The Ethics of Unequal Basic Income Guarantees Nicolaus Tideman

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The Ethics of Unequal Basic Income Guarantees
Nicolaus Tideman

Advocates of basic income guarantees face a web of interconnected ethical questions: If simply being a person entitles one to an income, is there any ethically acceptable basis for distinguishing between citizens of a nation and foreigners? If so, what is that basis? And is there anything that foreigners are due? If there is no basis for distinguishing between citizens and foreigners, how can American citizens be expected to get by on the kind of basic income guarantee that could be provided to the whole world?

Within the US, is it ethically necessary to provide all citizens with the same basic income guarantee? Can any distinctions be made in terms of geography? It costs a lot more to live in a city than in a rural place. Should people who live in cities be told to go live in a rural place if they don’t like the cost of living in cities? Would that be fair to those who have lived all their lives in cities?

What about children? Are they entitled to the same basic income guarantees as adults? What difference does age make, and why?

And who should pay for basic income guarantees?

All of these questions have straightforward answers in a left-libertarian ethical framework. The fundamental principles of left-libertarianism are that people have rights to themselves and that all persons have equal rights to natural opportunities.

Before applying the left-libertarian framework, it is important to address the question of the basis for a basic income guarantee. There are two possible bases. First, one might propose a basic income guarantee on the ground that justice requires it. Second, one might propose that in addition to the basic income guarantee that justice requires, the citizens in a polity may want to implement a larger basic income guarantee out of compassion for those with the greatest need. These two possible motives for basic income guarantees lead to different answers to the ethical questions.

Unequal Basic Income Guarantees from Justice

Consider first the basic income guarantee that justice requires. From a left-libertarian perspective, the basic income guarantee that justice requires has its source in the axiom that all persons have equal claims on the gifts of nature. The simple version of the resulting basic income guarantee is that everyone who has exclusive access to a natural opportunity—land, minerals, water rights, fishing rights, spectrum rights, etc.—should pay the value of that exclusive access into a fund from which a uniform basic income guarantee is paid to all persons. This sounds like it may require an equal basic income guarantee for all persons on earth. But there are considerations that lead in a different direction.

If the value of land has been improved by human effort (as by removing stones from an agricultural field, for example), then the person with exclusive use of the land has an obligation to share with others only what the rent of the land would be if it had not been improved. The addition to the value of the land from improvement belongs to the improver. By the same principle, not all of the value of land in a city can be claimed by all persons in the world. In addition to the value that comes from the efforts of the person with exclusive use of a site, there are three sources of value of urban land. 1. Some of the value is provided by nature—access to rivers and harbors for example. 2. Some of the value is provided by infrastructure that city provides—water lines, sewer lines, public transportation, parks, etc. The public collection of this component of the rent of urban land is the natural source of financing for the part of infrastructure costs that cannot be covered by marginal cost pricing of infrastructure services. 3. Some of the value arises from the history of human activity in the city. Public collection of this component of the rent of urban land can provide a just basic income supplement for the residents of a city. That is, the residents of a city can say, “By living and working here we have created this city. The rental value of the land in this city is greater than the sum of the value of the undeveloped land and the value added by infrastructure. It is our efforts that created that additional value, so it is just for us to collect it and share it among ourselves.” Since the contribution of each person to this socially created component of the rent of land could be approximated by the number of years that he or she had spent in the city, it would be just to have a supplementary basic income guarantee for the residents of the city that was proportional to the number of years they had spent in the city.

In the same way that the residents of a city can justly claim a supplementary basic income guarantee, so might the residents of a nation. Compare the land on the northeast side of the Rio Grande with land on the southwest side. While local variations in characteristics will cause variations in the rental value of land, it isn’t likely that just being on one side or the other of the river makes land inherently more valuable. But since the land on one side of the river is in a different country than land on the other side of the river, and the two countries have quite different institutions, it is likely that which side of the river land is on has a systematic effect on its rental value. The citizens of the nation who live on the side of the river where the value is higher can justly say, “The addition to the rental value of land that comes from being on our side of the river is not due to nature. It is due to the greater productivity of our institutions. Therefore it is just for us to share this component of value just among the citizens of our nation, rather than globally.”

Thus, taking account only of justice, the following unequal basic income guarantees emerge: Everyone in the world gets an equal share of those parts of the rental value of natural opportunities that are due purely to nature. Institutionally, it would be reasonable to handle this by payments between nations and a clearinghouse for the difference between what a nation appropriates in natural opportunities and its share of global natural opportunities, based on population. Individual nations would make the payments to their citizens.

Any nation with land and other natural opportunities such as the frequency spectrum that are more valuable than average because of the institutions of the nation will justly distribute to all of its citizens a supplemental basic income guarantee financed by public collection of the addition to the rental value of land that arises because of the efficiency of the nation’s institutions.

Any community with land and other natural opportunities that are more valuable because of the history of human activity in the community will distribute to its citizens a further supplemental basic income guarantee financed by public collection of the increase in the rental value of land that arises because of that history of human activity.

Unequal Basic Income Guarantees from Just expressions of Compassion

The basic income guarantees discussed above are based on justice alone. Additional basic income guarantees can arise from compassion, within justice. People can justly say, “Our conception of a good society is one that has institutions for the systematic transfer of resources from those who have more than they need to those who have less than they need, and on this basis we plan to collect public revenue to finance an additional basic income guarantee that is not required by justice.” The magnitudes of such basic income guarantees can be whatever the donors wish them to be.

If people were perfect saints, they would recognize that all persons have they same inherent value, and they would allocate whatever resources were regarded as theirs to allocate in the way that they judged would produce the greatest improvement in total well-being, to whomever it might accrue. They would regard every person’s well-being, including their own, as no more important than anyone else’s. Acting on this basis, people would give substantial parts of their income to organizations that would allocate it efficiently to whoever needed it most.

But people are not perfect saints. They generally recognize the virtue of acting compassionately, and they generally do not have the will to express as much compassion as they recognize that good people would. One of the human adaptations to this situation is to adopt social norms regarding the actions promoting the well-being of others that people must perform to remain in good standing in a community. Sometimes these norms are enforced by informal sanctions, and sometimes by obligations to pay taxes. The coercive nature of taxes makes them ethically questionable. They would not be questionable in a world in which people moved freely among competing sovereign entities with different social norms and taxes. In that event, anyone who was unhappy with the obligations that his society imposed on him could move to another.

Thus, ideally, people could justly decide democratically to tax their incomes, their consumption, their savings, or anything else that they wished, to finance basic income guarantees for whomever they choose. They would be likely to provide more for their fellow citizens than for foreigners, just because it is human to care more for those who are close than for those who are more distant. People providing unequal basic income guarantees could justly say, “We have a right to adopt institutions that express our conception of a good society, and that is what these particular, unequal, basic income guarantees do. We have a right to construct the society we want with our resources. And if you are one of our fellow citizens and do not like it, you are free to go and live somewhere else.”

Thus publicly financed unequal basic income guarantees can be justified both through justice alone and through compassion operating justly.

Basic Income Guarantees for Children?

Should children receive basic income guarantees too? Or should the parents receive them for the children? If so on either account, should the guarantee be of the same size?

What basis is there, if any, for treating children any differently than adults with respect to basic income guarantees? One relevant way in which children are different from adults is that they are regarded as not capable of signing binding contracts, because they are presumed to have an inadequate capacity to comprehend the consequences of important decisions. On this basis, it is sensible to put parents in charge of any basic income guarantees that would be provided for children.

Most children already receive something that is akin to a basic income guarantee, and that is a free public education. As long as governments are providing educations for children that cost as much as the basic income guarantee would, they can justify excluding children from the basic income guarantees required by justice. For guarantees motivated by compassion, those who provide them are free to use whatever criteria they wish.

When parents provide education for their children without using government resources, the children have a respectable claim under justice for a basic income guarantee of the size to which adults are entitled under justice, to be managed by the parents for the benefit of the children. As long as the only basis for distinguishing children from adults is their inability to evaluate alternatives well enough to take responsibility for major decisions, they cannot justly be denied the equivalent of the basic income guarantees to which adults are entitled.

This raises the question of the age at which children should be entitled to the financial benefits of citizenship. Should they be entitled when they go to school, or when they are born, or when they are conceived? In Social Justice in the Liberal State, Bruce Ackerman offers an interesting argument about when a child is first entitled to benefits of citizenship. Ackerman proposes that it is a child’s ability to ask, “Why don’t I have any? Am I not a person too?” that entitles the child to the benefits of citizenship. Since it is about when children are able to ask such questions that we send them to school, it is reasonable to begin delivering the basic income guarantee that justice requires at the time that children begin to go to school.

The Malthusian Issue

If everyone in the world, including children, is entitled to a basic income guarantee, is there a danger that the birth rate will go up and the world’s population will be unsustainable? It should be noted first that it is possible that a global basic income guarantee would have the opposite effect. One of the reasons that people have children is to try to ensure that they will be cared for in old age. If a global basic income guarantee provides for people in old age, then there will be less reason to have children.

Another reason not to assume that there would be a Malthusian problem is that there are many goods for which there are global economies of scale. This is true of software, books, movies, and all innovations. A larger population increases the market and reduces average costs for all goods that have significant fixed costs along with non-increasing marginal costs. Thus in some ways a larger population can be expected in increase average incomes. Still, there are other resources that are limited and become scarcer as population increases.

Whether a basic income guarantee would increase or decrease birth rates, and whether such a change in birth rates would increase or decrease average incomes I do not know. If it did happen that the global birth rate rose and this lowered average incomes, then it would be reasonable to treat the opportunity to have children as a globally limited resource, with those who appropriated more for themselves than their share owing compensation to those who appropriated less than their share.

Approximate Magnitudes

What size of basic income guarantees are likely to be implied by the arguments presented here. A detailed study would be needed to make reliable estimates, and yet it is interesting to make some back-of-the-envelope calculations. Confining the inquiry to basic income guarantees required by justice, the question is, how much income represents the value of exclusive access to natural opportunities?

In the U.S., about 70% of income goes to labor and 30% to assets. Assets can be regarded as land and capital. According to the Department of Commerce, the value of the capital stock in the U.S. in 2000 was about 22 trillion dollars. Calculations that a student and I made from the Fed’s figures in the Survey of Consumer Finances suggested that the value of all assets in 2000 was about 55 trillion dollars. A simple subtraction would say that the assets that are not capital are land, so the value of land and other natural opportunities comes to 33 trillion dollars. This calculation of land value is biased upward, however, because some of the assets that are not physical capital are good will and value generated by exploration costs. I don’t know how much to adjust for this bias.

One also needs to take account of the fact that the rate of current return on land and other natural opportunities is less than on capital, because investors reasonably expect to get part of their return on land and other natural opportunities in the form of a rise in price from one year to the next. Taking all of this into account, it seems reasonable to me to suggest that about a third of the return to assets is return to land and other natural opportunities and about two-thirds is return to capital. Thus I suggest that land and other natural opportunities get about 10% of income in the U.S. With annual Net National Product of about $12 trillion, the annual income of land and other natural opportunities in the U.S. is about $1.2 trillion.

This amount needs to be divided into four parts: the product of nature, the product of infrastructure, the product of U.S. institutions, and the product of the history of U.S. societies. Since I don’t know anything better to do, I will assume that each of the four is $300 billion per year.

Next, what share of global land and other natural opportunities does the U.S. have? The U.S. population is about 5% of world population. We are likely to have more than our share of global natural opportunities, but not many times more than our share. Suppose we have twice our share. Then the U.S. total is 1/10 of the world total, and the world total is $3 trillion per year. For a world population of 6 billion persons, this provides a global basic income guarantee of $500 per year for every adult and child.

In the U.S. the $500 per person would be supplemented by $300 billion per year in the value of U.S. institutions and another $300 billion per year in the value of the history of U.S. society. Dividing this among a U.S. population of 300 million yields an average of an additional $2,000 per year for each adult and child, for a total of $2,500 for each adult and child. And this is without compassionate supplements. The amount based on the history of the society would reasonably be shared in proportion to the number of years of contribution to the society. I hope that someday someone will delve deeply into the number and develop reliable estimates.


A left-libertarian theory of justice says that the value of natural opportunities should be shared equally, on a global basis. Individual nations should, in justice, share among their populations the contribution to land value from good institutions and from the history of the society. Societies can justly supplement these amounts based on compassion. Children who can ask for their shares deserve the same as adults, allocated to education if their parents so choose. If people respond to basic income guarantees by having so many children that more children make the world poorer, then those who have more than their share of children should compensate those who have less than their share. The principles developed in this paper are likely to imply global basic income guarantees of about $500 per person per year and U.S. basic income guarantees of about $2,500 per person per year.

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