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WHAT IF every American received a modest stipend from the government, sufficient for all basic needs and health care — distributed not through taxation but by the issuance of currency by the government. Consider “social credit,” the ingenious, thought-provoking economic system invented by the engineer Clifford Hugh Douglas to alleviate the joblessness caused by advanced technology and the money-lessness caused by central banking.

Robert Klinck looks at the social and psychological effects of a “social credit” dividend:

It is important to recognize the change in the social environment—in all areas of human relations and endeavour—that such a policy would effect.

     Knowing that you have a dependable source of income relieves the kind of destructive stress that manifests as psychological harm and disease. The edge would be taken off the desperate, often virtually life or death, aspect of competition for income-providing positions.

     Knowing that you have an economic backstop liberates you from participating in economic activity that you judge to be unethical or otherwise harmful.

     Having confidence that you will always have the monetary means of survival removes a common motive to commit crimes, including committing suicide, which are notoriously more common during so-called economic slowdowns.

     Because a failure in productive efficiency would automatically be reflected in reduced dividend payments, there would be a constant societal incentive to accomplish projects in the soundest, most durable and least cumbersome manner possible.
Since people who have economic clout learn quickly how to exercise it, governments would have to heed the wishes of the economically enfranchised population rather than circumvent them under pressure from corporate and political lobbyists.

     People would be able to work for causes in which they believed, without fear of consequently suffering punishment in the form of financial ruin.

     Social Harmony would be favoured and divisive identity politics obviated. Importantly, the economic pressure and exaggerated competition for markets that frequently results in war would be relieved.

     There would be considerably less waste of human life and fuel sitting in traffic in order to get to all-too-often make-work employment.

     As an aside, embittering phenomena such as the #MeToo movement would lose most of their raison-d’être.

— Comments —

The Dividualist writes:

“Because a failure in productive efficiency would automatically be reflected in reduced dividend payments, there would be a constant societal incentive”

It is a classic mistake. There is no such thing as a collective incentive, only individuals respond to incentives. Consider public choice theory, Mancur Olson. Suppose in a country of 100M people a special interest group of 1000 people proposes a policy to transfer $1 from every citizen to themselves. Classic democratic theory would say the majority votes against it. Public choice theory says the vast majority of people just don’t care – $1 does not worth getting off the couch. While the special interest group will lobby energetically for it.

An even better example is the rational ignorance of voters. Your vote has a very low chance of affecting policies in a way  that it is in your personal interest. The rational individual just does not care. They mostly use their vote and political positions for other purposes, like feeling like a good person or suchlike.

This is a fundamental problem of democracy. It is assumed “the people” vote in the interests of “the people”. But collectives have no incentives, only individuals so it does not happen.

Similarly it does not matter that hundreds of millions of people would vaguely feel that it would be nice to accomplish projects in an effective manner. They already  vaguely feel that going to the Department of Motor Vehicles in the US is a bad experience, the customer service is not good, and nothing happens. Why should anything happen? Only if the prez could lose an election on that one issue would they have the incentive to start a chain of butt-kicking down the bureaucratic ladder to fix it.

So how projects are ran is always about the personal incentives of the project managers.

Another but unrelated issue is that the devil really does find work for idle hands. There is a strong human desire for social competition, seeking status, power, or adventure, fun, anything but boredom. Really life tends to be pretty boring for most people and we see idleness cause a lot of social problems.

Public work is a better solution, it makes people tired enough to not seek dangerous fun, and gives a sense of accomplishment. But it has to be real public work, not loaning them out to Amazon. But directly employed by the government to repaint school buildings and plant flowers.

Laura writes:

Yes, you’re right.

There is not much collective incentive except in times of national emergency when people are moved to sacrifice themselves for their country.

However, money and status are not the only things that motivate individuals. When people truly believe that this world is not all there is and that they must work for their ultimate salvation, they possess supernatural  motives to work hard. They seek supernatural status in addition to temporal goods.

In any event, regarding natural drives, Social Credit could only work if it did not dampen individual initiative more than it is already dampened by the limits of the modern economy.One of the basic problems with the modern, mechanized economy is that it can’t create enough jobs. Social Credit seeks to make that an advantage. The solution is more money — equitably distributed instead of by fleecing some — not more jobs.

Any dividend should not be so great that it would take away the drive to have more in most people, but it still, realistically, might take away all drive in some people, something welfare entitlements already do in some cases. On the other hand, think of the low-skilled retail worker today. He’ll never earn enough to own a house. If he got a dividend, he might have more individual incentive to work because it would push him into the middle class, instead of keeping him in poverty. Individual dividends would also provide incentives to marry (but not necessarily discourage the institution of divorce.)

It seems there might be less incentive to commit crime if convictions involved loss of one’s dividend. That would discourage some of the negative effects of idleness.

I’m not sold on social credit, but I think it is very interesting and worthy of study.

Social Credit is not something that could be realistically enacted in our present political world. It’s something to think about and understand.

Laura adds:

One other thing — the dividends would create more jobs as spending power would increase. These would provide incentive to work because they would provide extra income.

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