book_chapter/chapter_11.txt

Chapter 11 
The productivity of dead people
Why is the income of an American middle-class professional hundreds of times greater than that of some rice farmer in Africa? 
Capitalists are fond of extolling the virtues of Òhard workÓ. If you work hard, the capitalist system will reward you. If youÕre paid by the hour and work more hours, you will make more money. But who works ÒharderÓ, the American or the African? Surely, the African does. They work longer hours, and the work itself is more physically taxing and perhaps more mentally taxing as well. 
Likely the American has a college degree and the African hasnÕt, but weÕd be unwilling to say the American is necessarily more intelligent or deserving than the African. We canÕt even say for sure that the American has spent more hours in education for their profession than the African, though the African didnÕt spend much time in a formal classroom. The African had informal education from mentors and careful observation of local conditions, and may have spent an equivalent time doing it. 
The sorts of things they know are different. The African would be utterly useless in the AmericanÕs profession, but put in the situation of farming in Africa, the American would probably starve to death. 
Of course, the American professionalÕs labor contributes to technology that is of much higher economic value in the first world than the small amount of rice the farmer produces. The big difference is that the American is embedded in a technological society, and the African rice farmer is not. 
The core of technology is clever, useful ideas that have been used to design tools. The use of those tools produces economic value. So one could say that the ideas that these tools embody can go on producing economic value even after the people who invented them are long gone. 
Ideas also amplify the efforts of people, thus increasing their economic value. A person can produce more per hour with better technology. Often, the best technical ideas donÕt increase individual productivity so much as they permit groups of people to accomplish more by working together than they otherwise would, even taking into account that cooperation itself has some costs as well as benefits. 
Your authors have made recognized contributions to advance science and technology. But weÕre not so smug as to say we deserve all the credit for the productivity our contributions might have produced. After all, the vast majority of that productive technology was there before we were born. We just added something to it. Since weÕre American, we get the benefit both of what we did and what the people before us did. The African, by contrast, didnÕt start out in a technologically sophisticated society. His world is dominated by scarcity, and scarcity results in resource-draining competition, and poor utilization of mental and physical effort. 
Now you know why the American makes more money than the African rice farmer. Basically, the American gets to reap the productivity of dead people. The African doesnÕt. 
Inequality and Incentive
A traditional Capitalist might argue that income inequality is necessary to achieve productivity. If we tried to even out income, then thereÕs a danger that productivity would plummet without the ÒincentiveÓ for individuals and corporations to obtain more money. But letÕs examine that assumption. 
First of all, incentive is not linear in money. A dollar is worth a lot more to a poor person than to a rich person. Two dollars donÕt provide twice as much incentive to a person as one dollar. 
So we should pose the question: How good is income inequality at proving incentive that does good for society in general? Is money doing its job?
To the extent that the income inequality is due to only some people reaping the productivity of dead people, the answer is: Not at all. Cesar Hidalgo [Hidalgo 2015] introduces the more general notion of Topocracy, reaping rewards based on your position in a network of interacting people, rather than on your own intrinsic productivity. ItÕs Topocracy that accounts for much of the income differential between the first world and third world. 
In the chapter Intrinsic and extrinsic motivation, we critique the notion of ÒincentiveÓ itself as a motivating force. Incentive can only provide an extrinsic motivation, which we argue is not as effective as intrinsic motivation in the long-term. 
The Fundamental Theorem of Capitalism
Laissez-faire capitalism has an underlying assumption that economic incentive promotes the general welfare. We call this
The Fundamental Theorem of Capitalism (FToC): 
If everybody acts according to the economic incentives that Capitalist society provides, the result will be best for society in general. 
Of course, it doesnÕt mean best for every single person at every moment; just that it would be better than if another overall policy, such as Socialism or Communism, were adopted. 
This is, put in different terms, like what in economics is called the Fundamental Theorem of Welfare Economics (although it is not about the social support programs called ÒwelfareÓ). 
The PrisonerÕs Dilemma shows that there are situations where everybody acts narrowly in their own self-interest, and the result is provably worse for everybody. This is a mathematical result. It is not a political position, and it is not debatable. Furthermore, as we show in the chapter Jailbreaking the PrisonerÕs Dilemma, these situations are not rare. They are what cause the worst excesses of industrial capitalism. 
ItÕs even worse when the financial incentives encourage someone to do things that cause negative impacts for society in general. The boss getting overpaid relative to workers below them may be unfortunate, but a weapons manufacturer who makes money off of blowing up thousands of people is a tragedy of the first order. In theory, lawsuits could be brought by those harmed by externalities, but the legal system is itself a scam with perverse incentives, as we explain in the chapters Justice and The worldÕs best business model. 
Advocates of laissez-faire Capitalism, who are the political group who hold most strongly to the FToC, seem to be oblivious to the challenge that the PrisonerÕs Dilemma poses to the FToC. We donÕt fault the original thinkers, like the Austrian economists, or even Ayn Rand, who all worked long before the PrisonerÕs Dilemma was popularized with AxelrodÕs 1984 book. Ironically, Libertarians love to quote the Tragedy of the Commons, which is a corollary of the PrisonerÕs Dilemma. But, inexcusably, we can find no contemporary discussion in the Libertarian or conservative literature about the general case.
WeÕre all heirs to the fortune of technology
So what should happen with the productivity of dead people? 
A rich person can leave an inheritance to their children, because it is one of the benefits to rich people to feel like their children are being taken care of. But should this go on forever? WhatÕs the point of providing additional incentive to dead people? 
An inheritance may or may not be a blessing for children who receive it. In many cases, it provides a disincentive for being productive. The rich are not necessarily happier than those of modest middle-class means that have basic needs met. Some enlightened rich people, like Bill Gates and Warren Buffett, are wary of the corrupting inßuence of inheritance and have pledged to give away most of their wealth to charity while ensuring a comfortable but not outrageous lifestyle for their family. 
Unless it is used wisely, excessive riches may simply fuel needless consumption and have a negative impact upon society. A conventional solution is inheritance taxes, and that works to some extent. Perhaps the US should have a much higher inheritance tax, as some other countries do. Some of the wealth makes its way back to activities that benefit society as a whole, such as rich people funding the next generation of innovative startups. But a lot of it doesnÕt. 
Piketty [Piketty 2014] documents the economic mechanisms by which accumulation of capital fuels more accumulation of capital. When people whose labor is vastly amplified by technical ideas die, benefits spread to their relatives, their employees and colleagues. To a much lesser extent, their customers and the citizens of their society may derive some benefit. ItÕs just that they donÕt reach far enough and fast enough to reach that poor African. 
Some of the creation, exploitation and harvesting of technological ideas is best thought of as done by companies or organizations, rather than individuals. And large companies (IBM, GM, etc.) at least potentially, can last far longer than a human. ThereÕs no such thing as an inheritance tax on companies, so companies can continue to amass inherited wealth across generations. 
The good news is that you canÕt keep good ideas bottled up forever. Word leaks out; ideas spread virally; technology is re-invented elsewhere. We are already seeing the fact that the reach of the Internet into even the poorest areas of the third world is spreading innovation faster than it can be restricted by such censoring mechanisms such as Ògreat firewallsÓ or Òintellectual propertyÓ. The chapter on Makerism shows how the spread of ideas will result in the spread of material wealth. 
Since the vast majority of the technological infrastructure was here before any of us were born, we can consider it the common heritage of humanity. WeÕre all its heirs. If youÕve been born, you deserve a share. (But you donÕt get two shares from being Òborn againÓ). It is an endowment that produces a dividend, and that dividend is what should fund a basic income for everybody. 
Your checkÕs in the mail
The obvious mechanism would be to establish some kind of minimum income, guaranteed income, or Ònegative income taxÓ. Even such ardent supporters of capitalism such as libertarians Milton Friedman [Friedman 1962] and Freidrich Hayek [Hayek 1995] are on board with this idea.
Anthony Atkinson wrote a book called Inequality: What Can Be Done? [Atkinson 2015]. You can see a detailed review by Thomas Piketty here [Piketty 2015]. The book discusses various forms of wealth transfer: Progressive taxes, inheritance tax, property transfer tax, etc. 
We note that this idea can be thought of as just a stepping stone to a more radical solution, as we discuss in Makerism. Makerism, the alternative that we advocate as the replacement for Capitalism, reduces or eliminates reliance on Capitalist notions of jobs and money, likely obviating a need for such income. But since itÕll be a while before full Makerism kicks in, the interim solution is worth exploring. 
Alaska has a small unconditional distribution to all of its citizens to share the wealth generated by its natural resources. Switzerland just voted it down, but the fact that the proposal got that far is encouraging. Many industrialized countries have some partial version of it, such as FranceÕs Revenu de SolidaritŽ Active. You could even argue that the US Social Security SSI/SSD is a form of it for senior citizens and the disabled. 
There is also a strong feminist argument for a guaranteed income. Work by women in child care, care of other family members, food, cleaning and other household maintenance, goes unpaid. Work in the public workforce by men is compensated, and men often shirk their fair share of household duties. The result is that many women have no financial independence, distorting personal relationships in the family. A guaranteed income would at least assure that everyone had some personal resources [Shulevitz 2016]. 
Eventually (and perhaps this is possible already), a universal minimum income will provide enough so that people will never feel like they are forced to work. They will perform paid work when they need or want extra money, or when they feel that the work is a positive contribution to their lives and helping others.
Some might find that our utopian vision of an abundance economy supported by artificial intelligence software and the hardware maker movement to be a far-off pipe dream. But the reality is, if we assess the current situation and project future trends, itÕs really within reach. 
First, letÕs look at how productive the world really is at the moment. According to the CIA World Factbook [CIA 2013], the Gross Domestic Product (GDP) of Earth in 2013 is approximately $77 trillion. If we stopped spending money on unproductive activities such as war ($13.6 trillion [Schippa 2016]), and invested properly in things like education, that number would be likely much, much higher. Besides the destructiveness of war, military spending displaces investment in education, infrastructure, etc. which would likely yield returns in productivity. 
ThatÕs really a pretty good number when you think about it. Since there are about 7 billion people in the world, if we divide that number down by the population, thatÕs on the order of $11,000 per person (around $13K if you deduct the military spending, above). Since that 7 billion figure also includes children, we can think about that number as being $44,000 for a family of four. It should certainly be enough to provide a decent lifestyle. The US median household income in 2013 was $51,939 [Wikipedia 2016a]. 
By any standard, the conclusion is inevitable that the total productive output of the world at the present time is sufficient to support a reasonable income for everybody. 
Can money buy happiness?
A question to ask is what is the relation between between income and happiness? After all, happiness is what we are trying to achieve, not just maximizing income. Studies show that indeed, the more money that people have, the happier they are. But only up to a point. 
And that point is surprisingly low. Poor people are indeed unhappy, and within a certain range, happiness is linear in income. But after a while, it plateaus, and additional money doesnÕt necessarily buy additional happiness. 
One study pegs that number at household income of $50,000 a year [Sanburn 2012]; another $75,000 a year [Kahneman 2010]. Within spitting distance of our $44,000 share, and certainly what we could get if we do things like eliminate war. Even at the high end, these are still modest middle-class incomes by American standards. Of course, you can argue about how these things are measured, factoring in differences in cost of living in various places. But the overall thing to note is that these numbers arenÕt very far from the quantification of the average productivity. 
Poverty is too expensive
Actually, if we think about it, we canÕt afford not to provide a basic income for everybody. 
If we donÕt, we inevitably have poverty. You might think that poverty doesnÕt cost society much because poor people donÕt get paid much. But youÕd be wrong. Poverty causes externalities that cost society vastly more than anything we could hope to save with low salaries. 
Where will poor people live? Why, in slums, of course, where housing is cheap. NobodyÕs figured out how to have poor people without having slums. 
Once you have slums, you have higher rates of crime. Maybe it would be possible to have slums without having a higher crime rate, but conservatives canÕt tell us how to do it reliably. Similarly, higher rates of harmful drug use, higher rates of medical problems because of the lack of preventive care, poorer education, and a host of other problems. They canÕt be divorced from poverty itself, because poverty is the cause. 
So we have to chalk up to poverty all the costs it creates: the costs of policing, the cost of crime, the cost of the ÒjusticeÓ system, medical costs absorbed by society, etc. etc. It costs way more to keep someone in prison than to educate them, or to get them into a productive job. 
Internationally, you could argue that poverty is such a root cause of war that we also need to chalk up all the costs of the military and waging war, on povertyÕs tab. ThereÕs also the opportunity cost of losing productivity from people whose time we waste with dealing with all the problems of poverty. Worst of all is the human cost in needless suffering. 
Why do we tolerate it? We shouldnÕt. Poverty is so expensive, we canÕt afford it. 
The surprising fact is: we can get an enormous amount of help solving the worldsÕ problems from dead people. We just have to unleash the ghosts.