Better Than The Onion, But Also Serious

For starters, any headline that has both President Clinton and "breast" is likely to be a hoax, something from the Onion or what Hillary called "the vast right wing conspiracy."

But it turns out to be a serious question.

Viz., is it morally allowable for wealthy mothers with inadequate breast milk to buy breast milk from poor women?  It's true that both parties to the exchange are made "better off," given their disparate bargaining positions.  One might claim that the exchange is plausibly voluntary, but certainly not euvoluntary.

If the poor women are selling breast milk that otherwise might nourish their own babies, and are selling more of it than would be prudent because they--being poor--need the money more than most people would....well, is that okay?  How would one decide?  Is this an over-reaction?

Poverty is not Euvoluntary: Basic Income Edition

The latest Cato Unbound, led by (left-handed?) friend of EE Matt Z. turns an eye to the Basic Income Guarantee. From the lead essay [emphasis removed]:

No libertarian would wish for a BIG as an addition to the currently existing welfare state. But what about as a replacement for it? Such a revolutionary overhaul of the welfare state would almost certainly require a constitutional amendment, both to insulate debate somewhat from the pleas and protests of special interests, and to make it considerably more difficult to renege on the deal afterwards.

For a basic income program to be palatable to directional libertarians (I'm inclined to prefer the term "marginal" libertarians, but let's not quibble), the replacement requirement is imperative. For more, see the KPC version here.

Zwolinski offers justifications that should appeal to just about anyone, regardless of political preferences. Please indulge me a brief consideration of his four main selling points.

1. Less bureaucracy. I don't claim to know what the optimal level of bureaucracy is. It probably ain't zero, but it's probably also a whole heck of a lot less than what it is now. Zwolinski cites overhead costs, and while I agree that those are troublesome, it's probably still small potatoes compared to the full opportunity cost of taking quite competent workers out of the productive economy and setting them to work shuffling other people's resources around. I cheer even harder for this point than does the lead essay.
2. Cheaper. Getting more for less is good (for normal or superior goods). Cheapness comports with the classical virtue of prudence. Economists like prudence.
3. Less rent-seeking. I've studied public choice economics. This is my dog whistle. There are many like it, but this one is mine. Matt even cites Buchanan. Beautiful.
4. Less paternalistic. Unfortunately, Matt doesn't cite quite enough Buchanan. One of JB's later papers made an important markets-in-everything point. If you model paternalism as a market, with both supply and demand, you should be skeptical about claims that no-strings-attached transfer payments will long stay free of paternalism.

Buchanan's insight in Afraid to be Free isn't particularly controversial. Self-discipline, like anything else valuable, is costly. Ordinary economic reasoning says that any time there's a valuable resource and the appropriate technology to harness that resource, there may well be an opportunity for specialized production and exchange. In this case, voters can organize to petition the state to restrain them from making certain decisions.

In Zwolinski's essay, he cites Charles Murray's proposed Constitutional amendment that would forever and anon banish targeted programs in favor of some version of the BIG. This amendment cannot constrain the sovereign from imposing paternalism on other margins. And it cannot and will not address an underlying demand for social control. If constituents wish the behavior of themselves and their fellows to be constrained by the state, they will find a way.

So the empirical question is whether or not the tradeoff is economically efficient. We need to ask questions like whether or not the NYC soda ban would have been more likely to stick around in a BIG world and what the costs would have been of that. It's a different analytical task, complicated by an out-of-sample general equilibrium.

The counterfactual state of the world is (probably) not one of no paternalism, but rather one of paternalism unbound. The real trick for libertarians is how to move towards a world of both lower discrimination and lower dominion. I submit to you, my dear readers, that this task is complicated by a constituency that actively seeks more of both. Underestimate their wiles at your peril.

Poverty relief is not euvoluntary. And some sort of income guarantee, be it universal transfers or workfare or whatever, is probably better than the status quo. But please don't oversell it. The pig iron law of public policy is that there are no solutions, only tradeoffs. 

Shoes, Ships, Sealing Wax, Cabbages, Kings

Why is the sea boiling hot? Rancor. Rancor over the working poor. Rancor over minimum wage legislation, and rancor over transfer programs. How does this happen? Well, let's ask the Rancor.

Zac G.: The working poor are back in the news as fast food employees gear up to strike for a higher minimum wage. As we know from both theoretical and empirical economics, mandated minimum wages tend to have disemployment effects for marginal workers, particularly the young, the less-well educated, and minorities. The arguments in support of a higher minimum wage are well-intentioned, but ultimately misguided. There are better ways to help low-income households, like wage subsidies or a basic income.

Kevin Drum scoffs at the wage subsidies idea for practical political reasons here. According to him, "a higher minimum wage is the only game in town." He also reads the empirical literature as claiming that the effects of MW legislation on employment as being close to zero. But there's more. 

Noah Smith: A job is more than just a paycheck. It's dignity, it's accomplishment, it's GDP+. If all you economists would stop being so parochial for a minute and go check out some of the other literature out there, you'll find that being able to provide for your family is causally connected to things like life satisfaction, health, longevity, &al. Working for peanuts is demeaning for individuals and has disruptive consequences in the aggregate. Duh.

But there's still more. 

Steve Landsburg here and here: The productive value of labor is an entirely separate consideration from poverty relief. If you want working families to have more disposable income, that is if you think poverty relief is a public good, then the just, fair policy is to fund transfer programs from the general coffers, not to force firms to take on possibly ruinous payroll obligations.

Garett Jones: More to the point, firms substitute capital for labor. I propose we call minimum wage legislation a "full employment for robots act." ATMs, self-checkout lanes, specialized farm equipment, the lack of movie theater ushers, and pump-your-own gas can all be explained pretty well by labor market interventions. Instead of hiring teenagers, business owners will relieve themselves of the expensive hassle by swapping in a machine. I for one welcome our future robot overlords.

You might reply by saying that the jobs replaced by robots are bad jobs anyway and like the farrier and the coachman, should probably be relegated to an historical dustbin, but I urge you to consider what the alternatives are. Yes, it might be that we can just send every boy and every girl off to college to springboard into a high-skilled career, but that doesn't square with a casual observation of the actual people you probably actually know.

Bryan Caplan: meep meep meeeep meep

Translation: It's worse than that. Since we're talking about service industry jobs, substitution in the form of DIY is a substantial threat to the stability of entry-level positions. Sure, an employer could replace a cashier with a touch-screen display, but even in the short term, a customer can replace a Big Mac and fries with a bag lunch from home. 

Don B. offers a thought experiment here to get at the practical morality behind MW increases. My impression is that someone could look at all the economic arguments against the MW and reply: "dogmatic free-market economists don't care about poor people." And when they do, oh boy, watch out. Here's one of our favorite apostates, linked here at EE yesterday.

Matt Z: Hey guys, how about a Basic Minimum Income? Novice workers can still get work and develop elementary workplace skills, and not have to worry about being caught in vicious poverty traps. Sure, there are probably some political barriers we have to overcome, but come on you guys: Milton Friedman ended military conscription in the United States. If he can fight the Pentagon and win, we've at least got a shot at reforming the welfare state. Right? Guys?

Munger: I like this guy. Makes sense. I won't bet on it happening anytime soon though. 

But the real hell broke loose in the comments. How dare Zwolinski retain the audacity to label himself "libertarian" when he so bald-facedly proposes to pick the pockets of his neighbors to ply his pet project of redistribution? 

I'm being kind with that paraphrasing. I won't link to the actual responses, but I will say that I've got a lot more sympathy for my neoliberal dudebros who claim that libertarians are borderline psychopathic after seeing yesterday's fallout. Egads. 

Anyway, Russ Roberts recently sponsored an essay contest comparing and contrasting T. Cowen's (crypto-pessimistic) and J. Mokyr's (historo-optimistic) visions of the future, and whichever view you align with, you'll probably agree that this debate is likely to become increasingly salient as the Jones Effect (pro-robot, ie probot) settles in. 

TGP: Hey Wilson! Aren't you forgetting something?

FiSH: Go easy on the kid. Maybe he fell on his head.

TGP: But this is the Euvoluntary Exchange blog, Steve. Shouldn't he be discussing, I don't know, euvoluntary exchange?

FiSH: That'd be great. There's a first time for everything.

Both: ho ho ho ho ho

Thanks guys. The trouble with making a coherent story about low-skilled labor is that there's always going to be disagreement over the counterfactual state of the world. All the thought experiments you can dream up, all the empirical studies you can cite, all the pathos you can muster will fall on deaf ears if your audience refuses to accept your description of the alternatives. I can say that the minimum wage will swap out workers for androids, but you can say that other opportunities will come along in a dynamic economy. I can say that over a long enough time horizon, all policy is subject to change, but you can say we can't wait that long. I can say that non-euvoluntary labor agreements are worse under coercive political circumstances than under laissez-faire, but you're under no obligation to believe me.

What makes my counterfactuals more plausible than yours? How am I more correct about BATNA assumptions than you? This isn't a relatively simple matter the way Norwegian butter import restrictions or airplane seat purchases might be. This is a debate that touches 70% of GDP, spans generations, and has implications far into the future. Because the stakes are so high, it's probably reasonable to expect some truculence.

Anyway, I'll leave JR to give today's closing comments.

You people are insane.

Matt Z on Basic Income

M. Zwolinski has a piece up at libertarianism.org on Basic Income.

ATSRTWT

Compare and contrast with Munger's comments.

My chief objection (if you can call it that) is that there's a robust market in paternalism fueled on the left and the right alike, both supply and demand. Ending the kaleidoscope of transfer programs faces severe transitional gains problems and may not be longitudinally stable.

It's still a very fine idea to ponder though.

Basic Income

If anyone actually wanted to "eliminate poverty," all we need is Basic Income.  Or negative income tax, or whatever you want to call it.  Are you dead?  "Not yet!"  Here you go.

I have written about this.

It would have to work something like this, though:  no strings, no disincentives to work (except the income effect, of course).

And it is being tried, in effect, in Alaska.

Why doesn't the left support Basic Income?  Two reasons:

1.  It would actually put the money, and therefore the power, in the hands of poor people.  And then there would be no poor people.  The political left does NOT trust poor people, and in fact considers them to be idiots.  Thank GOODNESS there are rich white people to tell the poor what to do!  If we give the poor actual cash, instead of vouchers (food stamps are vouchers, folks), then the poor will spend it wrong.  They must be controlled, at least in the life-arranger mind of the left.

2.  The Basic Income program would cost less, actually substantially less, than the alphabet salad of programs "designed" to "help" "the poor" (note triple scare quotes!  Actually, NOT designed that way at all, no one cares about the poor, and the programs don't help the poor anyway).  Why would it cost less?  Because it is not difficult to send out checks, if you stop pestering folks with moralistic rules and humiliating requirements.  Thousands and thousands of paper-shufflers would be fired, and be forced to find real jobs.  Or, with Basic Income, they could just be "not poor."