Automation and Universal Basic Income

This is an attempt to lay out an easily-understood argument for a universal basic income.

What's going on?

By the sweat of your brow you will eat your food until you return to the ground, since from it you were taken; for dust you are and to dust you will return. - Genesis 3:19

In order to make something, you have to put in labor. Agriculture gets you one harvest of grain for one season's worth of labor. Traditionally, if you wanted to grow more grain, you needed more workers. If you want more workers, you need to pay enough for them to survive. Labor has generally been the single most significant cost of production. Our economy has always depended on this direct relationship between supply of goods and services and demand for labor. Labor gets paid and buys things in an ever-growing feedback loop.

Technology is a way of changing the balance of this exchange. With automation it is possible to get out more than we put in. Farming has greater crop yields than ever before, with less labor. Office workers with computers are far more productive than those without. As automation continues its infiltration of our lives and software eats the world supply of goods and demand for labor will become almost entirely unlinked. Goods and services will be produced without any labor. As a result, supply of goods increases drastically, and demand for labor collapses.

When demand for labor collapses while the number of workers remains constant, wages drop, and unemployment increases. Mass layoffs of taxi drivers and truckers due to automated automobiles (auto-autos?) are commonly predicted. Given that self-driving cars are already in commercial use in several cities, this is not far-fetched. Labor no longer gets paid, which depresses demand for goods and services. People generally can't buy things they can't pay for.

What's next?

As a result of automation the supply of goods and services skyrockets, while demand for the same falters. When supply outpaces demand, the market needs to find a new equilibrium. The producers of goods and services need to revise their approach. There are only 3 ways this works out.

  1. Decrease supply.
  2. Drop prices drastically.
  3. Stimulate demand.

Producers can pause production in order to deflate supply, creating artificial scarcity. In the era of automation, artificial scarcity means declining to feed the hungry, clothe the poor, and heal the sick when we have the power to do so. Poverty is a difficult moral problem when food and shelter is scarce. Poverty without scarcity is morally reprehensible. Decreasing supply is not an acceptable solution.

Producers can drop prices drastically. This is a slightly more reasonable response. In the era of automation, everything is 99% off all the time, because it costs next to nothing to produce. However, even with very low prices, labor may not be able to afford goods. No matter how low prices are, people with no income can't buy goods. When labor is hard to come by, and many people are unemployed, any price is too high. Without additional measures this solution still creates poverty despite the presence of plenty. Simply decreasing prices is not a sufficient solution.

Producers can cooperate to stimulate demand. The economy needs demand for goods and services in order to function. This has always been provided by labor. After software eats the world labor will be unable to fill this role, because they have no purchasing power. Demand stimulation can take any number of forms, but must replace income. No-interest no-limit credit cards. Allowances of corporate Schrute Bucks. Any system that enables people to purchase goods and services without first receiving a wage for labor is a viable route to stimulating demand.

What's UBI?

Universal Basic Income (UBI) is a proposal to stimulate demand. Under a UBI scheme every person receives a living stipend, whether or not they are working. Stipends should be sufficient for the basic needs of life - food, clothing, shelter. Yes, UBI is a fancy word for "everyone gets free money."

UBI ensures each person has the ability to purchase goods and services. Most schemes include a little extra for luxuries. Hunger and human nature ensure each person has the desire to purchase goods and services. Because it gives purchasing power to the previously economically disenfranchised UBI stimulates demand. Because UBI stimulates demand, it resolves the imbalance caused by the unlinkage of supply of goods and services, and demand for labor.

Because UBI is universal, it also establishes a common standard of living for all participants. Every individual in the system has the power to purchase the basic needs of life. At worst, UBI systems are equivalent to current welfare systems. At best, a UBI system distributes plentiful resources in a way that avoids the moral bankruptcy of artificial poverty. That possibility alone makes UBI worth investigating.

I'm not advocating UBI exclusively, but I do think it's a very promising solution. And I believe in planning ahead. No matter whether you believe in UBI, some major change is coming. The world is not prepared to deal with how weird the future will be. We weren't prepared for the impact of plows, steam power, electricity, computers, the internet, smart phones, or social networks, and we aren't prepared for extreme automation. We can't predict the future, but if we're careful we can push it towards ethical outcomes.