Hayek Did Not Embrace a Universal Basic Income.

Author:Rallo, Juan Ramon

The Austrian economist Friedrich Hayek was one of the most outstanding classical liberal thinkers of the twentieth century. After a first intellectual stage focused on the study of economics (especially until the mid-1940s), he devoted the second stage of his intellectual life to other fields of social sciences, including political philosophy. In several books, he analyzed how social institutions should be structured to safeguard individual liberty; especially notable are The Road to Serfdom ([1944] 2001), The Constitution of Liberty ([1960] 2011), and The Political Order of a Free People (1979), the third volume of Law, Legislation, and Liberty.

Unlike other classical liberal thinkers (Nozick 1974; Rothbard 1982), Hayek did not limit himself to defending political institutions that protect the private property legitimately acquired by owners, but he also embraced a wide range of political interventions, including, among other ideas, guaranteeing a minimum income to those unable to integrate into a market economy: "The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born" (1979, 54). For this reason, many thinkers have concluded that Hayek was one of the earliest advocates of a "universal basic income." For example, the libertarian philosopher Kevin Vallier states that "on Hayek's view, the universal basic income is required as a condition of democratic legitimacy within the framework of a social contract" (2012). Also, the libertarian philosopher Matt Zwolinski says that "both Milton Friedman and Friedrich Hayek advocated for something like a Basic Income Guarantee as a proper function of government" (2013). And Andreas Bergh argues that "Hayek goes beyond the idea of income-tested support and argues for a basic income guarantee in Law, Legislation and Liberty" (2015, 24). The message that Hayek was a convinced advocate of a universal basic income has also caught up with the proponents of this policy: for example, Michael Lewis, Steven Pressman, and Karl Widerquist assert that "mainstream economists have also endorsed a Basic Income Guarantee (Hayek [1944] 2001; Friedman 1962; Friedman and Friedman 1980) because of its simplicity and obvious advantages in simplifying government antipoverty efforts" (2005, 589). And Allan Sheahen states that "market-oriented economists such as Milton Friedman and Friedrich A. Hayek endorsed the Negative Income Tax approach" (2012, 7).

I argue here that Hayek never advocated for a universal basic income but rather for a network of means-tested benefits. In fact, the idea of a universal basic income is inconsistent with his criticism of the "mirage of social justice," which he denounced in the second volume of Law, Legislation and Liberty (Hayek 1976). To this end, the first section of the paper exposes the differences between a universal basic income and a means-tested benefits scheme; the second section analyzes exactly what Hayek said throughout his work in order to show that he ascribed to a means-tested benefits scheme; and the final section discusses why Hayek could never have defended a universal basic income in a manner consistent with his critique of social justice.

Universal Basic Income versus Means-Tested Benefits

A universal basic income or basic-income guarantee is generally understood as "an income paid by a political community to all its members on an individual basis, without means test or work requirement" (Van Parijs 2004, 8). The two fundamental aspects that distinguish a basic-income proposal from other governmental income-redistribution schemes are "universality" and "unconditionality" (Barry 1996). "Universality" means that every single permanent resident in a political community is entitled to receive that basic income irrespective of income level (i.e., no means test); "unconditionality" means that the collection of this basic income is not subject to any type of requirement (paradigmatically, willingness to work). In other words, basic income is received by everyone without any kind of condition. It is a right that is granted to a person by the mere fact of being a citizen (Raventos 2007, 10).

We may better understand the distinguishing features of the universal basic income by comparing it to other similar welfare programs according to their universality and unconditionality (table 1).

Unemployment subsidies (3) are universal (every citizen is entitled to them irrespective of his or her income level), but certain conditions must be met to collect them (willingness to work); old-age insurance benefits (4) are universal, but certain conditions must be met to collect them (being fully insured under the Social Security system); Medicaid (5) is not universal (it is a means-tested program), but work-requirement conditions generally do not exist for it; the child tax credit (6) is not universal (it is a means-tested program), but it is not associated with any work requirement; the earned-income tax credit (7) is not universal (there are certain thresholds of income after which it phases out), and only those who are currently employed are allowed to collect it; minimum guaranteed income (8) is a means-tested income, which is, moreover, subject to a willingness-to-work condition (as we will later see, this is the type of income transfer that Hayek advocated).

Contrary to all the previous schemes (Hoynes and Rothstein 2019), a universal basic income (1) is both universal (everyone gets it irrespective of his or her income) and unconditional (its collection is not subject to any requirement). Furthermore, a universal basic income can be instrumented as a refundable allowance within the income tax structure, in which case we can speak of it as a negative income tax (2). The negative income tax entails a universal income tax allowance (every citizen is en tided to that tax allowance irrespective of his or her income), which is, moreover, not dependent on any economic requirement (even voluntarily inactive people also collect it); it is just a type of universal basic income. Basic income is a universal gross transfer of money before taxes (you collect the basic-income check first and then pay your tax liability afterward), whereas the negative income tax is a universal net transfer of money after taxes (you eventually collect the net difference between the basic income and your tax liability). Milton Friedman, one of the most prominent advocates of the negative income tax, recognized this equivalence and explicitly embraced the universal basic income: "A basic or citizen's income is not an alternative to a negative income tax. It is simply another way to introduce a negative income tax if it is accompanied with a positive income tax with no exemption. A basic income of a thousand units with a 20 percent rate on earned income is equivalent to a negative income tax with an exemption of five thousand units and a 20 percent rate below and above five thousand units" (2000; see also Friedman 1962, chap. 12).

Basic income is consequently opposed to any welfare program that is not universal or unconditional. Means-tested benefits are not a type of basic income because only those individuals who are below a certain threshold of income (nonuniversality) and normally who are also unable to find a job (conditionality) are entitled to receive them. Actually, advocates of a universal basic-income plan explicitly reject the identification between their proposal and means-tested benefits: "A basic income scheme, instead, operates ex ante, irrespective of any income test. The benefit is given in full to those whose income exceeds the stipulated minimum no less than to those whose income falls short of it ... Being unconditional, a basic income sharply contrasts with these forms of guaranteed income intimately linked to guaranteed...

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