Thursday, April 26, 2018

Basic Income: From an Ideology to The Working (!) Mechanism

Part I
Why do people have to work?
In capitalistic and socialistic countries, economist and politicians on the left and on the right, as well common folks know that
in order to have a nice life a person MUST work
(unless he or she inherits a fortune, or wins a lottery).
This proposition -
in order to have a nice life a person MUST work
- does not generate questions or doubts.
It is considered a common-sense rule.
It is used as a fundamental axiom, a basic social and economic principle for the functioning of any society.
It is like the Euclidian axiom that two parallel lines never cross.
But then Nikolai Lobachevsky came and asked “Why?”.
And developed a brand new, beautiful, and absolutely abstract not related to anything in a real world geometry.
And then Albert Einstein stepped in and taught us that our space and time are described by that new, beautiful, and absolutely unexpected and counterintuitive geometry.
Maybe, next time when we think, or read, or hear that in order to have a nice life a person MUST work we could also ask “Why?”.
Maybe that could lead to a brand new, beautiful (or just practical), and badly needed social-economic philosophy, which could lead to a brand new, beautiful (or just practical), and badly needed social-economic theory, which could leave to a brand new, beautiful (or just practical), and badly needed social-economic practice?
Imagine that one day we wake up and find out that aliens visited the Earth and now every city, every town, every village has a huge magical warehouse where everyone can  ask for anything and a magical black box will make it for him or her. For free. For anyone. For everyone. Forever.
Too futuristic?
Well.
What if soon the advances in robotics, genetic engineering, artificial intelligence and technologies in general would lead to such warehouses where anyone could get for free any basic life related item (food, cloth, transportation, even a home)?
Would people still HAD to work in order to have a nice life?
And if not – how would that affect the whole social structure, individual and group behavior, politics, governing, education, progress?
Maybe the idea of the “basic income” is the answer, maybe not – I do not know.
But I think this scenario deserves further exploration, because the technologies make it less and less imaginary and more and more realistic.
Part II
That is why I wrote an open letter to some of the proponents of the idea of the “basic income”.
To Mr. Sam Altman, Elon Musk, Mark Zuckerberg, Chris Hughes, and Sir Richard Branson.
Dear Mr. Sam Altman, Elon Musk, Mark Zuckerberg, Chris Hughes, and Sir Richard Branson.
According to a WSJ video (https://www.wsj.com/video/series/moving-upstream/basic-income-the-free-money-experiments-moving-upstream/AAF2641C-53F5-4C32-99C9-C0BD8409D7C6), or just the Internet search, you all ponder the idea of a basic income.
The point of this publication is simple: if you really truly believe in that idea
STOP discussing the idea of a basic income
(leave it to politologists, sociologists, philosophers, etc.)
START discussing the mechanism of the realization!
BTW: the mission of true management is designing and constructing social structures which become mechanisms for making a transition form an idea to its realization, you all are considered as highly experienced managers.
You may have different reasons for that (see Appendix I for more), but the best strategy for moving ahead would be 
zeroing in on practical mechanism for a possible local implementation,
and a future broad realization of the idea.
First, stop calling it "guaranteed income". You seem don't know well your fellow Americans, for many of whom this word combination sounds un-American (you should figure out - why). Find a better term, e.g. "assured decent living".
Second, currently, all proponents and opponents of a basic income discuss only one possible mechanism for the realization of the idea (https://www.manhattan-institute.org/html/wage-subsidy-better-way-help-poor-7778.html), which is the governmental redistribution of funds collected via taxation;
or, in simple words, taking money from the rich by boosting taxes on them, and using those money to support poor via various governmental programs. 
This is what conservatives rightly call "redistribution of wealth", although, they forget to mention that redistribution of wealth had been know from the day wealth had become a part of human life - so thousands of years.
In my view, the governmental redistribution of funds collected via taxation is the least probable approach, and will not happen in America (at least any soon). 
In America, for millions of people, taxes are as sacred and untouchable as cows in India. This situation will not change any soon, because the view on taxation is deeply rooted into American traditions, into “what does it mean to be American”, into psychology of general public. Accepting this as a fact, one needs to search for mechanisms outside of the taxation (preferably, based on behavioral economics, which proves that most people make economic decisions based on their “feelings” more often than based on thorough calculations; in short, psychology leads economy; https://www.theguardian.com/world/2017/oct/09/nobel-prize-in-economics-richard-thaler).
That is why - as a practical mechanism for realisation of the idea of a better wealth distribution - I propose a creation of a “Federal Entitlement Fund” (or a “Federal Fund for a Basic Income”, or a “Federal Fund for the Advancement of the Living”, or a “Federal Fund for the Advancement of the Living Conditions)”.
The Fund will function in a way similar to the Federal Reserve and the Supreme Court, i.e. the board will be composed based on a consensus between the Congress and the White House (and, maybe, the Governor’s Association); but the board will function independently from all other business and government entities, and the members are elected for life.
The goals and functioning of the board will be:
*  Establishing on the annual basis the minimum level of the “States decent living” (may be different for different States).
* The board will be annually providing a formal definition of a “decent living”.
*  Every citizen and permanent resident who makes less than that level can apply for the financial help.
* Every U.S. based business will have to pay a one-time annual fee.
* The amount of the fee will be determined by the board depending on the number of the requests, and the total amount of the funds needed to grant those requests (and the funds required for the functioning of the Fund, so the functioning of the Fund would not depend on the federal budget).
*  The amount of the fee will be determined by the board according to the formula set by the board on the annual basis.
*  The fee is NOT a tax, it does NOT go to a federal budget, it CANNOT be used for anything else but the activities set by the board.
* If needed, the board may file a request to the governmental budgeting entities to request funds from the federal budget.
It is very important to stress, that only the board will be setting up the targets and the brackets for collecting and distributed the funds, and it will be done annually (without a need for a long legislative process, because it is NOT related to the federal tax code).
Results:
* This approach will lead to ensuring that every US citizen will have a “decent living” conditions.
*  More importantly, this approach will become a strong psychological instrument; this approach will provide incentives for business owners to stimulate the wages of the employees, because that would result in decreasing the number of requests to the fund, which would lead to the decrease (and maybe even a complete elimination) of the fee.
* More importantly, this approach will become a strong psychological instrument; this approach will provide incentives for business owners to stimulate job creation, because that would result in decreasing the number of requests to the fund, which would lead to the decrease (and maybe even a complete elimination) of the fee.
*  Even more importantly, this approach will become a strong psychological instrument; this approach will provide incentives for business owners to join forces and to reach out to legislative bodies to push for laws and regulations which would stimulate job creation and wage growth, because that would result in decreasing the number of requests to the fund, which would lead to the decrease (and maybe even a complete elimination) of the fee.
This approach can be attempted starting on a scale of one company, or one State.
All business owners who would generally support the idea of a basic income could join the funds and create one mutual fund for the initial experimental program. Of course, that would mean that each individual business owner would lost his or her name and ownership over his or her individual program. However, on the other hand, that would mean that all business owners involved in the project would mutually own the idea. This collaboration would greatly increase the effectiveness of the program.
Of course, this collaboration will not happen until some of the business owner starts reaching out to other business owners, inviting to discuss the creation of the Fund.

Thank you for visiting,
Dr. Valentin Voroshilov
Education Advancement Professionals
GoMars.xyz

To learn more about my professional experience:
The voices of my students 
"The Backpack Full of Cahs": pointing at a problem, not offering a solution
Essentials of Teaching Science

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Appendix I.

The idea of a basic income is not new: http://basicincome.org/basic-income/history/.
For many business owners pondering the idea of a basic income, the reason behind the idea is mostly practical: advances in automisation, robotisation, machine leaning and AI (which so far is far from human intelligence; http://www.cognisity.how/2017/04/AIforEDU.html) may lead to many people not having a good paying job, and the increase in the number of economically depressed people may lead to social unrest.
However, the idea of basic income has deep moral and philosophical roots.
One should start from questions like:
·      Why do people have to work for having a good living?
·      Why do people work and still not having a good living?
·      Why do people have to work?
·      Do people have to work?
·      Who and how decides who and how much a person is a valuable person?
·      How much do people need to work to be considered valuable?
·      How many people need to consider someone valuable in order that one would deserve some financial reword?
·      How many people need to consider someone’s work valuable in order that one would deserve some financial reword?
·      How to assess the importance of a person?
·      Does the amount of money one has correlates to the one’s social weight and importance?
·      Does the amount of money one has reflects the significant of work done by the one?
·      Does the amount of money one has reflects the amount of work done by the one?
·      Is a person who has ten times more money than another person also ten times more valuable for the society?
·      How much different factors are reflected in the total worth of a person?
·      What is “wealth”?
·      Who are true wealth creators? (http://the3dforce.blogspot.com/2017/09/wealth.html)

For example, when an owner of a company issuing IPO becomes a billionaire, how much of that is due to the talent of the owner, how much of that is due to the effort of the owner, and how much of that due to other factors, like good timing, good luck, greed. The latter – greed – is related to the actions of the people who have decided how many stocks to print, what price to set, and who and how much would also profit from the mere fact of a stock offering.
BTW: what the government can do is to pass a law according to which 2 % of every new IPO should go to the “Federal Entitlement Fund”. Automatically. Because the only reason all those venture capitalist firms and hedge funds exist is people who live in the Country.
But the true philosophical and moral question is related to the nature of human activities, including work.
One may think that almost all people are naturally, intrinsically lazy, and without fear for their existence they would never work.
Or.
One may think that almost all people are naturally, intrinsically creative, and – if given an opportunity – would work even without fear for their existence.
Depending on the general view on the human nature people would have opposite vies on the very idea of a basic income.
For example, if people are intrinsically lazy, they do not deserve any income besides pay for their work. If that income is not enough, it is the fault of those people.
If people are intrinsically creative, all people deserve a “decent life”, and if someone does not make enough money, it is not his or her fault but a glitch in the social-economic system. If someone gets money but does not work, maybe that person just cannot work (too yang, too old, too sick, too undereducated)?
Of course, answers to such questions like: “What is the nature of human activity?”, or “What is the mission of human subjects?”, or “What are those intrinsic norms which govern people’s actions?” would only be a beginning of a long and broad philosophical discussion.

Appendix II:

The same approach can be used to decrease spending on health insurance, and to increase the number of insured citizens via a creation (eventually) of a “Federal Health Care Fund”.
The Fund will function in a way similar to the Federal Reserve and the Supreme Court, i.e. the board will be composed based on a consensus between the Congress and the White House (and, maybe, the Governor’s Association); but the board will function independently from all other business and government entities, and the members are elected for life.
The goals and functioning of the board will be:
* Establishing on the annual basis the minimum level of the “States health insurance coverage” (may be different for different States).
*  Every citizen and permanent resident who does not have health insurance coverage can apply for the financial help to cover medical expenses.
* Every U.S. citizen and a U.S. based business will have to pay a one-time annual fee.
* The amount of the fee will be determined by the board depending on the number of the requests, and the total amount of the fund need to grant those requests.
* The amount of the fee will be determined by the board according to the formula set by the board on the annual basis.
*  The fee is NOT a tax, it does NOT go to a federal budget, it CANNOT be used on anything else but the activities set by the board.
* If needed, the board may file a request to the budgeting entities to request funds from the federal budget.
Results:
*  This approach will lead to ensuring that every US citizen will have sufficient health insurance.
*   More importantly, this approach will become a strong psychological instrument; this approach will provide incentives for business owners to provide sufficient health insurance, because that would result in decreasing the number of requests to the fund, which would lead to the decrease (and maybe even a complete elimination) of the fee.
*   More importantly, this approach will become a strong psychological instrument; this approach will provide incentives for business owners to extend the health insurance coverage in the various forms, because that would result in decreasing the number of requests to the fund, which would lead to the decrease (and maybe even a complete elimination) of the fee.
*  More importantly, this approach will become a strong psychological instrument; this approach will provide incentives for business owners to reach out to healthcare providers and healthcare insurers to make them to lower the cost of the healthcare, which would lead to the decrease (and maybe even a complete elimination) of the fee.

Appendix III.

When someone tells us that “this is the way to do it just because it has been done that way for years and decades”, we all should ask “but what about Donald Trump? He broke all the rules of political engagement, and of a Presidential campaign, and succeeded, despite the disbelief of all major political and social analysts. Donald Trump is a clear proof that even the least expected things can happen”.
Of course, we could also just turn to a history in general, or to the history of science, to see how wide-spread views and opinions (“The Earth is flat”) have been replaced by new views and opinions (“The Earth is round”).
Nowadays, we can expect that the same type of an opinion change can happen again, but this time in politics and economics.
Let’s take a look at taxes, for example.
The conventional models do not work anymore. If nothing will be done, the federal government may become insolvent simply due to payments related to financing the government debt. Another extreme possibility is cutting all government support to low income citizens but to risk a social instability. Standard models do not offer any other options except theses two.
In a situation like this, all ideas should be welcome and discussed and analyzed.
For example, an idea of raising taxes on everyone.
It is assumed that raising taxes on people will automatically make their life worse – because people will have left with less money.
However, this assumption is too general.
Raising taxes may be complimented by other legislative actions, which could lead simultaneously to a drop in the cost of living.
For example, a household would have to pay $300 more in annual taxes, but the cost of food would drop so the same household would spend $500 less a year.
That would increase the level of living.
This example shows that statement “raising taxes always lowers standard of living” is wrong, in general. Only the complete analysis of all possibilities can demonstrate the net effect of any proposed tax/financial reform.

Appendix IV.

Innovation, vision, creativity, an ability to think outside of a box, an ability to think are important in business, in venture capital adventures, in R&D for new devices, new designs, new applications.
But innovation, vision, creativity, an ability to think outside of a box, an ability to think are also important in social designing (including education: e.g. http://www.teachology.xyz/30uS.html, or https://teachologyforall.blogspot.com/2017/03/YidanPrize.html; etc.).

Appendix V.

An original post on taxes and tax cuts:

http://the3dforce.blogspot.com/2017/11/taxcode.html

Appendix VI: the letter to Mr. Chris Hughes

To: Mr. Chris Hughes

Dear Mr. Hughes,
Your experiment with “The New Republic” demonstrates the difference between having good intentions and making the right steps.
In your book “Fair Shot: Rethinking Inequality and How We Earn” you make many very good points.
For example,
“We need to be as open to creative, new ideas as the most forward-thinking leaders of the Progressive Era were then.”
“Unique circumstances had more to do with our success than others realized.”
“No average American has any way to buy shares in the early days of the lives of valuable companies.”
However, your approach to the implementation of the idea of “basic income” has flaws, mostly due to underestimating some of the psychological traits of American people.
You write that “Venture capitalists plan for seven out of ten of their investments to fail, two to break even, and one to explode in value, wiping out all of the other losses and guaranteeing a high return.”
Consider spending your time on reading this letter (the larger part of which for your convenience is posted in the form of an online page at http://www.cognisity.how/2018/04/bincome.html) as an investment which may fail, but may lead to some valuable lessons useful to making your strategy more efficient.
Sincerely,
Dr. Valentin Voroshilov