This is an idea to add two new policies in Democracy 4:
Universal Basic Income and the Negative Income Tax are two economic ideas that in the past year have rapidly risen to prevalence in places like the US or UK. UBI is a set amount of money that is given to every citizen of a country. If added to the game UBI would probably be popular with socialists, trade unionists, and everyone. NIT or the Negative Income Tax is a policy idea from the 40s that is more popular with Capitalists, Conservatives, and poor earners. Similar to UBI, the Negative Income Tax model gives money directly to people, but instead of giving money to all it gives cash to people in poverty and other low earners. I say this is a popular idea for capitalist, because men like Milton Friedman (father of modern capitalism) and George Shultz (Ronald Reagan’s Economic advisor) all support NIT. In D4 UBI could increase poor/middle/rich earnings, increase equality, decrease poverty, immigration, and Increase Unemployment. NIT could increase only poor earnings (but at a stronger rate than UBI), increase equality, decrease poverty, not do anything to immigration, but Decrease Unemployment. Either way I’m really excited for the game and believe that it’s going to be great.
Sorry if what I wrote seems messy, I have a concussion, so I hope it made sense.
This is an idea to add two new policies in Democracy 4:
I agree with what you wrote; I also think Negative Income Tax should decrease State Employee membership because the point was to also decrease the need for bureaucracy because cash payments are less complicated than government anti-poverty schemes and also eliminates the welfare trap, which I don’t know if it would decrease unemployment, but at least wouldn’t raise it like UBI would if high enough.
I agree with what your saying on decreasing state employees, but the whole point of Friedman’s NIT model was to decrease unemployment. In his model, to receive the cash, the person would need to have a job. So I think that UBI could increase unemployment, while NIT decreases unemployment.
Sure, if other welfare programs existed it could decrease unemployment, like unemployed subsidies in game increases unemployment, but Negative Income Tax doesn’t. But my understanding is not that it required employment; the reason it’s called “negative income” is because the neutral income is set at the poverty level, for simplicity sake $10000, and if your income is below that, like $9000, then you are $1000 below poverty level, and receive half that amount as subsidy from the government (which is the part that eliminated the welfare trap). All that is required is the person file taxes; if it’s filed as $0, then they would receive half of $10000, or $5000. If that person next year made $1000, they would still get half of $9000, or $4500, so overall they’d be at $5500 income that year. This way they would still want to work and make more money.
I would be interested if you found where it said it required employment, because as far as I remember Friedman said it would help people “in distress,” as a cash payment substitute for welfare programs. The main point was to get rid of bureaucratic inefficiency/make the government smaller. Later iterations of the bill he ended up opposing, maybe the one that included employment as a requirement.
Universal basic income is already in the game, the negative income tax definitely sounds interesting, and maybe it shold go in. Its complex because we dont have a system for having one policy prevent another, so a negative income tax would hav to work seamlessly in co-operation with the existing income tax policy…
Instead of having it prevent the income tax, could the cost of the policy just be based on whatever percentage/level of income your taxing at the moment? NIT doesn’t change the tax rate as much as it raises the bar for those who actually pay tax and gives people below that bar a subsidy, and so the gradients of the NIT policy (none/low/medium/high) would represent in a simple way the changes in the government’s defined poverty level and the percentage amount of subsidy. Friedman preferred a certain number and 50% subsidy, but it could be much higher or lower than that. This way, NIT would eventually cause unemployment like other antipoverty programs if it was too high. But using NIT in a very Capitalist playthrough could help replace all the other government programs for the player (state housing, unemployment subsidies, child provision, etc) without kicking people to the curb.
So I don’t know exactly how the coding works but at least theoretically it doesn’t seem to have to work differently than any of the other tax credits in game that already exist.
But the effects on voters would be to raise unemployment much later or not at all based on the level of the policy, capitalists happy (eventually unhappy if too high), poor happy (but not as strong as other programs), decrease state employee membership, decrease poverty, and I guess you could start to add other groups depending on how strong it gets (like if it were “very generous” then it essentially would be like any other socialist antipoverty program, and socialists would be turn from neutral/unhappy to happy).
Adding NIT isnt a technical problem really in terms of calculating the cost, its easy to create a policy that has a cost, fading to zero at some level, and then generates an income from some other level, so technically it could be done.
What concerns me more (and to be honest this is also true of flat tax and UBI which are already in), is that there is nothing to stop people having a flat tax, an income tax, welfare payments, NIT and UBI all at once, which might get very confusing for the player…
Also it does occur to me that if I understand things correctly, one of the main attractions of NIT is that it prevents the problems with cliff-edge cut-off points and ‘bands’ and ensures there is always a positive incentive to work. This is great, but it fixes a problem with income tax that we never acually model in the game as it is, so the need for the policy in the game is possibly less than it would be in real life
Sure I can understand that, and yes you do understand that correctly, that’s why I think NIT is better! But it also differs from UBI in that it is still a program for those in poverty (as defined by government), whereas UBI seems to be a fixed amount of money for everyone in society, no means-testing. I think it would please different voter groups than UBI and have different effects (although similarly help attack the poverty rate). You have a decent amount of libertarian references in your game I saw from screenshots (Ayn Rand, Invisible Hand ) so I think Friedman’s NIT would fit in pretty well with that.
If I recall correctly, negative income taxes were already in D3. There was an Earned Income Tax Credit policy, which is the name of the American program. Work requirements for welfare should be a separate policy, IMO.
A “Welfare Cliffs” negative situation would be welcome. Having more right-wing/capitalist welfare state policies and issues would be good in general.
True, although it needs to be an interesting decision. If the ‘poverty trap’ (as its called in the UK) was an automatic outcome of standard income tax, and the only solution is NIT, then its more of an annoyance than an interesting choice.
Actually, your new economic system might simulate welfare cliffs by itself. If you have a policy that raises poor income, you might see a big accumulation right on the border between the poor and middle income regions.
we need to adjust a lot of numbers but right now it looks like we have a welfare cliff on steroids, as its possible for the disposable income of poor people to easily outweight the middle income ones, with the right set of policies!
Yeah, like mine.
I don’t think that’s necessarily a bug though, as surely a sufficiently advanced, industrially automated state would want to eclipse the working class with technology and have a huge middle class? Star Trek society baby.
True, although sadly that still seems a while off to me. Ironically a lot of the jobs done by people in the lower income bracket are still really hard to automate, because it involved picking/selecting complex objects, especially soft objects like fruit picking, or doing gardening.
However there is something scary coming where AI basically becomes peoples boss, and smart glasses turn humans into organic extensions of AI warehouse management machines like this:
I suspect this will go mainstream before UBI does, which is kinda depressing.
I mean, long term technological unemployment isn’t really a thing. And if it was, it would have shown up during the fastest period of technological growth, not now.
Give it a decade or two.
People have been predicting “automation will put everyone out of work” every decade since the late 1700s, and it hasn’t.
It doesn’t make any sense, anyway. The reaction to the invention of a machine that allows 1 person to do the work of five universally isn’t to sack those four guys and make the same amount, it’s to make five times as much stuff. Not to mention that if it were true, immigration and population growth would have the same effect.
I think if general AI is invented than human workers would be unnecessary for tasks that don’t require human interaction. However, even if technically society could support every single person without them working, it would not do so. Any country that chose to let its populace live in a post-scarcity utopia without working would be at a disadvantage compared to a country that used its general AI as well as its human workforce. So maybe that society of the future would have AI doing a lot of the technical work with some specialist human supervision, while work such as healthcare, social work, teaching, etc. where people prefer human interaction would have humans working in them. Over time the vast, vast majority of people would end up doing that kind of service-oriented work while everything else is done by AI. I think we’re already heading there. The U.S.'s manufacturing capacity has continued to grow over time, yet manufacturing employs less people than it did in the past for that reason. Despite that, the unemployment rate was pretty low right before the pandemic. All that labor just got reallocated to where it would be more useful.
The solution to the loss of jobs by industrialistion has been to redefine our understanding, and value for human labour. Before the first industrial revolution around 70% of jobs were in agriculture. Those jobs were rapidly destroyed forever, and people rapidly moved to urban areas to find more advanced forms of employment. That fuelled the need for public schooling because the workforce that existed was not educated enough to fill the new jobs being created.
A job used to be something critically relevant to human survival, like building shelter or ensuring food and water availability. Now the majority of us work in offices filing reports, something the average worker a century ago would find difficult to see value in, let alone a 1700s peasant. They would think an entire population being able to spend their work time at a comfortable desk earning a pension and living a long happy life would be an economic impossibility.
As our needs and necessities are increasingly handled by ever more sophisticated technology, the nature of labour will continue to become more nuanced. We won’t stop working, our children will have more variety and dignity in the work that’s presented to them. The best case scenario is we’d have the abundance to afford to pay the majority of the workforce to simply learn and apply their skills, as a select few tenured academics do now. That was Gene Roddenberry’s (perhaps naive) hope, echoed by so many idealist intellectuals like Einstein.
Given that general AI is centuries away, if not impossible, I don’t think this is something to worry about in the near future.
On the other hand, wages dropping to the point where we have a society where everyone either employs a servant or is one, that’s a lot more plausible.