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Economics

Stretch that Basic Income

Is a free-market economist supporting basic income a contradiction?  Hardly.  Milton Friedman supported it.  When you think about it, basic income is the perfect complement to the free-market economy, which creates social wealth and is eliminating poverty, but is also very disruptive.  Basic income as part of the free market should be as controversial as skydiving with a parachute. 

In 2020, can we afford a basic income which covers life’s basic necessities? (I’m not talking living large — you have to work for that.) I’m not sure, but I know how to get there: relentless cost-cutting to make the necessities of life as cheap as possible.

This is happening on the grand scale of things.  And I notice it more and more for everyday expenses. I pay $240/YEAR with Mint Mobile and get 8GB 4G data. Previously I paid $40/month with T-Mobile for 2GB data.  My new sub-$200 Xiaomi phone is much closer to top of the line than my previous $300 Motorola was.  Act used to sell me 3 bottles of fluoride mouthwash for over $20. Now I can get 4 for $16 from Amazon (Act has since lowered its price too). From Halloween costumes to cloud computing services and web hosting for my campaign, prices continue down.

One area where costs are cratering (and quality, measured as less pollution, is improving) is energy. The inexorable price declines in renewables could save the average American hundreds of dollars per month in lower heating, transport, and power costs. The cost of anything needing energy to produce (ie most everything) will also fall. And less pollution means less healthcare spending on things like asthma.

Unfortunately, one area where costs are not going down is most people’s biggest monthly expense: housing.  Why?  Because we of very restrictive policies on building housing, from zoning to preservation to NIMBY lawsuits, which limit the amount of housing we build and make building more expensive.  In New York City for instance, we’ve built less housing in each of the last five decades than during the Great Depression.

Covid has shown us how quickly rents can fall when supply exceeds demand.  Covid is a demand destruction story, but a supply boom has the same punchline.  In the 1920s when you had that huge NYC supply spike, prices fell so much that when rent control lapsed, nobody cared! 

Let’s get rid of these regulations, keep our markets free and competitive, and let relentless cost cutting stretch our incomes.  I look forward to the day when the average American can adequately pay for the basic necessities of life, including rent, with a basic income.  Sounds fantastic? In 1900, 40% of our population were farmers, meaning we needed 40% of our nation’s labor just to feed everyone.  Today we do it with less than 1%.  With ever accelerating technology, automation and productivity gains, there’s no reason we can’t pummel our other everyday expenses, so everyone knows they are covered even during the rough patches.

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