You’re absolutely right, the post is light on details. To answer a few of your points: I don’t have a deep understanding of housing market dynamics beyond the bad deals and pressures I’ve heard about from many different people, especially in the Bay Area. If we were to develop this into a full proposal for public consumption it would include an analysis of how housing subsidy on both the demand and supply side would affect real outcomes. However, that’s somewhat beside the point, as that analysis has nothing to do with the soundness of the system as a whole, and actively denies the good it’s hoping to promulgate.
The debit card system is much less like food stamps than it is like dynamic UBI with constraints. You may have missed the part when a new corps of inspector-accountants validate businesses before they qualify to participate in the program. Once they do, they get a widget that adds a unique nonce to their transaction strings that the system validates. This solves a lot of problems you mention, also, the dynamic and constrained nature of the cards solve many of the issues people have with UBI: that people would spend on trivialities and non-essentials, and that it wouldn’t be enough to make a difference economically. Could someone buy $500 of alcohol with their five $100 retail transactions a week and drink themselves to death? Sure. That’s their prerogative, and their community Target worker (or wherever, just not the liquor store) could ask them if they’re ok the second time if they believe that shouldn’t happen. Further, if that’s not conscionable by a majority of people, the system could include disallowing drugs and alcohol from approved stores.
I am not an expert, but the standard answer to why anything is expensive is that there is less of it than what people want. With housing, the usual reason are various restrictions: you are not allowed to build new houses anywhere you want to; and sometimes without good political connections you simply won’t get a permission to build anywhere in the city. The reason for that is that people who already own houses (that is, those who vote for the local government) want their prices to go up.
This gets further complicated by the fact that the value of living in a city depends on the opportunities that are there (such as jobs, shops, etc.). So when you only build a relatively few new houses, the costs may actually go up—partially because the costs keep going up almost all the time, and partially because the greater city is now even more attractive for people who want to get there. Someone should do an experiment and build so many houses that it literally doubles the capacity of the city—I would expect the prices to go down. But such thing is unlikely to happen, because the people in the city would vote against it.
The problem with “corps of inspector-accountants validating businesses” is… well, I guess you would have to experience being their target to understand it. Basically, when there is an army of bureaucrats giving you certificates, that kinda makes you their servant in the sense that if you do anything slightly differently than they want you to do, no certificate for you! Among other things, it means zero innovation, because doing something differently than the current “best practice” means not getting certified. Or it may mean that getting literally 100% score on their criteria is impossible, so everyone needs to pay bribes to get certified. Yeah, in theory it is not supposed to work like that. But in practice, it often does.
I hear you, and it’s really unfortunate that the real life dynamics go that way, since the “bureaucrats” are necessary to defeat subsidy fraud, and the subsidies are what balance the increased demand from living consumption (about 6T by one estimate).
Sometimes it feels like the society is a big computer program, and it doesn’t matter if you have the general idea right, as long as there is a syntax error in line 1013, the program is not going too work. (Running a company seems to be the same thing, on a much smaller scale.) Some errors can be fixed by adding a missing semicolon. Sometimes merely fixing an error in one place introduces a related error in a different place, so many places need to be changed in sync.
On top of that, it is a living system. People try to find new exploits all the time. Plus there is a cultural momentum, so that things that work okay in one country will completely fail in a different one; or the things that worked okay a few decades ago no longer work now. The simple model is that people follow the incentives, but in addition to the formal incentives, you have informal ones, such as the opinion of your neighbors. (Sometimes the fear of being rejected by your neighbors is stronger than the fear of legal consequences. And depending on your neighbors, sometimes they push you towards obeying the law, and sometimes they push you towards breaking it.) Now consider that half of the population has IQ 100 or less, some people are psychopaths or drug addicts, so even in the hypothetically optimal system, you will still get people who hurt themselves or others for no good reason, just because the idea occurred to them at the moment.
Also, unlike the situation with programming, there is no clear distinction between the programmer and the system that is programmed. Your attempts to change the system, even for the better, will be actively rejected by those who profit from the way the things currently are, plus everyone who falls for their propaganda. Also, all idealists who have a different vision. Even if you are a dictator, your situation is actually not much better (from the perspective of social engineering), because now you have to keep your army and foreign allies happy, and prevent the population from rebelling against you, which may dramatically limit your options.
...in summary, sometimes it feels to me like magic that things work at all, considering the number of reasons why they should not. I guess it’s because there are also millions of people who try to improve things, mostly locally, and they push back against the forces of entropy. But they are often uncoordinated individuals; and also, as individuals, sometimes they die, or burn out, or start a family and no longer have time for their previous activities; and in such cases, sometimes there is a replacement for them, and sometimes there is not and then the local good things fall apart again.
The reason I am writing this is that I don’t want to discourage you, but really the devil is in the details.
One typical problem when trying to design a society is: “who will guard the guards themselves?” Like, if you propose an “army of inspectors” to check the business, the obvious next question is who will check this army of inspectors. If you don’t have a good answer, sooner or later the inspectors will naturally start doing things for their own benefit, rather than to make the system work as intended. Two typical ways are taking bribes, and trying to make their own work as easy as possible. Taking bribes may motivate them to lobby for making the regulations as strict as possible; seemingly for the benefit of the customers (it will be easy to get a popular support for such proposal), but in fact to give more opportunities to take bribes. (From their perspective, the perfect outcome is when the regulation is so difficult that it is virtually impossible to comply with, or at least so difficult that it would be impossible to make a profit while complying with it, so everyone need to pay a bribe to get approved.) Optimizing for less work means that whenever the business owner proposes a small change, the answer is an automatic no; no one has an incentive to actually think about the proposal. To address this, you would need a second army of meta-inspectors who would check the inspectors, but then the problem might reappear at another level.
And this is not just empty speculation, you can see it at many places. (For example, you need police to reduce crime, but now USA has a problem with criminal policemen protected by the police unions.) I grew up on socialist Czechoslovakia, which in theory was supposed to be a paradise for workers and peasants, governed by wise and benevolent people in the Party. (We typically called it “the Party”, because there was only one.) In theory, it was a perfect opportunity to make everything work great. In practice, that didn’t happen. Not only was the entire economy mismanaged (the proverbial shortages of toilet paper), but practically all aspects of life were dysfunctional somehow.
The housing situation… well, you applied for a waiting list, waited for a decade or more, and then you were assigned a place to live (you couldn’t choose the part of the city; you were happy that you were allowed to stay in the same city because sometimes even that wasn’t guaranteed). During that decade or two, you had to stay with your parents, or on your friend’s couch; I think there was not an opportunity to rent. (Technically, you could stay in a hotel all the time, but most people didn’t have enough money for that.) If you were lucky, there was a job opportunity offering temporary free housing for their employees. So, even if money technically wasn’t the problem, the housing still was.
Food… was cheap (heavily subsidized) and available, but only the basic forms. If you walk in a supermarket today, imagine that you would have to choose a subset of maybe 15% of the stuff that is there, and that will be all that is ever available, in the entire country (except for a few super expensive luxury shops). Forget about things like “yogurt with fruit flavor” or “low-fat yogurt”. Be happy to buy the yogurt if they have one in the shop; there is only one kind, so it’s easy to choose. One kind of bread, two kinds of milk, etc. All restaurants in the country cook the same set of meals, based on the government-approved book of recipes, and the inspectors check that they never deviate from a recipe, even if the customers would really prefer something different. But, yeah, unlike in Soviet Union, at least nobody was starving.
Before you object to comparison with socialism, my point is that this (as far as I know) didn’t happen on purpose. The ruling party might have had its ideological objections against the ways markets work, but they had no reason to prevent the workers from getting housing soon or eating tasty meals. Actually, considering that most workers mostly care about their houses and food and beer, improving the housing and meals would increase the stability of the regime. And yet. The lesson is that things can easily go wrong even with good intentions, if you regulate a bit too much.
Thank you for sharing your experiences. It’s a story of how the best intentions go awry due to human nature and how free markets are a way of working around this. The vibrancy and efficiency of motivated people competing to make things better is a strong and vital force in the society that fosters it, and to some extent people who grow up that way tend to take it for granted. Thank you for the reality check.
In a way, this is an argument, not for social Darwinism, but for creating the possibility to escape the mean. If you take a distribution and flatten it, you eliminate the worst outcomes, but you also eliminate the vibrant top and middle. I’m guessing that allowing for a bottom allows for a much more elevated middle.
In a sense, this means that the current system is working as intended: wealth inequality gives us the highest middle.
If we ignored housing, then “free market + some taxation and giving the money to the poor” kinda sounds like the best of both words. Unfortunately, the increasing rents can eat the extra money given to the poor. (See also: Georgism.)
Maybe if we could get UBI high enough that people could survive on that alone, it would no longer be necessary to live in cities (close to good jobs) and people could avoid paying too high rent. Or maybe not, because ultimately all land belongs to someone? Not sure.
Georgism for sure. When we build the political will to reclaim all titles to land and charge leases held for the public by the government, UBI is easily and appropriately funded. As you say though, the question is whether it will ever be enough to live on given other market forces.
My hope has been that a system like the one I described can get ahead of all of it by defining the minimum purchasing power as exactly what’s necessary to live on. In principle this only works when the economy has a high post scarcity multiplier, that is, one unit of work gives you four or more units of goods. As you mentioned before, automation may not be there yet, but as a hint of things to come, our current per capita GDP is double the current living wage floor.
You’re absolutely right, the post is light on details. To answer a few of your points: I don’t have a deep understanding of housing market dynamics beyond the bad deals and pressures I’ve heard about from many different people, especially in the Bay Area. If we were to develop this into a full proposal for public consumption it would include an analysis of how housing subsidy on both the demand and supply side would affect real outcomes. However, that’s somewhat beside the point, as that analysis has nothing to do with the soundness of the system as a whole, and actively denies the good it’s hoping to promulgate.
The debit card system is much less like food stamps than it is like dynamic UBI with constraints. You may have missed the part when a new corps of inspector-accountants validate businesses before they qualify to participate in the program. Once they do, they get a widget that adds a unique nonce to their transaction strings that the system validates. This solves a lot of problems you mention, also, the dynamic and constrained nature of the cards solve many of the issues people have with UBI: that people would spend on trivialities and non-essentials, and that it wouldn’t be enough to make a difference economically. Could someone buy $500 of alcohol with their five $100 retail transactions a week and drink themselves to death? Sure. That’s their prerogative, and their community Target worker (or wherever, just not the liquor store) could ask them if they’re ok the second time if they believe that shouldn’t happen. Further, if that’s not conscionable by a majority of people, the system could include disallowing drugs and alcohol from approved stores.
I am not an expert, but the standard answer to why anything is expensive is that there is less of it than what people want. With housing, the usual reason are various restrictions: you are not allowed to build new houses anywhere you want to; and sometimes without good political connections you simply won’t get a permission to build anywhere in the city. The reason for that is that people who already own houses (that is, those who vote for the local government) want their prices to go up.
This gets further complicated by the fact that the value of living in a city depends on the opportunities that are there (such as jobs, shops, etc.). So when you only build a relatively few new houses, the costs may actually go up—partially because the costs keep going up almost all the time, and partially because the greater city is now even more attractive for people who want to get there. Someone should do an experiment and build so many houses that it literally doubles the capacity of the city—I would expect the prices to go down. But such thing is unlikely to happen, because the people in the city would vote against it.
The problem with “corps of inspector-accountants validating businesses” is… well, I guess you would have to experience being their target to understand it. Basically, when there is an army of bureaucrats giving you certificates, that kinda makes you their servant in the sense that if you do anything slightly differently than they want you to do, no certificate for you! Among other things, it means zero innovation, because doing something differently than the current “best practice” means not getting certified. Or it may mean that getting literally 100% score on their criteria is impossible, so everyone needs to pay bribes to get certified. Yeah, in theory it is not supposed to work like that. But in practice, it often does.
I hear you, and it’s really unfortunate that the real life dynamics go that way, since the “bureaucrats” are necessary to defeat subsidy fraud, and the subsidies are what balance the increased demand from living consumption (about 6T by one estimate).
Sometimes it feels like the society is a big computer program, and it doesn’t matter if you have the general idea right, as long as there is a syntax error in line 1013, the program is not going too work. (Running a company seems to be the same thing, on a much smaller scale.) Some errors can be fixed by adding a missing semicolon. Sometimes merely fixing an error in one place introduces a related error in a different place, so many places need to be changed in sync.
On top of that, it is a living system. People try to find new exploits all the time. Plus there is a cultural momentum, so that things that work okay in one country will completely fail in a different one; or the things that worked okay a few decades ago no longer work now. The simple model is that people follow the incentives, but in addition to the formal incentives, you have informal ones, such as the opinion of your neighbors. (Sometimes the fear of being rejected by your neighbors is stronger than the fear of legal consequences. And depending on your neighbors, sometimes they push you towards obeying the law, and sometimes they push you towards breaking it.) Now consider that half of the population has IQ 100 or less, some people are psychopaths or drug addicts, so even in the hypothetically optimal system, you will still get people who hurt themselves or others for no good reason, just because the idea occurred to them at the moment.
Also, unlike the situation with programming, there is no clear distinction between the programmer and the system that is programmed. Your attempts to change the system, even for the better, will be actively rejected by those who profit from the way the things currently are, plus everyone who falls for their propaganda. Also, all idealists who have a different vision. Even if you are a dictator, your situation is actually not much better (from the perspective of social engineering), because now you have to keep your army and foreign allies happy, and prevent the population from rebelling against you, which may dramatically limit your options.
...in summary, sometimes it feels to me like magic that things work at all, considering the number of reasons why they should not. I guess it’s because there are also millions of people who try to improve things, mostly locally, and they push back against the forces of entropy. But they are often uncoordinated individuals; and also, as individuals, sometimes they die, or burn out, or start a family and no longer have time for their previous activities; and in such cases, sometimes there is a replacement for them, and sometimes there is not and then the local good things fall apart again.
The reason I am writing this is that I don’t want to discourage you, but really the devil is in the details.
One typical problem when trying to design a society is: “who will guard the guards themselves?” Like, if you propose an “army of inspectors” to check the business, the obvious next question is who will check this army of inspectors. If you don’t have a good answer, sooner or later the inspectors will naturally start doing things for their own benefit, rather than to make the system work as intended. Two typical ways are taking bribes, and trying to make their own work as easy as possible. Taking bribes may motivate them to lobby for making the regulations as strict as possible; seemingly for the benefit of the customers (it will be easy to get a popular support for such proposal), but in fact to give more opportunities to take bribes. (From their perspective, the perfect outcome is when the regulation is so difficult that it is virtually impossible to comply with, or at least so difficult that it would be impossible to make a profit while complying with it, so everyone need to pay a bribe to get approved.) Optimizing for less work means that whenever the business owner proposes a small change, the answer is an automatic no; no one has an incentive to actually think about the proposal. To address this, you would need a second army of meta-inspectors who would check the inspectors, but then the problem might reappear at another level.
And this is not just empty speculation, you can see it at many places. (For example, you need police to reduce crime, but now USA has a problem with criminal policemen protected by the police unions.) I grew up on socialist Czechoslovakia, which in theory was supposed to be a paradise for workers and peasants, governed by wise and benevolent people in the Party. (We typically called it “the Party”, because there was only one.) In theory, it was a perfect opportunity to make everything work great. In practice, that didn’t happen. Not only was the entire economy mismanaged (the proverbial shortages of toilet paper), but practically all aspects of life were dysfunctional somehow.
The housing situation… well, you applied for a waiting list, waited for a decade or more, and then you were assigned a place to live (you couldn’t choose the part of the city; you were happy that you were allowed to stay in the same city because sometimes even that wasn’t guaranteed). During that decade or two, you had to stay with your parents, or on your friend’s couch; I think there was not an opportunity to rent. (Technically, you could stay in a hotel all the time, but most people didn’t have enough money for that.) If you were lucky, there was a job opportunity offering temporary free housing for their employees. So, even if money technically wasn’t the problem, the housing still was.
Food… was cheap (heavily subsidized) and available, but only the basic forms. If you walk in a supermarket today, imagine that you would have to choose a subset of maybe 15% of the stuff that is there, and that will be all that is ever available, in the entire country (except for a few super expensive luxury shops). Forget about things like “yogurt with fruit flavor” or “low-fat yogurt”. Be happy to buy the yogurt if they have one in the shop; there is only one kind, so it’s easy to choose. One kind of bread, two kinds of milk, etc. All restaurants in the country cook the same set of meals, based on the government-approved book of recipes, and the inspectors check that they never deviate from a recipe, even if the customers would really prefer something different. But, yeah, unlike in Soviet Union, at least nobody was starving.
Before you object to comparison with socialism, my point is that this (as far as I know) didn’t happen on purpose. The ruling party might have had its ideological objections against the ways markets work, but they had no reason to prevent the workers from getting housing soon or eating tasty meals. Actually, considering that most workers mostly care about their houses and food and beer, improving the housing and meals would increase the stability of the regime. And yet. The lesson is that things can easily go wrong even with good intentions, if you regulate a bit too much.
Thank you for sharing your experiences. It’s a story of how the best intentions go awry due to human nature and how free markets are a way of working around this. The vibrancy and efficiency of motivated people competing to make things better is a strong and vital force in the society that fosters it, and to some extent people who grow up that way tend to take it for granted. Thank you for the reality check.
In a way, this is an argument, not for social Darwinism, but for creating the possibility to escape the mean. If you take a distribution and flatten it, you eliminate the worst outcomes, but you also eliminate the vibrant top and middle. I’m guessing that allowing for a bottom allows for a much more elevated middle.
In a sense, this means that the current system is working as intended: wealth inequality gives us the highest middle.
If we ignored housing, then “free market + some taxation and giving the money to the poor” kinda sounds like the best of both words. Unfortunately, the increasing rents can eat the extra money given to the poor. (See also: Georgism.)
Maybe if we could get UBI high enough that people could survive on that alone, it would no longer be necessary to live in cities (close to good jobs) and people could avoid paying too high rent. Or maybe not, because ultimately all land belongs to someone? Not sure.
Georgism for sure. When we build the political will to reclaim all titles to land and charge leases held for the public by the government, UBI is easily and appropriately funded. As you say though, the question is whether it will ever be enough to live on given other market forces.
My hope has been that a system like the one I described can get ahead of all of it by defining the minimum purchasing power as exactly what’s necessary to live on. In principle this only works when the economy has a high post scarcity multiplier, that is, one unit of work gives you four or more units of goods. As you mentioned before, automation may not be there yet, but as a hint of things to come, our current per capita GDP is double the current living wage floor.