Capital Accumulation in the 21st Century

On Twitter, the other cartoon duck named Sam quibbles with my claim that:

Retorteth the Hammond:

 The point I had bookmarked was intended to be an extension of some of the remarks I made yesterday at EE. You see, not only might a basic income not do much to curb the production and trade in paternalistic policy, but it occurred to me that it might actually increase the demand for paternalism by amplifying productive inequality. After all, cash transfers reduce the relative price of less-productive rural living, particularly in areas with heavily restrictive urban zoning statutes. If you’re a marginal worker, why bother looking for a decent job in the big city if the IRS just sends you a check once a month? Retire early to Humpalump county, kick back with your copy of Titanfall, and pwn n00bs all the livelong day. The infinitely extensible adolescence. 

But Other Sam’s challenge gives me at least a little pause. Later in the conversation he notes that some in-kind mandates are allocated by quantity rather than price. In Canada, for example, they fly doctors above the Arctic Circle to treat folks who live in the suburbs of Nunavut. This is a gargantuan subsidy when you roll in all the opportunity (economic) costs in addition to the direct (accounting) costs. Under ten grand a year, no single citizen could possibly afford to import a medical professional from Toronto for a checkup.

Sam’s right. Quantity-allocated transfers are impressively large subsidies for living in areas where land is cheap and neighbors distant. As for cash vs. strings-attached in-kind payments, I might still be on the fence a little bit. For very low productivity folks (particularly those below the Federal minimum wage threshold), a BIG that covers rent in the boondocks plus a little left over for food and entertainment might give enough of a shove to move out of Section 8 housing and into the countryside. But for folks a little closer to the margin, the cash option might give them just enough cushion to encourage them to give it a go in the big city.

It’d be interesting to see what the general equilibrium would look like. Would a BIG worsen productive inequality, turning rural areas into transfer payment reservations? How does that compare to the status quo? Is there a capital accumulation death spiral in communities that obtain a large share of income from transfer payments? Is that necessarily a social problem? What effect would this have on popular support for immigration reform?


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