So, people have been worried about my mental state and, given what I’ve written, that’s understandable. Writing has helped me get out ideas in the past and right now people are quite busy, so, here I am, writing again. I thought it might be healthy to give a chronological account of my “mental progression” these past few days.
Briefly some background though. If you disagree with some of the claims here, I reference you to this post.
I’ve known about UBI for a while and it seemed like a neat idea. It has theoretic advantages, not needing means testing, not acting as a ceiling for jobseekers (whereby they lose it if they start working). With that said, it had obvious problems: it was always going to be incredibly expensive to fund, and many people would just save it, it wouldn’t actually go into the economy. Targeted alternatives are considered better.
Some time later, understanding methods of taxation, I read a bit more about VAT. Although I don’t see the connection at the time, there are some similarities. It taxes consumption, and can do so extremely effectively by invoicing every step of a production chain. It’s conceptually a very pure tax on economic turnover. Except, it also has its problems. When used, it tends to disproportionately harm the poor, as they spend most of their income already and can’t afford the rising prices, whereas the rich can just spend more of their income. It’s therefore described as a “regressive” tax, and proportional or progressive taxes (again, targeted alternatives) are considered better.
At some point it clicks in my head that these two concepts are really mirrors of eachother. And beautifully so, if you do the math.
Around the same time, I read up on Georgism. I “see the cat” as the saying goes. Rents are an economic deadweight. It isn’t just land, it’s anything you own that is “truly” scarce. “Truly” meaning a competitor could not recreate it with any amount of time and effort. Taxation on economic rents is important to avoid distorting the economy. I realize such a tax and a UBI are probably a good idea, but it is complicated to set up, politically and economically. So far, my mind is still doing fine though.
I begin toying with the idea of all three. Of LVT (Shall we come up with RVT? Rent Value Taxation?), VAT, and UBI in combination. VAT + UBI acts as an initial stabilizer, redistributing over consumption, and RVT ensures rent-seeking behaviour does not grow out of control.
During this I am thinking about what drives consumption. I recognise that it is labor. People’s wages is what drives most consumption. I start thinking about government transfers (welfare, retirement, unemployment benefits), which also drives consumption, but I realise much of it is also labor-linked. Pensions are filled from wages, income taxes come from wages, unemployment is conditioned on wages lost.
I begin to wonder if that could be a problem. I begin to wonder, what does a world without labor look like?
I realize it can exist, and the only way the economy functions in that world is RVT and UBI. (VAT isn’t theoretically necessary, it just has some technical advantages).
I begin to wonder if, as automation increases, we need to transition to that world, or if it is only one of those theoretical toys, true in theory but useless in practice.
I ask myself what would be the signs. Lower labour demand, yes. Unemployment? no, the economy can always create jobs. Wait, is that a good thing?
And then it clicks.
Every single person who finishes their schooling puts their labor supply onto the market, unless they can get government transfers or become a dependent (also heavily labor linked, mind you). Jobs are a cost. The economy needs to allocate capital to create them. It will do so, and once it has, no one is the wiser. That is a forced supply, textbook market distortion.
The distortion is perfectly analogous to corn subsidies in the united states. Everything “seems” fine, corn farmers aren’t making insane profits, all the corn gets “used”, bought, mostly for biofuel. And removing the subsidy would, if done suddenly, be quite harmful. Farmers and biofuel refineries would be hurt if you removed it. Except it’s economically still damaging to keep it. Capital flowed over years to make biofuel refineries not because that’s necessarily best, but because of a market distortion. Downstream, biofuel itself is the same, buyers need to be found for it and the economy obliges. To make jobs for corn that otherwise wouldn’t have existed. The only sign that there is a problem is that the US government pays billions of dollars a year for “something” that we seemingly can’t undo.
Jobs are the same, except there isn’t even a billion dollar stream of money that can be measured.
I begin to wonder, how much damage has this done?
I had heard of the great stagnation before. I follow its threads along with the estimation by Keynes regarding leisure time. I realise that this distortion is why leisure has not grown since the 1970s. I am beginning to get worried.
I do the math, millions of lifetimes misallocated. I am beginning to get anxious.
I can’t stop thinking about this. I know that it’s more than just leisure. A market distortion can also misallocate capital, attention, politics. I realise the growth we have not been able to reinvigorate in Europe and the US is almost certainly connected.
I begin to fret for 50 years of lost time. Of lost progress. Of all the things that disenfranchisement has wrought upon society. It is beginning to hurt and I feel sick. I cannot work, I lose sleep, I barely eat.
I am trying to reach out to people. I am trying to figure out how I am wrong. This is where I am now. If you know how I am wrong, please help me.