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March 21st, 2012 by Edward Miller

Sharing | Toban Black
Sharing | Toban Black
Technological progress is accelerating faster than ever before. Are robots going to “take our jobs?” Do we require a Basic Income to solve this? Let’s examine some basic principles.

Wages are determined by the margin of production. What this means is that a laborer’s bargaining power in the market is determined by their next best alternative to wage labor. Typically, that alternative, where available, has been homesteading.

That was the historic difference between the “New World” and the “Old World.” The New World was a land of opportunity because it had a lot of high quality land available for the taking. Not just for elites, but for any citizen who was willing and able.

In fact, in the United States the federal government didn’t require any income taxes for the first hundred years. Government was funded largely by the sale of federal lands (as well as tariffs). The rate of growth was astounding. Like China today, the growth rates were regularly reaching 10% per year.

As the land became increasingly homesteaded and auctioned off, the margin of production was reduced. By this I mean the quality of freely available land was diminished, and this reduced the bargaining power of labor.

Land is required for all production and even life itself. Without access to it, we die. Simple as that. Yet, there is no principle of justice by which one can legitimately claim sovereignty over locations on the Earth. It can and is accomplished with the sword or the barrel of a gun, but the principles of classical liberalism provide no basis for any exclusive claims over our common inheritance of nature.

“The land is the original inheritance of mankind. The usual, and by far the best argument for its appropriation by individuals is that private ownership gives the strongest motive for making the soil yield the greatest possible produce. But this argument is only valid for leaving to the owner the full enjoyment of whatever value he adds to the land by his own exertions and expenditure.” – John Stuart Mill

With the exception of Malthus, all the classical liberals recognized that land is there for everyone. With the exception of Malthus, the classicals saw the potential for an increasing pie of wealth to be enjoyed by all. The aristocratic Malthus, by contrast, was fixated on natural limits and overpopulation.

The idea of Technological Unemployment is a Malthusian concept (via Keynes) which teaches us to focus on scarcities, even though the scarcities are entirely artificial. Malthus didn’t believe we had a right to exist on the planet. He didn’t see people in their proper role as wealth-creators, but instead as resource consumers. And if the current owners of land decided to “make room” for more, that would just mean less food to go around.

All this raises an obvious question. What happens when there is no free land? The answer is that landless laborers become entirely dependent upon landowners simply for their right to exist on the surface of the planet. You get a scenario that looks very much like a Malthusian Trap, but in fact has nothing to do with natural scarcity.

When the free land is gone, and the bargaining power that comes with it, wages tend towards subsistence. The only reason subsistence wages are paid at all is because it would be unprofitable for the landlords to let their serfs starve to death. When they’re dead they stop paying rent. Landlessness is the essence of serfdom, and although the aesthetic trappings of feudalism are gone, serfdom has never left us.

The last chapters of Henry George’s book Protection or Free Trade were devoted to this topic, especially the one titled “The Robber Who Takes All That Is Left.” Here’s an excerpt:

“Labor may be likened to a man who as he carries home his earnings is waylaid by a series of robbers. One demands this much, and another that much, but last of all stands one who demands all that is left, save just enough to enable the victim to maintain life and come forth next day to work. So long as this last robber remains, what will it benefit such a man to drive off any or all of the other robbers?” – Henry George, Protection or Free Trade

Because of this, labor is placed into an artificial race to the bottom in wages. There is always some level of wages at which it is profitable to trade capital for labor. Furthermore, even if technology somehow progressed to a stage where robots really were better at every single task than humans, it would still make sense to employ humans because of the Law of Comparative Advantage.

If you want a vision of the future, imagine a child grinding away in a sweatshop… forever. That is, unless we awaken to the realities I just described.

The secret to raising the margin of production without the chaos of land redistribution or the economic damage of income taxation is to use Land Value Taxation.

“Men did not make the earth… it is the value of the improvement only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds.” – Thomas Paine, Agrarian Justice

One way to share the fruits of that rental value of the Commons is to simply distribute it as an equal Citizen’s Dividend.

How is this different than the Basic Income? The Basic Income is not tied to any funding mechanism, and as such would almost assuredly come out of taxes on labor, sales, or other productive activities. Thus, it leaves untouched the Robber Who Takes All That Is Left.

How does giving money help a serf whose existence is utterly dependent upon a landlord? The rents are not based on cost of production… because land is not produced! The landlord will just increase the rent by however much the Basic Income is, because he has all the bargaining power. It is like trying to fill a bucket with a hole in the bottom.

We can plug up that hole by taxing the rental value of land to the fullest extent possible, and provide not just a “basic” income, but a dividend that sustainably grows over time with the progress of civilization. The value of our birthright to the Earth increases with every passing year. Why limit ourselves to just a basic income?

The Basic Income is Dead. Long Live the Citizen’s Dividend!

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8 Responses to “The Basic Income is Dead”

  1. Dear Edward,

    I must disagree strongly with your article.

    “Wages are determined by the margin of production.”

    No it is not true, the article itself says that it only means they cannot be lower, but they can be higher if there is competition for skilled labor.

    I think you make the same pessimistic mistake as Marx did: assuming employers do not compete for the workers. Perhaps this mistake comes from the same deeper mistake: assuming there is such a thing as a unified working class.

    In reality there are simply individuals there with various skills, hence employers compete for them to a various amount, hence they get various levels of extra above the margin of production.

    I mean this is obvious. A Google programmers is a worker too, but he makes much more than an unskilled cucumber picker.

    I think your argument may be valid only for unskilled cucumber pickers. But everybody else surely not.

    Both Marx and Ricardo had this old-fashioned view and maybe you too that work is simply muscle-work, human machines, workers are meat robots. In reality most work is about using the brain. This is precisely what the education system is trying to achieve, to make people more than meat robots. And those who are not meat robots always make more than the margin of production. Those few people who really have only muscle and no brain will perhaps suffer and it is a problem but it is not that many people I hope.

  2. Shenpen,

    That is an important caveat, but everyone’s next best alternative is made worse by a lowering of the margin of production.

    People are always wondering how best to improve the lot of workers, especially the worst off. I think my article sufficiently shows why most techniques cannot hope to meet that objective without first considering the margin of production.

    Also, why shouldn’t we be concerned with unskilled laborers? Their wellbeing is no less important than ours. Furthermore, by the logic you just used their existence is what allows for the high wages of everyone else. If they weren’t around, everyone’s wages would be lower. So that logic leads to the conclusion that LESS education is better for wages, not more.

    My goal is to seek a non-absurd state of affairs where social goods, like education or philanthropy, do not become nullified by systemic injustices. Indeed, any serious examination of the foundations of Political Economy can find no basis by which to grant eternal and exclusive sovereignties over locations on the surface of the planet.

  3. Great analysis !

    In fact you follow one of the fundamentals of the Relative Money Theory : http://wiki.creationmonetaire.info/index.php?title=Main_Page

    And of course the JOHN LOCKE clause : http://www.creationmonetaire.info/2010/10/dividende-universel-john-locke-et.html !

    There are other ways to undestand Universal Dividend like EARTH TIME SHARING thru generations : http://www.creationmonetaire.info/2011/05/le-flux-lhomme-la-monnaie.html

    And also of course thru understing sharing the FREEDOM values that cannot be sell and be part of the market, but need investments to be created http://www.creationmonetaire.info/2012/02/debian-14-milliards-deuros-valeur-libre.html

    We are NOT forced to produce ONLY market values. So true Liberalism MUST include Universal Dividend into a global money system.

  4. Another article on various aspects of funding and universal income http://www.livableincome.org/agbifunding.htm

  5. Edward,

    Greetings! Of course we’re both admins of a related site, Triumph of the Commons, but a little friendly talk is good. I submit that the Citizens Dividend is inherently contradictory of a georgist perspective for it atomizes (privatizes) that which is in its nature a collective/communal substance, namely the economic rent of land.

    I cite one example of the corrosive effects of a citizen’s dividend. The Alaskan Citizen’s Dividend leads citizens of that state to seek their individual good, perhaps a new television, through the exploitation of public oil lands, rather than to deliberate a common good application of that exploitation. I believe the individual Alaskan’s contribution to the debate over whether or not to open up ANWAR would be consistently informed by larger than selfish impulses were the outcome of Land Use policy to be an inclusive communal consideration rather than a private benefit consideration. And so, my argument runs, a citizen’s dividend corrupts communal good thinking.

  6. David, you may be right about that, though it is clearly superior to both the current system and any other proposed Basic Income strategy.

    Also, unless the full value of the land were recaptured, then the Citizens Dividend, like any other improvement in nominal wages, would be eaten up by increases in rent… if 50% of the rent were recaptured, then only 50% of the dividend would not be eaten up by increases in rent.

    Still, I think that having a Citizen’s Dividend makes LVT more politically sustainable. The way to do it is that all surpluses go towards the dividend, and everything else goes towards normal government expenditures. Perhaps the dividend could be averaged out like they do in Alaska.

    If you really wanted to promote long term thinking, the dividend could be delayed. You’d only get a dividend from the rent collected 20 years ago.

  7. […] Ideas 15 quotes that show Basic Income is the way forward Wealth and Want: Citizen Dividends EmbraceUnity » The Basic Income is Dead Negative Income Tax: How does it differ from basic income? Universal Basic Income versus […]

  8. Shenpen said:

    [begin quote]

    “Wages are determined by the margin of production.”

    No it is not true, the article itself says that it only means they cannot be lower, but they can be higher if there is competition for skilled labor.

    [end quote]

    What I think you’re missing, Shenpen, is that Edward is using the classical (useful) definition of wages: What the laborer can keep after paying his landlord.

    Wages, seen this way, have zero to do with competition or anything else regarding the labor market because, simply put, the landlord — if he knows how much he can charge — can take everything beyond the margin of production. It’s simple bargaining power.

    The only way for the worker to keep more is if his landlord hasn’t fully discovered what he can charge for use of the site.

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