In 1991 Why Surfers Should be Fed, by Belgian Political philosopher Philippe Van Parjis, made the liberal case for a universal basic income. He argued that given certain factual circumstances, liberal justice requires us to give the surfers on Hawaiian beaches an unconditional cash payment. This seems to fly in the face of economic and ethical intuition. Afterall, why should we subsidize someone who doesn’t produce anything people will pay for?
Since then, UBI has become a more prominent issue and questions of efficiency and cost have been raised. While this paper remains controversial, there is considerable force behind the argument, if we accept that individuals should be free to live to whatever conception of the good that they may have (an important part of Rawlsian justice). So where does economics come in?
Cost disease, first observed by William Baumol, is the idea that given the prices of inputs are relative, large increases in productivity in one area of the economy may increase prices in other areas of the economy due to the relative change in opportunity cost. The classic example is that a symphony takes the same number of musicians and the same amount of time to be played now when compared to 100 years ago. In other words, there has been no productivity growth in this industry over that time. Meanwhile, factories and other workers in the economy have become increasingly productive in this period. Yet, we are unable to pay musicians the same wages that they would have earned 100 years ago even in real terms. What then does this have to do with surfers or philosophers?
The idea that rising labour costs in low productivity areas of the economy are a normal result of innovation does not seem to bode well for highly labour intensive jobs. In fact, everything from artists to education and health are potentially impacted by this. Is it inevitable that the costs of the services should increase, perhaps to unaffordable levels, if productivity continues to increase?
It helps to remember that this cost increase simply reflects the opportunity cost of labour allocation and the implication that those with high degrees of education undoubtedly benefit from this. Worryingly, it is possible that this also exacerbates inequality. Afterall, Harvard can only educate so many students at a time. However, it would appear the real issue here is how these benefits are distributed rather than the effect itself. For example, education costs across the developed world have increased dramatically over the past few decades (most notably in the USA). However, in Australia this has not necessarily put education at a highly ranked university out of reach for most of the population, while in the USA this has been the case. This has potentially dire consequences. While it could be argued that the arts have little to do with the economic prosperity, high quality accessible education most certainly does.
This brings us back to the title of this blog post and Van Parjis’ argument. He reasons that “those who take an unfair share of society’s resources are not those who opt for a low-production low-consumption lifestyle.” In other words, while it might seem unfair for the government to provide extra income to lower productivity income, these are not usually those who distort markets and extract economic rents. He also makes the point that to predicate additional income from unexpected windfalls etc. on measures like productivity may have pernicious unexpected impacts on the labour market. In fact, he characterizes this as inherently unjust because it, in effect, privileges one conception of a good life over others that have a negligible impact on other people’s lives. If we view a just society as one that gives the greatest freedom to those that live within it, then this is a persuasive argument.
Additionally, if governments view things like university educations as inherently valuable for the community, then perhaps we should also see “low productivity” sectors as worthy of the same commitment to public funding. Indeed, while arts funding in Australia is seen as under threat there is a strong argument to suggest that a larger share of public spending should be allocated to it in order to support individuals and culture. In fact, if the consequences of Baumol’s cost disease are the same as they are in the USA, this argument goes further. It implies that government’s have an obligation to fund the arts in order to provide the public with equitable access. However, this requires us to ignore the immediate “economic value” of these services as to do so requires significant value judgments about their purpose. It would be, by extension unjust for governments to encourage children to study STEM of the humanities like history or philosophy by allocating disproportionately great funding to these areas.
Unfortunately, the main issue here seems to be just how much control the government should have over what defines art and how education should be funded. This is, however, a different argument. What is more important is recognising that there are important reasons why we should ensure equitable access to all.