3way Moral Hazard

Walter Stanners (fab06@dial.pipex.com)
Thu, 13 Aug 1998 12:21:57 +0100

A contributor dismisses Basic Income with two words, "moral hazard".
Later, he implies that there should be "no option to be on benefit and
refusing participation". This is indeed, as he says, "one of the clear
themes of the economics of the third way", but it is in reality only a
newish way of dressing up the old language of "the undeserving poor ...
dependency culture ... scroungers .. ", which goes back as far as
records exist. If the argument were serious, it would have to address
the moral hazards of inherited wealth, unearned income, windfall
acquisitions, and the inflation of asset values. And it would need to
make proposals on how to remove or reduce those hazards.

The use of the word "benefits" implies that the idea of Basic Income has
simply not been understood. The whole point is to remove the concept of
"benefit". The basic income is like a negative "lump sum tax" so
admired as an unattainable theoretical ideal in the text books as
providing zero market distortion. It provides no disincentive to work,
no enormous marginal tax-rate as is inherent in a benefit system. Of
course, it removes actual hunger and misery as an incentive to work, but
it shares that characteristic with the moral hazards of the well off, as
listed above.

Walter Stanners
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