Why Should Anyone Get Free Money?

“Why should anyone get free money for doing nothing?”

This moral argument is a common criticism of Universal Basic Income, typically followed by “people should have to work for their money”.

Well the first contradiction here is that in any capitalist economy, the money you receive is not necessarily money earned from work. In fact, the wealthiest people earn their money not through labor, but through “owning things” and the labor of others.

For example, when traveling the world I met more than a handful of people living off of real estate. They own a house or apartment somewhere (usually big cities like SF where housing supply is deliberately constrained to ensure asset-price appreciation), and their tenant pays for the mortgage, plus a little extra. These landlords travel the world on their tenants’ dime. They don’t work or contribute anything of value, but make more money than the average laborer.

Or consider the absentee business owner who has hired managers and workers to do all of the work required to operate the business. He doesn’t work anymore and simply lives a life of leisure, yet earns more than any of his workers. Is that business owner working for his money?

Or consider the case of a trust fund baby who doesn’t have to work a day in his/her life because grandma divorced a rich guy. Are they working for their trust fund checks?

Or what about someone with a million dollars who invests it in U.S. treasuries and lives off of the interest (at 2.35% that’s $23,500/year). Is the bondholder “working” for those dividend checks and any asset appreciation on their bonds? If he invests it in the stock market instead, is he “working” for any of those stock market gains and dividends? No, he is just earning money off of ownership, something that simply requires a lot of money to begin with.

Or consider the “disabled” person living off of disability benefits. Just last week I met an American who gets $1,800/month from the government in disability benefits, and is traveling the world. Is he working for that money?

The point is, we already have a system where money earned is not necessary correlated with having worked for it. The most egregious cases of this are pure rent-seeking (eg. the landlord), an example of a market inefficiency that over-rewards one group (the rentier, or owner) at the expense of another (usually the laborer).

Thus it is morally justified to tax this unearned income and distribute it to the people as a citizen’s dividend.

Here’s another way to look at it: Where does money come from anyways?

Ultimately money has to originate from somewhere, and be distributed.

Hypothetical Scenario: Creating and distributing a new currency

Imagine we’re starting a new country and we want to introduce a currency. How do we distribute that money?

A fair way to do this would be to give everyone the same amount of money.

Now imagine 2,000 years later, the distribution of money is highly skewed, and the top 1% own 40% of the money, while the bottom 90% only own 20% (this is actually the wealth distribution in the U.S.). There are wealthy families who don’t have to work for generations. Children of the top 1% grow up never needing to work a day in their lives due to their inherited wealth, while the rest have to work their whole lives to even see a fraction of the wealth the kids start with. Is this fair?

I. A conservative might say that yes, this is fair because when we first introduced money 2,000 years ago, we distributed it fairly.

II. Someone else might say that no, this is not fair because the top 1% do not deserve to own more than the bottom 90% combined. Much of this wealth was simply inherited from generations ago, and does not reflect rewards for one’s contribution to society.

Who is right?

Well because this is a question of morality, it is entirely subjective and there is no right or wrong answer.

I’m a pragmatist, so I prefer to look at things from a practical perspective. I’m not opposed to the existence of rich people, but I am opposed to the existence of poverty, especially when rich people are born into wealth many lifetimes worth of what any laborer could ever hope to make. Not only is this not “fair”, but it’s not healthy from a societal perspective as it destroys any sense of meritocracy.

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For those who don’t like the idea of “free money”, realize that it already exists, it’s just generally not going to the people who need it the most.

It is not unreasonable to suggest that free riders (rentiers) should be taxed, with the money distributed equally into everyone’s pockets as a citizen’s dividend.

The government already spends your taxpayer dollars. Why not distribute that money back to the people as a Universal Basic Income? This won’t end the enormous level of unearned wealth inequality, but it’ll at least raise the floor so that nobody has to suffer in poverty.