Tuesday, March 12, 2013

Basic Guaranteed Job

by Robert H.

Morgan Warstler has a plan to replace a bunch of our current welfare programs with a new, more economically efficient scheme.  He thinks it will be able to woo liberals with it.  Well, I'm a liberal already wooed by Milton Freedman, so let's see how he does.  I'll put the basics of his plan here, but it is worth reading the whole thing.  Anyways, the basics (long):

The Basic Plan
Using the Paypal and Ebay platforms, the US govt. should establish a Guaranteed Income of $240 per week. Anyone who wants to work registers, receives a Paypal Debit Card, and each Friday at 5PM has their GI deposited.
All GI recipients have their labor weeks auctioned online. 
Job offers begin at $40 per week ($1 per hour).  Offers increase by .50 cents per hour ($20 increments).
At $40 per week, there’s no able bodied / able minded person that some rational returns bidder won’t find use for.  The 70 yr old woman in a wheelchair who wants to work to keep busy?  Plenty of teleservice operators have work for her to do from home for $1 per hour.
Note: I solve for the criminally lazy.  Identifying and fixing them is one of my plan’s advantages. I’ll get to it a bit later in the What Abouts plan.
So minimum take home cash under GI is $7 per hour or $280.  $240 is the social commitment paid out of taxes and $40 is the winning job offer.
To perfectly align incentives, for each $20 per week offer increase over $40, the govt. gets back $10 of our $240 social commitment, and the auctioned employed keeps $10.
So, on a offer of $100, the govt. is paying $210 and the auctioned receives $310.  A offer of $200, hits the govt. for $160 and auctioned receives $360.
The system ends at $10 per hour.  The maximum offer allowed in the GI Auction is $280 and the govt. is still kicking $120 netting the auctioned $400 per week.
So, I have some questions.  Keep in mind that my current preferred policy is a basic guaranteed income coupled with a negative income tax.  I think this should replace most forms of subsidies for low income folks (college subsidies, food stamps, TANF, unemployment, etc) with healthcare and educating children left as big expenses (and boy howdy, how we educate children also needs to be reformed too).

So, with that as my alternative, I have some questions.:

1. Surely there are, sometimes, more socially useful things someone can do with their time than work?  What if someone wants to go to school?  What if they want to stay home and take care of their kids?   Take an unpaid  internship?  Under my plan people can spend their lump to support themselves while they do these things and to cover their expenses (IE, tuition).  Under Warstler's plans either no one can devote themselves to those things or else we will need some separate  convoluted government programs to subsidize higher education, work training, etc.

2. What about part time workers?  Surely for some people working an amount lower than 40 hours a week is efficient?

3. Are we not trying to maximize utility?  It seems to me letting an old blind granny have 280 a week to live off of and + all of her free time is much more utility maximizing than giving her 280 a week and making her work for very marginal social gain 8 hours a weekday.

4.  What does Warstler think is a better way to have 1000 dollars allocated efficiently:  give it to someone who hasn't earned it, or give it to someone who hasn't earned it along with some preconditions on how they can spend it, what they can do with their time, etc?

5. If Warstler is worried about poor people getting money who haven't worked for it, what does that imply about the optimal inheritance tax?

6. What about parasites?  In eastern Europe under communism, another system in which everyone was required to work, there was a class of people called parasites (that link talks about anti-parasite laws as a pretext for oppressing social dissidents, which happened, but they were also used to go after actual parasites.  A few seconds googling can't find a better source).  They didn't work hard so no one wanted to hire them, and when firms were forced to hire them their bosses hated them.  At their jobs everyone had to cover for them in order to make the communal work norms, so their co-workers hated them.  They were fired at the first opportunity, at which point they were technically breaking the law.  Generally a judge or social worker would at first try to encourage them to get work, but at some point it would become clear that the person simply wasn't interested and they would be sentenced to jail.   The end result was that they tended to bounce from job to unemployment to prison in a sort of depressed, alcoholic haze.  Eventually they would die young.  This was a relatively large class of young men, and was often the fate of the non-functioning alcoholic in the GDR.

Under my system, people like that stay at home and try to scrape a little bit of happiness out of life.  Maybe they drink themselves to death, maybe they reform.  Under Warstler's system, they apparently don't exit?  This is how he describes lazy people:
That guy right now hides amongst 30M good people who want to work.  The first step is to expose him.  The second step is ostracizing and singling him out.  The third step is firm but forgiving punishments until his behavior is altered.

On day one, he signs up with everybody else, and never shows up at job.  His feedback is bad, he gives an excuse, or he ignores it.  The bidder doesn’t lose anything.  He’s just disappointed. 

After 4 weeks of taking the $240 GI, never being rehired, and given negative feedback, the criminal lazy is suspended, cut off for 6 weeks on first infraction.  Where does he go?  How does he eat?  Who’s couch does he sleep on?

Now all around him are 30M people waking up and going to work, getting their GI + Bid. They are happily employed, they are choosing between multiple jobs.  They are productive members of society.

He lives amongst them and they hate him.  They are getting louder and angrier with him.  He’s no longer able to hide amongst them complaining about the bad economy.  His support system crumbles.

Finally he breaks, after 6 weeks, maybe then 12, maybe then 26, he is put back to auction, and if he is rehired, he’s back in the game!  Take pictures of the work he did, prove he arrived early, stayed late by his own choice!  The system quickly exposes any positive effort and rewards it.
26 weeks to go from alcoholic bum to the new soviet man!


So yeah, I could keep going, but those are my big questions.  In general Warstler confirms a pet theory of mine: we can blame both liberals and conservatives for not having a more rational welfare system.  Liberals are too paternalistic and aren't willing to just give low income people money and trust they will know what to do with it.  But free market types are often too righteous, and aren't willing to give people money who haven't worked for it.  Obviously there are exceptions to the rule.

HT: Scott Sumner


  1. Warstler's whole plan seems kind of silly to me, obviously, and not really grounded in the reality that I experience, but I can at least follow what he wrote up until his description of how to solve the "lazy" problem. His plan is to force dudes to couch-surf for 6 weeks, and be cured of their lethargy by shame? It's as though he started to discuss Brood Queens and how to properly raise our larva, accidentally revealing himself as some kind of space-borne parasite bent on world domination.

  2. To be fair, it isn't easy raising ravenous space larva. The man might have some good ideas.