Economic Utopian Plan

Economics Economics Questions
81

So are you saying that an extra $50k is not going to make a real improvement in your life? Why would you not be in favor of a plan like this?

Because it requires taxes? That is completely irrational!!

That is like someone saying they don’t want to win the $1 million lotto because then they would have to pay $300k in taxes! It makes no sense.

Can I get you to vote for a plan like this? If not, why?

Sure it is, but not if everybody else gets it too. If everybody gets an extra 50k per year and production is the same, then prices will simply go up. Perhaps you can convince me that giving everyone 50k per year will increase production.

The only reason I would want to win the lottery is because not everyone else is getting lottery money at the same time. I want an extra $50k a year for actually doing something productive like providing value to my fellow man in some way. I don’t want it from a welfare scheme.

However, if I bust my ass to create something of value and then somebody just comes along and takes a large part of my success to give to someone who sits around drawing pictures all day, then yes I am going to be pissed off. I would stop working and join the bums leaching off everybody else. I will be quite honest with you man. If I didn’t have to work at all, then I certainly wouldn’t. I would watch sports, drink beer, read Mises, and be completely worthless all day long.

You might say, “why would you turn down an extra $50k a year???” Because I know it won’t make me better off in the long run.

82

mwalsh: You are correct that prices are going to go up and it is quite ridiculous to think that capital investment would not go down taxing as much as will be needed. 220 million adults at $20,000 a year is $4,400,000,000,000 off the top every single year. That is more than the entire 2009 federal budget ($3.5 trillion) that ran a massive deficit of $1.4 trillion dollars.

83

So ALL jobs that cannot be automated are, by default, desirable (thus desired) by humans, and will therefore be performed out of choice rather than necessity?

Also, again, why not just keep things simple and redistribute wealth/income in a way that negatively affects the least amount of people and over the shortest period of time? Tax all people with net worth > $Xm once to the amount of $220T and give $1m to all adults. Then each of them would be able to live the lives they really want and only perform activities they enjoy, while all boredom and necessity has been automated away. I’m sure you can find at least 150m adults that would love this idea enough to vote you into power so you can “implement” it for them.

Z. (MeThinksYouBlindToBadIdeas)

84

I dunno guys, this sounds legit.

85

Is it progress to create more jobs, or less jobs?

We do have blacksmiths currently because people enjoy handcrafted metal goods. To say there won’t be any blacksmith or any other jobs that “people don’t want to do” you are simply substituting your own values about specific jobs and assuming others won’t do them as well. On that note, there are no longer any milkmen today because there is a lack of demand for them. Cashiers, cab drivers, and other jobs you consider menial others consider valuable. Whether the job is enjoyed or not is irrelevant, what’s important is that they are valued by others. Jobs that are valued will continue to exist, while jobs that are not valued will not. Heartbroken workers and businesses, who may love what they are doing, will have to find other markets or go bankrupt.

How will workers know what jobs are valued? How will companies know what to produce?

86

Other than the obvious disincentivisation another thought has occurred to me.

The plan says that all workers are paid at least $30,000, correct? But at the same time there is a free market? What happens if a company wishes to employ someone in a role where their DMVP (discounted marginal value product) is below that? It’s just a minimum wage, but an extremely high one.

Also I’m not clear on how you can simply do any job you wish to and guarantee to receive the $30,000? Say for example you decide to be an artist, but you have absolutely no artisitic skill, and you produce paintings that have no merit, and no one wishes to purchase them. Would they still receive the $30,000 from the state? In which case given the absence of the need to have any talent, or to produce anything desired by consumers, no one would settle for the paltry $20,000 given out as your dividend, they would simply declare themselves an artist and produce a worthless piece of art once a week, or declare themselves a musician and play worthless noise to an empty hall, hence receiving an extra $30,000…

As far as I can see this utopian plan boils down to a social democracy with an incredibly high minimum wage, and incredibly high unemployment benefit which will clearly in time result in an awe-inspiring destruction of wealth in terms of goods and services.

87

mwalsh said: "wouldn’t this do 2 things:

1) Raise prices (making the purchasing power of the 20k-50k less)"

Taxes just reallocate existing income. It does not cause inflation. It does not print new money in order to fund the dividend.

However, it does change the makeup of spending. So some companies may lose sales and other companies will gain sales. If you implemented this plan immediately, it could have an effect on prices. Companies need some time to adjust to the new spending. But the effect on prices would be temporary.

Because of that, a more prudent way to roll out this program would be to implement it gradually, instead of just giving millions of people an additional $50k to spend tomorrow.

“2) reduce investment, which increases the amount of goods, and lowers the price or improves quality for the same price or both (computers are an example of both)”

I’m not sure what you mean here. Reducing investment would reduce the amount of goods available, not increase them.

But investment in a market economy is driven by what owners of capital think about future sales.

Companies that get new sales from the change in the allocation of income will increase their investment. Companies that lose sales from the change in the allocation of income will decrease their investment.

However, it is important to keep in mind that since taxes from this program will not be spent by government but by individuals in the market, it will not have any effect on the overall amount of consumption or investment in the private sector.

In other words, taxes normally take income out of the private sector and spend it in the public sector. That obviously has an effect on private sector investment and income. This program does not do that. The tax revenue is spent by individuals in the private sector, it is not spent by government in the public sector.

88

mattm said: “If everybody gets an extra 50k per year and production is the same, then prices will simply go up. Perhaps you can convince me that giving everyone 50k per year will increase production.”

Taxes do NOT increase overall income and do NOT increase overall production. If your income increases $50k from this program, someone else’s income went down $50k. Taxes redistribute EXISTING income.

If I have $100k and you have $0, we both have a total of $100k.

If I then give you $20k, that means I now have $80k and you now have $20k. But we both STILL have a total of $100k. The same overall income is being spent regardless of how it is allocated. So it has no effect on prices.

Taxes do not cause inflation, they do not affect prices.

“I want an extra $50k a year for actually doing something productive like providing value to my fellow man in some way. I don’t want it from a welfare scheme.”

The only way you get the $50k is if you work. So you will be doing something productive. The $50k just makes sure you get a high enough income to live a wealthy lifestyle.

This is not welfare. Welfare is money taken from people who work and paid to people who do not. The dividend is paid to EVERYONE, even if you are not employed. Even Bill Gates will get the dividend.

“However, if I bust my ass to create something of value and then somebody just comes along and takes a large part of my success to give to someone who sits around drawing pictures all day, then yes I am going to be pissed off.”

It is given to EVERYONE, including you. But rest assured that if you ever become unemployed or ever want to take a year off to travel or to do whatever, that you live in a country where you will always be able to continue to live a decent life and you have the freedom to explore opportunities other than a job.

“I would stop working and join the bums leaching off everybody else. I will be quite honest with you man. If I didn’t have to work at all, then I certainly wouldn’t.”

If you work a job you hate, you should find something you enjoy doing. That is the whole point of this program. Most people are in the same position you are. That is what we are trying to fix. We want to automate all those jobs so nobody has to do them. And sadly, we have the ability to automate 80% of jobs people don’t want to do. The system gets in the way. It is inefficient.

“I would watch sports, drink beer, read Mises, and be completely worthless all day long.”

That would grow old quickly. I doubt you would spend your entire life being unproductive.

But consider this. If you were paid the $20k, and you decided to permanently retire, your employer (assuming they couldn’t find a replacement) would adopt some kind of automated solution (assuming you work one of the 55% of jobs we can currently automate) to do what you used to do.

So if you never worked again for the rest of your life except for one day when your spouse forced you to volunteer at some charity, the economy’s overall production has increased. Because now we have the production from the machine that took over your former job PLUS the production from your one day of volunteer service.

“You might say, “why would you turn down an extra $50k a year???” Because I know it won’t make me better off in the long run.”

If you think that, somebody is giving you very bad advice.

89

z1235 said: “So ALL jobs that cannot be automated are, by default, desirable (thus desired) by humans, and will therefore be performed out of choice rather than necessity?”

A job is defined as work that people have no interest in doing. 20% of existing jobs cannot be automated immediately. These jobs mostly come from all the existing jobs in mining, utilities, manufacturing, construction, maintenance and health care.

“Also, again, why not just Tax all people with net worth > $Xm once to the amount of $220T and give $1m to all adults.”

That would be impossible. That much money does not exist in the world.

90

Dustin Jussila said: “Is it progress to create more jobs, or less jobs?”

It is progress to have whatever amount of jobs exists to be done by machines since people have no interest in doing them.

“We do have blacksmiths currently because people enjoy handcrafted metal goods. To say there won’t be any blacksmith or any other jobs that “people don’t want to do” you are simply substituting your own values about specific jobs and assuming others won’t do them as well.”

You are missing my point. The goal is to automate jobs people don’t want to do. If people want to do blacksmithing, they are free to continue doing that. The goal is to give people the opportunity to do what they want to do instead of what they don’t want to do. Everyone will decide for themselves what they want to do with their time.

“Cashiers, cab drivers, and other jobs you consider menial others consider valuable. Whether the job is enjoyed or not is irrelevant, what’s important is that they are valued by others.”

Yikes! That sounds pretty cruel.

I never said cashiers or any other job was not valued. Clearly you need cashiers. What I’m saying is if people don’t want to spend their lives ringing up sales all day, everyday, and we have a way to automate cashiers, then nobody should have to waste their life being a cashier.

Unlike you, I believe making the time human beings spend here on Earth as enjoyable as possile is very relevant and is of paramount importance.

“Heartbroken workers and businesses, who may love what they are doing, will have to find other markets or go bankrupt.”

I agree. Except, bankruptcy will never drive you to poverty and total ruin because you will always have at least $20k in income.

“How will workers know what jobs are valued? How will companies know what to produce”

The market will work exactly as it does today. Workers will continue to find out what jobs are valued the same way they do today. Companies will continue to find out what to produce the same way they do today.

91

Sorry I wasn’t clear- I wasn’t 100% away then, I had just woken up.

For the price adjustment- when you have a relatively large income inequality, the one’s with less income spend most of it to survive, correct?

When you reach the highest incomes, yes, they may spend more $ gross, but as a % of income, it is lower. When you take the income from the higher income (Gates, Buffet, Jobs, etc) and give it to the lower incomes, the amount spent by the highest incomes, gross, won’t change a whole lot. The other side is that the lower incomes will now improve their standards of living by spending this new found wealth. This is an apparent increase in money in the area od consumption goods, not the investments that were made under Buffet, Gates, etc. This will bid up prices in the consumer’s market.

The other half is that since the money that would have been invested by the highest incomes is now spent, the loanable funds market has a new, smaller supply. This will raise interest rates, reducing the profitablility of new investments by entrepentures (sp?), which reduces nw consumption goods. This is what I was meaning. The part that didn’t make sense of reduce investment=more goods was supposed to be, the less savings there are- as only from savings, and real saving at that, the lack of consumption, does investment occur from. As investment increases, then one of two variants occur- either a longer, more productive production cycle is created, or more goods are sunk into the existing goods to increase their quality.

92

JohnnyFive said: “Other than the obvious disincentivisation another thought has occurred to me.”

Machines dont need incentives. And people dont need incentives to do what they love.

“What happens if a company wishes to employ someone in a role where their [salary] is below [$30k]?”

In order to avoid fraud, the dividend would probably have to match the person’s salary. So if you earned $18k, your dividend would go from $30k to $18k.

So if you made $18k, your total earnings would be $56k ($20k + $18k + $18k).

“Also I’m not clear on how you can simply do any job you wish to and guarantee to receive the $30,000? Say for example you decide to be an artist, but you have absolutely no artisitic skill…**”

You are not guaranteed the $30k in exchange for doing any job.

Everyone gets the $20k no matter what they do. But you need to get hired by some company or volunteer at some approved civic or charitable organization in order to get the $30k. So although you are guaranteed work, you are not guaranteed it will be work you want to do.

However, some of the volunteer civic organizations would be cultural organizations which would include artistic projects. So you might not be able to get hired as a painter privately, but you would be be able to volunteer for this organization and qualify for the $30k.

“As far as I can see this utopian plan”

This plan will turn society into a paradise compared to how society is today. But it is not utopian. This is not the final destination. This is just the start. We will always continue to improve our living conditions.

“boils down to a social democracy with an incredibly high minimum wage”

The $30k is not a minimum wage. Unlike a minimum wage, this does NOT interfere with the pricing of labor. It does not force employers to pay people a $30k minimum wage. The $30k comes from taxes, not by telling employers how much to pay their employees.

“and incredibly high unemployment benefit”

The $20k is not an unemployment benefit. Unlike unemployment benefits, this does NOT give people the incentive to stay unemployed in order to continue getting their $20k. You get the $20k whether you are unemployed or employed.

“which will clearly in time result in an awe-inspiring destruction of wealth in terms of goods and services.”

Although it is possible for people to spend their dividend on bombs and begin blowing up all our country’s factories and infrastructure. But that is very unlikely. It is unlikely this plan will result in the awe-inspiring destruction of wealth.

But it will make you $50k wealthier. And it will lower your cost of living by eliminating the scam banks use to charge you interest for borrowing a digital number.

93

No, you are missing mine. Any job that is disliked by any individual can be filled many times over by those who do enjoy that type of work. The biggest problem in your theory is that you treat labor as a homogeneous factor. You don’t need to automate when you have a perfectly willing labor force who will work uncoerced.

There won’t be any “bankruptcy” because of the moral hazard you are setting up. If you guarantee at least $20k in income, you are eliminating the factor of risk. Because there wont be any financial risk to anybody, at anytime, more risker projects will ensure resources will be misallocated more frequently. This is like the the FDIC with it’s deposit insurance.

The market will not work under your plan like it does today. Workers and businesses rely on prices to reflect the interplay of supply and demand to direct resources and labor to where they are the most efficient. Your plan distorts the price mechanism with its fiscal policies, distorting businesses decisions.

94

Wow, we are really getting into some wonky economic minutia!

mwalsh said: “This is an apparent increase in money in the area od consumption goods, not the investments that were made under Buffet, Gates, etc. This will bid up prices in the consumer’s market.”

You are making innacurate assumptions.

If the money wasn’t transferred from Gates to whomever, that money would have been lent to someone. That someone could have spent it on consumption or investment.

If this plan is implemented and $50k is transferred from Gates to someone, that someone can spend it on consumption or investment.

Transferring the $50k from Gates to someone else does not mean that money would have been spent on investment and now will be spent on consumption.

“The other half is that since the money that would have been invested by the highest incomes is now spent, the loanable funds market has a new, smaller supply. This will raise interest rates”

That is potentially true. However, if rates rise and that doesnt attract new people to start loaning money and if there is no inflation, the FED will lower interest rates which would allow banks to expand the money supply.

Persistant high interest rates and low inflation means there is a money supply shortage.

Of course, this is all moot if we also adopt the bank system proposed in the manifesto. The whole concept of commercial banking where people are forced to pay for the increase of a digital number is idiotic.

“As investment increases, then one of two variants occur- either a longer, more productive production cycle is created, or more goods are sunk into the existing goods to increase their quality.”

But don’t forget that the whole point of investment is for more consumption. So more consumption is good. And more consumption is the ONLY reason why we invest.

95

@MeSeesBadIdeas

"Persistant high interest rates and low inflation means there is a money supply shortage."

No, the amount of money, or in this case, fiduciary media, in an economy will always be sufficient- whether it is 10cents a loaf or 10trillion dollars a loaf of bread does not matter- its the change experienced during inflation.

To have investment, people must be willing to forgo current consumption to save, and invest in the longer production time, or new equipment, etc. If there is no savings, you result in the boom(bubble). If the interest rate is high, that means people prefer current consumption, and are willing only to save minimally, meaning only the highest yielding/most satisfing to the greatest number, will be executed.

96

For free? I may have no interest in painting your house or giving you a massage, but could become interested provided a large enough $$ incentive. So would that be a “job” according to your definition or not?

I thought it was your manifesto that began with:

“This manifesto shows how today we have the ability to instantly make all 220 million adults millionaires.”

Z.

97

Dustin Jussila said: “Any job that is disliked by any individual can be filled many times over by those who do enjoy that type of work. The biggest problem in your theory is that you treat labor as a homogeneous factor. You don’t need to automate when you have a perfectly willing labor force who will work uncoerced.”

OK, I see your point now. But I disagree. If you polled every worker and told them they could do anything they want with their life and money was no object, would they still do the job they currently work? Some will say yes. Some will say they would, but work less hours. Most will say no, they would do something else.

Someone posted on this board that he would quit his job if he was able to. So we know there is at least one! :slight_smile:

But even if what you say is true, that does not diminish the benefit of the dividend.

“There won’t be any “bankruptcy” because of the moral hazard you are setting up. If you guarantee at least $20k in income, you are eliminating the factor of risk.”

If you save $100k and invest it in a business, how does your $20k eliminate the risk of losing the $100k?

“The market will not work under your plan like it does today. Workers and businesses rely on prices.”

Today, we have taxes and prices. Under my plan we will have taxes and prices. What’s different?

98

mwalsh said: “No, the amount of money, or in this case, fiduciary media, in an economy will always be sufficient- whether it is 10cents a loaf or 10trillion dollars a loaf of bread does not matter- its the change experienced during inflation.”

And while you wait for prices to adjust to the growing market, instead of just adjusting the money supply, businesses are going bankrupt and unemployment is rising.

It is much quicker to just increase the money supply in order to accomodate growth in production than to wait for prices to adjust.

This is monetary theory 101, the foundation of our modern monetary system and the reason why we no longer have constant booms and busts, bank failures, and money value volatility, like we did before we had a central bank with fiat currency.

I know austrians dispute this. But austrian economics is not a science. Their crank, pseudoscientific claims are not backed by data, are not supported by empirical evidence and not published in a credible journal subject to peer review. All they are interested in doing is eliminating government, not economic research.

99

If you intend to have a strong argument, never generalize. It gives the impression you are gasping at straws.

You are presupposing $100k in savings. That is, if anyone saves at all. People save for a rainy day, to hedge against uncertainty. Seems to me there wont be many “rainy days” in your supposed system. If your guaranteed $20k, which is no small sum, why save at all?

Nothing, other than you taking our flawed system and giving it steroids.

100

z1235 said: “I may have no interest in painting your house or giving you a massage, but could become interested provided a large enough $$ incentive. So would that be a “job” according to your definition or not?”

That would be defined as a job. You are doing it not because you like the activity but because you are getting paid.

“I thought it was your manifesto that began with: This manifesto shows how today we have the ability to instantly make all 220 million adults millionaires.”

It pays you $20k per year. An asset that pays $20k per year has a net present value of about $1 million. Having an asset worth $1 million makes you a millionaire.