Elon Musk loves UBI. Here's why it will fail.

 

Elon Musk seems to believe UBI, universal basic income, is something that can exist inside the framework of our current (mostly) free market economy. 

I haven't tried to really get his total insight on how his vision of a system would work, but I have paid attention to what it appears he believes could make UBI reality. He seems to believe that those people who buy his robot servants will have at their disposal a completely autonomous 'clone' of their own working capability output. 

Effectively he sees that if you want to earn a living, you would first have to purchase one of his robots so that it works instead of you. This belief comes from faith in AI as a benevolent and ubiquitous surrogate, far more capable than a lowly human. It doesn't get tired or need breaks. It just works... Until it breaks. 

The problem with this faith is that it completely ignores market forces that would drive the greedy advancement of corporations far above people. The machines that corporations have, would be capable of taking jobs, but those same machines would be owned by the company. The machines the rest of us get would not be able to be sold for work. There would be no point in trying to Uber out your personal slave bot because it would have to work for free. It couldn't compete with the corporate bots.

Advancement from AI, powered by autonomous bots could rapidly approach the singularity... That moment when machine becomes unbounded by human constraints as well as those imposed by physical reality of limited resources. This moment would make humans unnecessary. There would be no containment on market forces. The economy would simply break down into total relevance. 

If we don't kill ourselves by accidently supplanting our requirements for survival, then UBI could potentially exist, but only with severe, rigid control systems in place.

I too have thought long about UBI and I have a different take than what it seems some of you are looking at in the lens of our present day economic system.

The articles and posts I've read so far seem to think that UBI can work so long as we tax corporations for the government to fund a massive welfare subsidy. 

This kind of thinking is like putting a magnet on a pole beyond the end of the car with another magnet on the car and expecting it to get pulled forward. ...aka a perpetual motion device.

You cannot effectively pull money from the corporations that supply the goods that you purchase with the money that was taxed. Costs exceed the money input into the system, so they have to raise prices. Government funds more, taxes more, prints more money, creating a feedback loop that enters the Weimar Republic levels of inflation. The money becomes worthless. 

Experiments in UBI to date have been successful to some degree, largely because it is implanted in a micro economic scale with a macro economic support structure. That version of UBI can never fully exist at a macro economic scale. 

The only way I can see that UBI would work at a macro scale, would be under these conditions: 

1. There can't be a competing currency. If UBI was only implemented in America, we would drive our 'fiat' currency into that inflation spiral. Our dollars could not compete with other markets, especially those that did not implement UBI. Another currency would rise as the global reserve and our system would immediately collapse. So for this to work, there would need to be a single global currency. Only then could UBI exist in the US as a micro scale in comparison to the global market.

2. Ownership of assets, such as precious metals and property would have to be illegal. Assets can only be held by the government so that there can't rise an alternative market system that exists outside of the global currency.

3. Institute a price freeze. If you want UBI to exist as more than a temporary experiment in welfare subsidy of a single nation, or you want UBI to exist at a global scale, then you have to institutionalize market stability. Market stability consists of controlling how low and how high prices can go. Without price controls, the inflationary spiral will occur. With a single global currency, you can simply print more money to continue to subsidize, after all, what's the alternative? Gold? Assets? Those are illegal for private ownership.

4. Institute earnings caps. All sectors of industry have to have standardized earnings. This isn't to say everyone earns the same. That socialist, Communist nightmare kills the human drive to succeed on individual merits. No, these things need to be fostered, so there still needs to be a relative hierarchy of poor, middle class, and rich. CPI (consumer price index) is the estimated ratio that puts a number behind those class categories. So the numbers in that equation have to be controlled methodically.

5. Credit has to be rigorously controlled. Gone would be the days that you can run up thousands of dollars and default into bankruptcy. That volatility would erode the stable financial system that is trying to be achieved. Those kinds of risks would be meaningless in a captured economy such as the one that would have to exist so that UBI could function without imploding on itself. Credit could still exist, but it would resemble the kind of statistical analysis conducted by insurance underwriters. Life expectancy, earnings potential, repayment pool. Effectively consider it like a new kind of social security where you can draw from your estimated lifetime account. You can draw from it and pay back into it, but it would also function as a retirement account at a certain CPI level of living. 

6. Rationing. Digital currency that controls quantity expenditure on items. All the price controls in the world would be meaningless if I were able to manipulate my allotment of funds to purchase items only to turn around and barter them for other items. The oldest financial system in history has an interesting way of asserting itself, especially when the original purpose of money (a standardized bartering proxy) becomes a thing completely under government control. If a wide arrange and assortment of items are available to purchase, under the mimicry of a functioning free market system, then it would be wildly complex to develop a functioning and enforceable rationing system, free of fraud, unless it were built into the money itself. Programmable digital currency provides the rationing system capability at an Internet, government dictated level. 

By completely capturing all aspects of a free market system, you lock people into their places so that you can control that CPI, that emotional attachment to one's sense of wealth and comfort. 

Now, even with all of this, you will see that costs, real costs will still rise. Resources still exist outside of anyone's control. They are finite, many of them. The access and use of resources were controlled by market forces. Prices kept people and corporations in check under the old system. Expansion could only go so far before expenses were over extended and companies had to retract, downsize. With the market captured, the government becomes unrestrained. It can spend endlessly on resources without contraction. It can afford to subsidize the UBI system endlessly, so long as it understood the reason UBI exists - a means to lock everyone into certain lifestyles. As the physical reality of finite resources causes costs to raise as they become scarce or harder to obtain, then a government choice has to take place to decide whether to accurately represent that scarcity inside the controlled market or to manipulate it up or down as desired.

This is the only way UBI can exist on a consistent decades long basis at a macro level. It is still a subsidy to living, but once that won't cause a death spiral as a result.