Dan Larimer vs the Rothschilds
Written by Peter Keay
EOS’s URI and Bitcoin as Universal Basic Income
It’s an idea that, in the English-speaking world, has been explored and supported by people as diverse as…
Martin Luther King Jr., Thomas Payne, Bill Gates, Sir Thomas More, Elon Musk, Ron Paul, Hillary Clinton, John Stuart Mill, Mark Zuckerberg, and Republican Richard Nixon and his Democratic opponent George McGovern.
When Nixon and McGovern’s “negative income tax” experiments, which hilariously involved Donald Rumsfeld and Dick Cheney, found that their form of UBI seemed to increase divorce rates, they were cut short. That all but ended the discussion for a generation.
But the discussion has returned. For many centuries, Universal Basic Incomehas been often proposed as a solution to a number of social problems.
Some people are against UBI because people shouldn’t get rewarded for doing nothing. And guess what? Some people support UBI because people shouldn’t get rewarded for doing nothing.
Regardless of your initial reaction, as one blockchain creator puts it:
The concept is something that everyone should carefully consider after setting aside preconceived notions about the nature of property rights, socialism, and capitalism.
Join me as we explore the pros and cons of UBI, the experiments and studies around the world, EOS’s Universal Resource Inheritance, and how Bitcoin already has some properties of a UBI.
I’m Peter Keay, and this is Bitgenstein’s Table.
As always, I recommend you listen to this episode, a combination of narrative and music, instead of reading.
It’s a staple of the mindset and media of the 1950s and 1960s: the teenager at the fast food place, working evenings and summers to raise money for college.
After all, the American dream is that you can do something like flip burgers and work hard and get to a place of opportunity.
Nowadays, only about ⅓ of fast food workers are teenagers. The rest are middle-aged. They have families to feed and even some college under their belts, but they have to flip burgers.
And the jobs they hold have been getting worse. Algorithmic job scheduling means they get unpredictable hours on short notice, which is terrible for family life. Automated productivity makes work quite boring.
Perhaps these are part of why mortality is increasing for this segment of society, in ways that experts argue is related to the pathology of older people who are struggling and suffering.
1769. Mayer Amschel Rothschild enters the business of selling rare coins.
He gains the patronage of Crown Prince Wilhelm of Hesse and many other wealthy nobles, and eventually expands to banking.
Fast-forward to the end of the 19th century, and the Rothschilds are the richest family in the world, partly because of Nathan Rothschild’s backing of military forces in the Napoleonic Wars and a remarkably well-timed sell of bonds.
Though their wealth has since been reduced — conspiracy theorists will argue that the Rothschilds have merely diversified into institutions such as nearly every central bank in the world — the family remains one of the richest and most powerful. Other great families like the Rockefellers continue to wield power, and the advent of tech billionaires has created new families who will hold power and wealth for an unknown number of generations into the future.
Family dynasties have been known to make or break countries and currencies and companies and causes.
But what is a system where grandchildren and great-grandchildren are unassailably powerful because of the good business sense, luck, or even the illegal activity of their grandparents or great-grandparents?
Isn’t that the definition of nobility? A noble class?
This recreation of nobility — a return to monarchy, almost, brought about by creating super-powerful, super-rich dynasties that can last for generations — is part of why some libertarians are on board with the idea of Universal Basic Income.
We don’t want to create a new nobility to crush the promise of opportunity.
People can make their fortunes, and give fortunes to their children, yes, but perhaps it shouldn’t be so easy for them to turn fortunes into dynasties where their heirs, be they benevolent or malevolent, can do as they please.
Larimer begins his article on URI with what he calls “a fundamental question: ‘How do we allocate the natural resources of the universe fairly across all generations?’”
There are a number of philosophical bases people use to understand property rights. But one of the prevailing views, a “first come, first served” view, is easy to reduce to absurdity.
“Who owns the moon, the ocean, the land, and the air? Is each new generation bound to recognize the property rights allocated by the prior generation? Is ‘first come, first served’ a proper basis for assigning initial ownership to unowned property? Does this generation have the right to consume all the oil and rainforests? Does this generation have the right to allocate all of the mineral rights for all of eternity?”
He has a point. Why should the generations of the future abide by the rules of past generations, people from a different time, long since dead, who set up long-lasting dynasties over them?
Larimer continues (emphasis mine):
“While some people naturally respect other people’s property and contracts, other people choose to follow the might-makes-right approach to property. This is the law of the jungle and is what has largely governed how property is allocated via wars and taxation.
“In practice, most property rights are driven by respecting the status quo. What was yours yesterday is yours today. If you can maintain control over property for long enough, then people forget how you obtained it and it becomes yours.
“But I find all of the above systems to be logically inconsistent … Force, fraud, theft, and extortion are not valid means to acquire property. Systems set up by one generation should not be binding on subsequent generations. Contracts are only valid if the parties have the ability to consent and are negotiating as equals.
“It is clear that in practice, property is allocated by the law of the jungle. The strongest parties conquer the weaker. The victors write the history books and redefine property rights. Property rights are enforced by violence or the threat thereof. Any new system of property rights must account for this natural tendency of mankind and should gradually correct for misconduct rather than compound it.”
Larimer proceeds to recommend a variant of Universal Basic Income that he calls “Universal Resource Inheritance.”
Many libertarians favor variants of UBI. On the surface, that might seem like it doesn’t make sense. Why would a political position centered on individual liberty give money from some people to other people?
Universal basic income schemes are not at their core about taking money away — in fact they are arguably much better than current programs.
Trillions of dollars go to current welfare programs, but the complex administrative structures, many of them expensive ways to determine how to administer aid and to whom, gobble up a large portion of this aid spending as overhead.
How many billions disappear into pits of red tape and corruption each year We don’t really know.
Meanwhile, the most cunning corporations take incredible advantage of these government welfare programs. In some cases, it is said they train their own employees how to collect welfare checks. These companies shrewdly increase the value of their own stock by using tax dollars to supplement their employees’ income.
Against the backdrop of such an inscrutable labyrinth of social aid, UBI might be a simpler, more straightforward solution that may just offer freedom and opportunity once again to people who lack it.
But UBI and similar projects often meet with objections.
Wouldn’t people mis-spend their income?
Wouldn’t UBI cause people to work less?
Shouldn’t UBI have conditions attached?
And finally, we shouldn’t give people money for doing nothing, right?
Let’s consider these one at a time.
First up, wouldn’t people mis-spend the income?
Let’s head back to Larimer’s article. He’s not the primary source of information on UBI — several books on UBI came across my desk as I researched the topic — but he is one of the more outspoken advocates in the cryptocurrency space.
He says, “While it is true that a certain percentage of the population will squander their resources, it is equally true that the wealthy also squander resources.”
He goes on to question the wisdom of libertarians who suggest that others will squander resources. “Economic efficiency,” Larimer points out, “is a biased argument used to justify a biased status quo. It presupposes that certain goals are higher than other goals. It assumes that some people do not have a right to participate in influencing which goods and services are provided.”
In other words, it assumes we have the right to tell everyone else what’s important in their lives.
“All of a sudden,” Larimer suggests, “the libertarians who are arguing for the status-quo property-rights system start sounding like central planning statists who know better how to run the economy.”
More importantly, UBI experiments done so far do not suggest that people spend much of their additional income on “vices,” on liquor and sex and drugs.
So what do the experiments say about the next big objection?
Wouldn’t people stop working?
The country of Iran, of all places, instituted a sort of UBI, and worried that their plans of cash transfers to people equal to 29% of Iran’s median income would “foster beggars.” To the contrary. A serious study by two economists discovered they the Iranian programs had slashed poverty and inequality and even encouraged some people to work more — these people apparently used the cash to invest in their small businesses.
The University of Pennsylvania conducted a survey of all unconditional cash transfer pilots in North America and concluded that “the evidence does not suggest an average worker will drop out of the labor force when provided with unconditional cash, even when the transfer is large.”
It’s worth noting that some experiments such as the Negative Income Tax experiments I mentioned, conducted in the Johnson and Nixon years, did reduce employment rates — but this reduction was arguably because the Negative Income Tax was conditional, which created incentive for people to work less. Or to under-report income so that they would receive more.
That touches on our third question.
Shouldn’t UBI be conditional?
Here’s Larimer again:
“From the lesser of two evils department, a URI system could replace complex, impossible to understand or follow, privacy destroying income tax systems. It would replace our corrupt unemployment, welfare, child support, and social security systems. In effect, half of the population is already receiving cash-payouts.
“The current system punishes those who increase their income and tells people that they qualify for money based upon their ‘need.’ This need-based distribution is far more harmful to the mental wellbeing of those who accept it than an inheritance-based distribution.”
One of the must-read modern books on UBI is Give People Money, by Annie Lowrey.
As she discusses Aadhaar, the Indian cash transfer assistance program, at length, she brings up another good point that expands on how conditional support programs can be “privacy destroying.”
UBI with ID or info allows governments to cut cash to minorities, activists, and so on. It gives governments an avenue of control and power that unconditional payments don’t.
One of the biggest sentiments against Universal Basic Income is also one of the reasons many libertarians support it.
People shouldn’t make gobs of money for doing nothing, right?
Let’s set aside the fact that no Universal Basic Income proposal is “gobs of money.” But still, people shouldn’t make money for doing nothing, right?
Actually, that’s exactly what dynasties do.
Dynasties are Daniel Larimer’s primary concern with the current setup of capitalist society.
In his proposal for Universal Resource Inheritance, he suggests a 5% URI rate, which “would redistribute 99.5% of initial wealth over 100 years. Those who do not use their assets productively (by earning more than 5%) will slowly lose them to the next generation over the course of their life.”
Those who do not use their assets productively will slowly lose them.
You see, in our current system, people who inherit lots of wealth earned through whatever means in the generations before them can live in permanent power and luxury while doing nothing.
People born into dynasties can live ruling on high or on beds of roses based on nothing more than their birth.
That’s not democracy. That’s nobility.
For much of history, the divine right of kings — lines of rulers in systems of monarchy — dominated the world. One good king might garner the favor of the people through military valor, or by revolutionizing quality of life or justice. But what about that king’s great-grandson? History has proven time and time again that systems built on bloodlines of rulers fall apart before long.
In the modern world, we value equal opportunity. We do not value nobles, or dynasties, or generations of “trust fund kids” sitting on wealth and doing nothing with it.
In its best form, the American dream is about equal opportunity.
It is not about family dynasties.
It is not about corporate dynasties.
It is not about bureaucratic dynasties.
It is not about small groups being successfully able with minimal effort to hoard massive amounts of wealth and to sap the results of massive increases in productivity in society for 100 years or more.
It is about equal opportunity.
And as much as people who have through hard work and ingenuity made a lot of money show survivorship bias and say that anyone has opportunity and anyone can do the same thing, it’s not true. People usually do not have the same opportunities the ultra-successful have.
A universal resource inheritance or other form of universal basic income may be our best way to prevent to rebirth of monopolies and monarchies.
After all, monopoly and monarchy are not parts of the American dream nor of its sister ideas in other cultures around the world.
Speaking of Monopoly…
It’s Larimer’s best analogy, I think.
“One analogy which I have found helps people understand the concept is a modification of the game of Monopoly. With the simple rule of reallocating 1% of the wealth of the players evenly after each roll, the game can go on forever. Players that exercise good trading skill and a bit of luck can still get ahead, but they never bankrupt the other players.
“Modern capitalist systems are like a game of monopoly where the owners of the means of production see compounding gains due to efficiencies of economies of scale. The more you win, the faster you win. The rich get richer simply by virtue of being rich. Ask a poor man with a shovel to compete in the market for ditch digging against a rich man with a backhoe. It doesn’t matter how ‘smart’ or ‘hardworking’ the poor man is, his labor is worthless unless it can be mixed with the capital represented by the backhoe.
“The move toward increasingly automated production of goods and services is like giving the rich capital holder the equivalent of a backhoe in every industry. In many cases, they purchased that backhoe with stolen goods and government favors.
“The compounding nature of wealth naturally centralizes. URI is needed to keep a sustainable decentralization of power required to secure our life, liberty, and property.”
“The compounding nature of wealth naturally centralizes.”
A common argument, mentioned here by Dan and used by many modern proponents of Universal Basic Income, is the rise of AI and robots.
It’s an argument often repeated by many compelling authors, for a couple of centuries so far.
Artificial intelligence and robotics are taking over factories and will soon displace drivers — and even “brainier” jobs like doctors to some extent.
At the same time, cryptocurrency might end up displacing a large portion of the accounting and banking sectors, and maybe even the legal sector.
Won’t this cause masses of unemployed men and women roaming the streets, unable to afford the basics of life?
I’m not so sure.
The hypothesis that machines would replace workers has been repeated at least since the writings of Karl Marx, but revolutions in technology have generally created jobs. When the percentage of agricultural jobs dropped from 40% to 4% thanks to technology, it didn’t result in 36% of people being newly unemployed.
But perhaps this revolution of AI and robots is so sweeping and will replace so many jobs — even though the efficiency gains are currently stagnating — that we really should be concerned.
Again, for centuries, people have said technology would replace jobs, and it always ends up making new jobs, too. But if this time massive numbers of workers will truly be displaced, we will at last have the opportunity to expand the humanities fields that machines won’t be taking over anytime soon: things like art, music, philosophy, poetry, literature, and so on.
As the popular Twitter account The Stoic Emperor hopes, after centuries of learning to become machines, we will learn to become human again.
Businessman and investor Mark Cuban suggests that AIs will learn to code, to create new machines, even to repair machines, and that fields that require humans will become premium skills once again.
Perhaps the Journalism and French Lit majors out there will have the last laugh, after all. People might even start searching for good crypto philosophy podcasts.
And perhaps society will be forced to implement something like UBI out of necessity.
We don’t need to look to EOS and intentional cryptocurrency UBI programs to see a future including something like UBI, though.
Bitcoin’s ultimate deflationary model will already function as a sort of UBI.
Poor people currently hold cash, so their savings and their wages are both hurt by inflation over time.
Some argue that if a deflationary currency were to become a dominant form of money, cash savings would go up in value over time — a phenomenon that has some similarities to a Universal Basic Income.
No longer would we be stealth-taxing the poor to give to the rich with inflation, reducing the value of cash to increase the value of other assets. Instead, the value of people’s savings and even wages would increase over time.
Now, is Universal Basic Income or URI a key to mass adoption? Perhaps.
PayPal gave people money to open new accounts. Many banks and other companies do the same.
Imagine if all you had to do was open a new wallet to start collecting some money. No matter how small the incentive, people would flock to the system. Perhaps UBI or URI will be one of the keys that unlocks the future cryptocurrency advocates dream of.
But as always, we need to think very carefully about the future we want to build.
We haven’t seen enough large-scale projects to know all the details of how UBI or URI plans would work, and I’m sure there would be unanticipated hiccups and even models that fail completely.
UBI schemes are, at core, focused on upholding the values of liberty, justice, opportunity, and equality. Will they actually uphold those values? We don’t know yet.
They are not worth knee-jerk reactions, nor are they yet worth unqualified devotion. But they are certainly worth further study and analysis.