The Cognitive Aristocracy and the UBI

Saw this going viral: The Cognitive Aristocracy

I agree with the part about a ‘cognitive aristocracy’, although the solution he proposes is unworkable.

A growing cognitive aristocracy is important for one reason, and one reason alone—income. If being smarter, on average, didn’t help you to have a higher income, then this post would be moot. So how do we improve the incomes of those who didn’t win the genetic lottery or never received a great education? We give them capital.

Of all the solutions I have heard to fix the growing divide between rich and poor, the idea that seems the most reasonable is a sovereign wealth fund (SWF). A sovereign wealth fund is a government-managed, globally-diversified portfolio of assets that periodically distributes income to all of its citizens. Every citizen owns one share of the fund (i.e. equal ownership) and no citizen can sell their share or acquire more shares. Norway has a SWF, Alaska has a SWF, and others are being tested out. I particularly like Matt Bruenig’s proposal of a Social Wealth Fund for America.

The author’s logic is “the wealthy are wealthy because they have a lot of capital, so if we give everyone capital, there will be less wealth inequality.” But he never explains where such capital would come from.

A sovereign wealth fund would only work with state-owned businesses, because such capital is publicly owned. The example he gives of the Alaska Permanent Fund is managed by a state-owned corporation, the Alaska Permanent Fund Corporation (APFC), and funded by oil revenue. This would not work for the rest of the U.S.

This seems like another variant of the UBI, but replace income with ‘capital’. Either way, private individuals would have to pay for it, either through higher income taxes, wealth taxes, higher estate taxes, or other forms of wealth redistribution.

Related, Democratic 2020 candidate Andrew Yang has proposed a $1,000/month UBI for all Americans over the age of 18. This would cost an estimated $2.4 trillion/year.

I’ve long been skeptical of the UBI. A UBI or sovereign wealth fund may work for resource-rich countries with small, homogeneous, high-trust populations and high GDP per capita rates, but not for large, diverse, low-trust societies such as the US.

The cold reality is, there are no good solutions for these men. There will always be suitors and abundant welfare for low-achieving women, but it’s low-achieving men who have the most to worry about. Homelessness disproportionately affects men. As the author states, the exhortation “learn to code” excludes at least 85% of people by virtue of the Bell Curve. Trades work requires a lot of training and certification. The service sector has more openings and requires the least amount of skills, but the pay is the poorest of all. The 4% unemployment rate, the lowest in decades, belies the fact that a lot of men are not working, as shown by the labor participation rate, which is at multi-decade lows. Companies have a lot of openings, but cannot fill them, not because there is a labor shortage, but because people either don’t want to work or don’t meet the qualifications. What is happening is that these unemployed men are coping by going on disability or other forms of public assistance, living with friends or family, drawing down retirement savings, working under the table in gig/freelance jobs, or just dropping out altogether, possibly due to drugs and homelessness. The future is a sort of post-scarcity society in which there is enough for everyone due to to the expansion of the welfare state, but maybe only 10% of the population actually owns anything or has a stake in anything.