters rather than going unhappily into whatever job will pay the rent. It allows people who are abused by their bosses the security to quit and seek another job, knowing that they won't starve to death in the mean-time, thus putting employers in actual competition for employees. It allows people who want jobs the security to move to where the jobs are, and (by putting a little bit of money into a lot of people's pockets, even in rural areas) may create jobs in places where there currently aren't any.

Some of the points in the previous paragraph might be viewed as bugs rather than features, depending on where you sit. There's a theory that (country-club) Republican economic policy for the last hundred years can be explained by one goal: cheap labor. The ideal economy, from this perspective, is one with lots of workers competing for few jobs and bidding down the price of labor. Minimum wage laws are bad because they limit how far down the price of labor can be bid. Anything that makes workers less desperate for work, or in any way strengthens their bargaining positions, is bad. If there are fewer undocumented immigrants in the U.S, that's bad because they were willing to work for low wages. On the other hand, if undocumented immigrants can live and work in the U.S. without fear of deportation, that's bad too because they might complain about their wages or working conditions. If UBI or universal health care draws potential workers (even bad ones you wouldn't actually hire) out of the job pool, that's bad; if UBI or universal health care gives workers the security to walk away from a bad job and look for a better one, that's bad too. The moment an employee anywhere feels secure and empowered, Bolshevism is around the corner.

But enough of that rant. I'm starting to be fairly convinced that UBI makes sense, at least more sense than universal-guaranteed-employment.

Mind you, there are good arguments for government-hiring-to-create-jobs, as long as it's doing something useful (like FDR's Civilian Conservation Corps) that wouldn't otherwise have been done by the private sector. Hiring people for pointless jobs doesn't really serve the goal of "giving them dignity through work," and it doesn't make the world any better than just writing them a check. Hiring people to do things the private sector is already doing (as Alexander points out) hurts private-sector businesses without much benefit to the workers, and is really difficult to back out of if you decide it didn't work. And trying to hire everybody ensures that many of them will fall into either the pointless-jobs or the competing-with-the-private-sector categories.

But perhaps the strongest argument for guaranteed employment over guaranteed income is not about how well it would work, but how it could be enacted.

There's a thing in economics called moral hazard. In its narrowest sense, the term refers to situations in which being insured or protected against a particular danger causes people to discount that danger and take more risks, e.g. sub-prime mortgage lenders who knew they were going to sell off their loans so they didn't care whether those loans were repayable in the long run, or orange-haired real estate tycoons who repeatedly walked away from failing investments with a profit while their investors ate the losses. Somewhat more broadly, it describes any situation in which the party making a decision is shielded from some of the negative consequences of that decision, and therefore makes decisions as though the negative consequences were much smaller than they actually are, e.g. a factory owner who saves money by not installing pollution controls, externalizing most of the costs of the pollution onto the general public. More broadly still, it is sometimes used to describe any situation in which somebody gets something without paying for it.

Suppose your city has sold bonds to build an expensive bridge. Where will the city get the money to repay the bonds? One obvious way is to charge a toll on the bridge. This has the appealing property that the only people paying for the bridge are the people using the bridge. Of course, it requires building toll booths, which adds to the cost of the bridge, and it requires paying people to collect the tolls, which adds an endless ongoing cost. And all the cars stopping to pay their tolls are delayed by a few seconds or minutes apiece, which when multiplied by thousands of days and thousands of cars turns into a substantial time cost. (E-Z Pass reduces these costs quantitatively, but doesn't change the phenomenon qualitatively.) And there's the enforcement cost of going after people who drive through the toll plaza without paying: if you don't punish them, more and more people will do it, and the tolls won't serve their intended purpose, but the police and court time cost money too. In short, the act of charging for use of the resource itself carries a cost. A responsible city planner must at least consider the possibility that the city might be holistically better off not charging tolls on the bridge. Sure, people may over-utilize it, but you won't be paying all this overhead.

Consider disposable (paper or plastic?) grocery bags. Traditionally, grocery stores have given you bags "for free", folding their minuscule cost into the cost of whatever else you were buying at the grocery store. Of course, the grocery store was only paying the cost of producing the bags, not the cost of disposing of them, so this system predictably leads to over-utilization of disposable bags. Some cities and states have decided to fight this externalized cost by requiring grocery stores to explicitly charge by the bag. The cost is usually a few cents per bag, which isn't enough to directly affect people's behavior much, but just the fact that it's nonzero and appears on the receipt is supposed to (and probably does) encourage people to reduce the number of bags they need or re-use bags from one shopping trip to the next, thus reducing pollution and the use of either wood fibers or petrochemicals. However, the other side might legitimately point out that the act of charging for bags imposes costs of its own: the checkout clerk has to count how many bags were used in order to charge for them, which takes a few seconds per customer, and the customer who doesn't bring in a reusable bag but also refuses to pay for bags may walk out with more objects than hands and drop some of them. In this case, the added costs of enforcement are pretty minimal, being attached to a money-and-time transaction that was already happening, so it probably makes sense to do it.

Consider immigration. Residency in the U.S. is in many ways a valuable resource, and giving it out for free to anybody who wants it could plausibly lead to over-utilization. So we restrict it to people who "deserve" it, either by being born here or by demonstrating some specific quality that the government deems desirable (a rare skill, advanced education, a large bank account, light-colored skin). But in the course of deciding who "deserves" to be in the U.S, we incur enormous costs: walls and surveillance cameras and border patrols and workplace raids and pre-employment checks and incarceration and deportation proceedings and torn-apart families and torn-apart communities. And those who don't "deserve" to be here but are anyway pay other costs: if they get a job, they can't complain about sub-minimum wages or unsafe working conditions or sexual harassment on the job for fear the employer will turn them in to ICE. One has to wonder whether the country would be better off, on balance, making the U.S. borders more open and saving 90% of those enforcement costs.

There's a deep-seated sense in American culture that people shouldn't get something for nothing: it's unjust and immoral. (More precisely, other people shouldn't get something for nothing. Even more precisely, other people whom I look down on, based on race or education or socioeconomic level or whatever, shouldn't get something for nothing.) This moral sense may ultimately be based on the counterproductive, greedy behavior that we often see when people are insulated from the costs of their decisions, but the moral indignation has become largely disconnected from that original utilitarian argument. Even in cases with no evidence of significant bad behavior, or in which the likely cost of charging for the resource in question far exceeds the likely cost of that behavior, there will be serious political resistance to giving anybody anything that they haven't paid or worked for. It sends the wrong message, it encourages a cycle of dependency, it juvenilizes people rather than encouraging them to stand on their own two feet, etc.

This is the ostensible problem with universal health care: it gives people something for nothing, just by virtue of being human beings in our country, and that's Wrong. To be fair, there really is reason to fear that health care without a marginal cost will be over-utilized, and over-utilization of health care really is one of our problems. On the other hand, we know for certain that the infrastructure of charging for health care imposes huge costs in bureaucracy, advertising, cost-shifting, emergency treatment for preventable problems, rent-seeking, monopolistic business practices, and so on; it's not obvious which is worse, except that most countries with universal health care get better health outcomes for much less money per capita than the U.S. does.

And this is the ostensible problem with universal basic income: it gives people something for nothing, and that's Wrong. Even a conservative who somehow manages to choke down universal health care on efficiency grounds will balk at the idea of writing people a check every month, regardless of whether they've done anything productive whatsoever. Surely they have to at least show up to a job, or show up to school, or pick up trash in the park, or dig ditches, or demonstrate that they really are disabled from those activities, and they should certainly demonstrate that they're not already rich; otherwise there's nothing to stop them from lolling back in their hammocks and living off the labor of the rest of us. On the other hand, enforcing any of those rules imposes a substantial cost on the system and on every individual participant; if we're being utilitarian rather than moralistic, we have to consider whether enforcing those rules costs more than the freeloading we'll get if we don't enforce them. Any enforcement mechanism will have both false negatives and false positives: just how bad is it to have a few people who could work lolling back in their hammocks, while others who really can't work starve? Maybe it really would be more efficient to write every human in the country (rich or poor, old or young, employed or un-, law-abiding or otherwise) a check every month than to build an enormous government bureaucracy to figure out who "deserves" it.

How you approach that question depends largely on where you fall on the utilitarian/moralistic spectrum.

Comments

[cellio]

I didn't read the whole (long!) article so I don't know if he addresses this, but I suspect that one of the concerns of UBI is whether it can (affordably!) mitigate the need to bail people out *anyway*. If the "deal" with UBI could really, truly be "we give you this money, no strings attached, and in turn you do not draw from the public -- have a good life!" then we could evaluate it economically, figure out what level we can pay for, do that, and let everybody get on with art or entrepeneurship or caregiving or goofing off on the Internet or however we choose to fill our days. But I suspect we aren't willing to do that, because as decent human beings we're not willing to stand by and let people die of their own bad decisions because they spent their basic income on recreation instead of rent and food. And *that* gets us to food stamps and rent stamps and whatnot instead of cash, which is much harder to judge fairly and administer.

I find the idea of UBI intriguing, but do its proponents have a credible plan for these downstream costs?

(I agree that universal basic jobs is fraught with problems, and -- even before I got to it in the article -- I thought of public schools as the negative model there. I don't want coworkers or employees who don't have to fear being removed from the position if they don't do their jobs; an employer (or school) that can't expel bad actors cannot thrive.)

[hudebnik]

If you're judging the article's length by the position of the scrolling thumb, note that at least 90% of that length is comments, not the original article.

There is some discussion of recognizing different financial needs for sick vs. healthy people, for which (IMHO) the "right" answer should be some kind of universal health care rather than a modification of the UBI -- which would complicate things almost as much as individual means-testing and proofs-of-disability. I don't think most UBI proponents view it as replacing *all* other forms of government social spending. (But I don't really know, not having read a lot on the subject.)

[siderea]

because as decent human beings we're not willing to stand by and let people die of their own bad decisions because they spent their basic income on recreation instead of rent and food. And *that* gets us to food stamps and rent stamps and whatnot instead of cash, which is much harder to judge fairly and administer.

Not necessarily! It's an approach, but it's not even the only approach our society uses, already today.

One thing that I think is a feature not a bug of the UBI approach is that it is likely to surface a bunch of problems we're failing to address as a society. One such problem is discovering that some people can't be handed money to live on, because they, for whatever reason, are not capable of being responsible for turning that money into survival.

Right now, there's a prejudicial belief that poor people are poor because they are all irresponsible with money. The real percentage of poor people who can't survive if given adequate means, due to what... let us call them behavioral problems, is likely much, much smaller.

Interestingly, it's likely to be pretty infintessimal, and actually largely already handled. Because people too irresponsible to get the rent to the landlord? Section 8 doesn't solve that. Recipients still have the equivalent of a copay. If you really can't handle that, well, there's a very, very good chance that the problem is that you are legitimately in some way disabled: cognitively, such as someone who is very mentally retarded, or psychologically, such as someone with a thought disorder or executive function disorder.

Consider how our soicety handles people who are mentally retarded or severely mentally ill, such that their judgment and functioning are impaired to the point they can't reliably get rent to a landlord. These people already qualify for Disability, but their Disability payment don't go to them. They have what are called rep payees. (Not even sure what "rep" is short for. Representative?) These rep payess are allegedly-responsible adults who use the money to pay the bills for the the disabled person. They may also give the disabled person an allowance out of it.

(You might be surprised to learn that many people who are not responsible enough to pay their rent on time actually choose to have a rep payee handle their money for them, because they know themselves and don't want to get evicted.)

We could use the same system: if you don't use your UBI to maintain your survival, you stop being in charge of it, and someone else – possibly someone else chosen by you, like a family member – gets it and handles it for you.

Important technical term: "self-neglect". Someone who is not managing to provide for their own survival - not maintaining their housing, not managing to feed themselves, not keeping themselves in sanitary conditions – is experiencing "self-neglect". In a vulnerable population, e.g. someone elderly or disabled, that's a mandated reporter call in my state.

Honestly, things like "food stamps and rent stamps and whatnot instead of cash" are pretty useless at preventing self-neglect. Frankly, all those can be liquidated (or stolen, or lost). Which is why there are rep payees.

ETA: Sorry, I wandered off before I actually closed the loop. What I'm saying is that it seems to me we have this prejudicial notion about povery that is possibly/likely obscuring the actual extent (probably vastly smaller) of people not actually being able to take care of themselves. And if we had a UBI, that might get clarified for us. I expect we would find very few people were not able to manage their money, but those that do need parent-equivalents to look after them, not large bureaucratic systems to earmark money for specific expenses.

[cellio]

I hadn't heard of rep payees before. That would make a big difference for those who, for whatever reason, are unable to turn money into survival on their own. Am I correct in understanding that in some cases (presumably involving a diagnosis), the system is imposed? How is that managed if there isn't a family member available; does some government agency administer it?

Many poor people are perfectly capable of turning money into survival if only they had the money; I assume that those who can't are a small minority but a large-enough one that we have to have some support system in place, because we don't want to multiply the problems we already have with elder (financial) abuse, food-stamp theft/liquidation, and the like. We don't want 19th-century workhouses, but some people can't be trusted with money (and even *saying* that invites claims of judgementalism and violation of individual liberty). That's the sticky wicket, probably made a lot worse by the poor state of healthcare in our country.

I hadn't considered that UBI could be the means to surface other problems we're failing to deal with. That's good. I hope we can identify and implement solutions to those problems -- in which case we win even if UBI never happens.

[siderea]

I hadn't heard of rep payees before. That would make a big difference for those who, for whatever reason, are unable to turn money into survival on their own. Am I correct in understanding that in some cases (presumably involving a diagnosis), the system is imposed?

It must be, in cases if legal incompetence.

How is that managed if there isn't a family member available; does some government agency administer it?

This is a good question and I'm hazy on the answer you're getting at, which is who is the rep payee of last resort. It's not just when there isn't a family member, since I believe legal strangers can do it as well. This may be similar to (or identical to) the legal guardian of last resort, which I think varies by state, and yes, is probably a government agency (or rather, a non-governmental social service agency with a contract from the government, which is how we do in Massachusetts.)

Googling "guardian of last resort" turns up this discussion of North Carolina.

(ETA: Ah, in MA a court-appointed guardian for financial matters is called a conservator. Googling "massachusetts conservator of last resort" turns up a controversy and recent reform efforts: 1, 2.)

Important detail: diagnosis doesn't cut it. Judges don't care about diagnoses, they care about functional impairments. See my post about what knowing someone is diagnosed with a mental illness tells you about them (tl;dr: nothing). So a qualified psychological assessor has to do an assessment of competence to argue in court someone isn't competent. Generally requires a psychologist, but a psychiatrist may also work.

but some people can't be trusted with money (and even saying that invites claims of judgementalism and violation of individual liberty)

Well, yes. Saying that some people can't be trusted with money therefore shouldn't be entrusted with money is an interesting thing. Rich people who are fiscally irresponsible are generally allowed to self-destruct. So there's a question of double standard.

Taking away someone's financial autonomy is a big, big deal. It can literally kill them, if, say, they are using their financial autonomy to get medical care they aren't insured for. It's a grave incursion on someone's liberty. So simply suspecting or claiming baselessly that someone isn't to be trusted with their money can't be sufficient to deprive them of that autonomy.

The way the UBI will surface this problem is by letting people screw up. Then we'll know who truly can't handle it. It's really the only way we'll know.

It seems obvious to me that if someone winds up in eviction or bankruptcy proceedings despite an ostensibly adequate UBI, that should trigger some sort of competency investigation. We need to allow for people making mistakes, but chronic (say > 4 in a year) screw-ups means you need a rep payee and/or legal guardian.

[snippy]

On the utilitarian/moralistic spectrum? That's a false dilemma. My morality and utility align in this case: it's moral to take care of people, and you can take care of more people this way. [here through network, read that article last week]

[hudebnik]

moralistic, adj. overfond of making moral judgements about others' behavior; too ready to moralize.

moralism, n. the practice of moralizing, especially showing a tendency to make judgments about others' morality.

moralize, v.
1: comment on issues of right and wrong, typically with an unfounded air of superiority.
2: interpret or explain as giving lessons on good and bad character and conduct.
3: reform the character and conduct of.

[from Google dictionary]