Handouts versus Markets

In today's political landscape the term "Universal Basic Income" is thrown around more often. From Elon Musk and Silicon Valley to Justin Trudeau and Bernie Sanders, celebrities and political rulers are trying to sell this idea to the public on the world stage. Even the classical liberal economist Friedrich Hayek who was a proud proponent of free markets supported UBI. In recent years there has been growing support for the idea that people should be guaranteed the right to a free check from the Government. A basic income should be ensured to every person so they can't go hungry or be evicted from their home if hard times come-a-knocking. With increasing automation in the workplace, some people view their jobs and careers in danger of being overtaken by robotics. Understandably so, as I write this, my robot vacuum is hard at work keeping my floors clean. However, UBI is more than a social safety net. Advocates like Hayek supported it because UBI offers protection for people from discrimination. If a company refuses service or jobs to you based on ethnicity, sexuality, disability, etc. you have an income to fall back on. People will be protected rather than coerced to hide, flee, or change oneself to meet their demands.

The issues that arise with implementing a plan like this have moral, economic, and practical issues. For a government to support a project like this, they must be able to pay for it. Two options are to tax the populace or to create the currency and then distribute it. Considering the population of a modern country can reach from 100,000,000 to over 1,000,000,000 the amount of revenue taxed would start in the Hundreds of Billions to fund a program like UBI. Morally you would be stealing vast amounts of wealth from the population. Economically businesses wouldn't be able to operate. They would shut down or move out of the country. Practically, the bureaucracy and police force needed to run this program would have to be enormous and burdensome requiring large amounts of funding and coordination.

If the government decided to mint the currency for a UBI program instead of taxation, it would still run into similar problems. The creation of the vast amount of currency needed would devalue it to almost worthlessness. Hyperinflation would ensue and impoverish many people. Morally there would be a huge theft of value from every individual. Hyperinflation would destroy many middle and upper-class families. Economically it would debase the entire currency leaving it worthless. Good examples are the Zimbabwean dollar and Weimar Deutsche Mark. Practically it would consume enough resources to the point where it would become too expensive to continue printing. Any combination of taxation and printing still succumb to the same issues discussed already.

Up until 2008, our monetary system had not changed much for several thousand years. Until 2008 when Satoshi Nakamoto introduced Bitcoin to the world. Suddenly this appearance of a new digital currency spurred innovation around the world. Since then, hundreds of copy-cat and unique coins have been created. Some bringing innovation to this rapidly changing digital landscape. One of these innovations is called Proof of Stake, as opposed to Proof of Work that Bitcoin uses. PoS coins work similar to your savings account. You earn coins by holding it in your wallet online instead of holding dollars in your bank's vault. The algorithm mints digital coins and distributes them to wallets online. This system is the beginning of a free market solution to Universal Basic Income. You can be guaranteed a stable income based on savings without the issues in our old monetary system. This technology is still in its infancy. Reward varies from coin to coin and value is quite volatile. An example of this is PIVX; I earn between two and five dollars every couple days. Small payments like these are not able to support many if any living in first world countries. However, in developing nations, two to five dollars Is enough to feed oneself for a day or more. These countries are also where services Bitcoin and PIVX are needed most.

We are in an exciting world of technological advancement. Many social issues get solved with technology rather than larger government and more legislation. Universal Basic Income will hopefully be implemented in the free market before the government gets a chance.