The BIG as a Helicopter Drop “with Austrian Characteristics”

Abstract

Typically, a basic income guarantee (BIG) is defended either on the grounds that it decouples the ability to live a fulfilling life from the obligation to work (Van Parijs, 1991), or that it is a more palatable social safety net than traditional welfare programs (Handler and Babcock, 2006). These can be thought of as philosophical and microeconomic avenues of approach, respectively, and each is amply represented in this book. A somewhat less common framework for thinking about a BIG is to consider it as a macroeconomic policy. Examples of this approach include Mitchell and Watts (2004), who compare the macroeconomic consequences of a BIG to those of a job guarantee program, and Moutos and Scarth (2003), who consider the operation of a BIG in both an open and a closed economy. This chapter argues that the macroeconomic perspective is critical, given the dramatic and broadly distributed changes in household income resulting from a BIG, as well as its highly predictable structure. Most importantly for the purposes of this chapter, the fact that a BIG is a lump sum transfer guarantees that it has certain nondistortionary properties that are relevant for assessing its impact in an Austrian model of the macroeconomy.

* Daniel Kuehn is a doctoral student in American University’s Department of Economics. He is grateful to Guinevere Nell, Robert Thorpe, and Karen Vaughn for helpful comments on a draft of this chapter.