Monday, September 16, 2013

Poverty as Pollution: Buchanan's Basic Minimum Income

Are transfer payments euvoluntary? Don't be silly. Of course not. Don't be DAFT. They're plainly coercive, so asking about their euvoluntarity is facile. What we might want to consider is whether or not there's an arrangement in a reasonable choice set that is both less distortionary and less wasteful.

In The Bases for Collective Action (Collected Works of James Buchanan. Vol. 15. Liberty Fund p. 21), James Buchanan forwards the following:
Extending the notions of externality and environmental quality even more broadly, we can also encompass the potential role of collective action in providing for the relief of primary poverty. In one sense, the mere existence of very poor members reduces the overall environmental quality of any community. Any action aimed at removal of this poverty will impose an external benefit on all members of the community. There are clear gains to be made from cooperative or collective efforts to eliminate or at least to reduce poverty.
 In another essay (Social Insurance in a Growing Economy, ibid p.410), he argues for clear separation between the social insurance function and the poverty relief function. He was dismayed at the illiberal clumping of the two for both analytical and practical purposes. "One of the chief sources of crisis in the existing social security system is the observed tendency of politicians, especially in recent years, to confuse the achievement of social insurance objectives with the relief of primary and secondary poverty and to load the same set of institutions with these quite different burdens." With an economists' eye, this is plainly obvious. But what is obvious to the trained economist may be hazy or irrelevant to the typical voter.

And in the taxonomy of umbrella-twirling pedestrian intuition, far from the clipped cane-tapping of the prudential pocketwatch-checkers, caring for the poor engages more or less the same moral machinery as caring for the elderly. In both instances, we have examples of unfortunate outcomes: Skid Row panhandlery on the one hand, grandma eating cat food so that she can afford her heart medicine on the other. In both instances we have at least the presumption of collective action "failures" (remember that there are no solutions, only tradeoffs), and in both instances, we have an increasingly powerful taxation authority and a bountiful Ĺ“conomy poised to clean up not merely our dunnage-strewn shores, but our drunkard-strewn boulevards.

So how about that basic minimum income? Mike has a piece published on the topic, and I've got a working paper on it, and we both motivate the discussion using poverty relief rather than old age insurance. In light of Buchanan's concerns and my hunch that in the moral intuition, OASDI and welfare get conflated, does the analytical argument for basic minimum income improve? Why or why not? Is a two-birds, one-stone approach inappropriate if it means that there should be significant efficiency gains to be had?

Or is consideration of this question meaningless if the core of the game is null? How would you buy out the bureaucracy?

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Do you have suggestions on where we could find more examples of this phenomenon?