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business philosophy

universal basic mug

Money helps people.

Due to many factors – decreased violence, technological advancements, increased education, charitable aid, foreign investment – the amount of poverty in the developing world has decreased drastically over the past few decades. In 1990, over 36% of the world’s population lived in extreme poverty. By 2015, that figure was under 10%.

Regardless of how the folks got the money, having it is clearly positive.

The underlying concept of a universal basic income is undeniably attractive. Everyone having a better quality of life? That’s progress.

But we’re not interested in ideas. We’re interested in doing things.

Ideas are worthless if they don’t work. That’s why people test things.

There have been multiple tests of a universal basic income. But the problem is that they are fundamentally flawed from a statistical level.

When the entire premise of an idea is that it’s a universal basic income, how do you accurately test the idea on a handful of people? How do you even accurately test the idea on a few thousand people? Or few millions?

Say the entire population of the world is one hundred. Some people have two coffee mugs and others have a dozen coffee mugs. And for this universal basic mug test, you give ten of these people an extra coffee mug.

That’s not a test. That’s just giving some people more coffee mugs than others. You may have done something else – temporarily reduce coffee mug inequality, for example – but you did not conduct a universal basic mug test.

Those people have an extra coffee mug, which they barter for whatever else they want. It trickles out into the coffee mug ecosystem, and someone else eventually ends up with the coffee mug.

This may be a test of something else – welfare, most likely – but it is not a test of universal basic mug.

When you’re injecting liquidity into a specific portion of the market, that does work. We already know that. I’m not sure why we would need or want to test this. Give someone a million dollars and they do have more expendable income than everyone else.

Now, what happens if you actually conduct a true universal basic mug program? You give a coffee mug to every person in that group of 100.

Now, everyone has a coffee mug. What did you do? Everyone with two mugs now has three. Everyone with a dozen mugs now has thirteen.

(Let’s ignore the question of where these mugs came from. Nobody knows.)

Coffee mugs are worth a little less now. Everyone has an extra one, after all. It does get distributed pretty quickly – the folks with three mugs probably barter one for a need – but in the end it just trickles over to someone who is producing something they want.

Value is created by scarcity. That’s why a painting by Rembrandt is so expensive. There aren’t many of them, and there will never be any new ones.

Let’s take this to the next level.

Why stop at one thousand dollars a month? Let’s give everybody a million dollars a month.

What would happen if you, and everyone you know, had a million dollars a month to spend?

The month before this happened, you could have bought a Ferrari with that money. But now almost eight billion people suddenly have the cash to buy a Ferrari.

Are Ferraris still going to cost a million dollars?

No, they’re going to cost a billion dollars. (Or, in other words, the dollar is worth a million times less).

Give or take a few months, and rent is going to be $500k instead of $700. Bread is going to be $10,000 instead of $3.

This is the basic, mathematical, fundamental flaw of universal basic income.

It’s not that I don’t wish everyone’s quality of life could go up.

It’s that the idea, economically and mathematically, doesn’t work.

(Unless, of course, you are taking the money from somewhere and giving it to someone else, aka taxes).

Is this what we’re talking about, in reality? Does this mean that the top 10% won’t get universal basic income?

If this is the case, then it’s not universal basic income at all, it’s just an expansion of welfare.

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