Basic Income: The Superpill for Greater Efficiency?

It is a common saying that ‘you can’t get something for nothing.’ In a sense, however, you sometimes can, because there is probably a considerable amount of waste and inefficiency involved in the production of most manufactured goods and in the provision of most services. And if we could find ways to waste fewer materials and make more effective use of people’s time, then we’d be producing things more ‘efficiently’ and we could, effectively, get something for nothing.

There are, of course, many different ways of improving the efficiency of a particular factory or a particular production process. Changing the layout of a factory, using improved technology and providing better training for workers are just a few possible examples.

Efficiency is a common topic in Economics, of course. Economists like to show how, by organising ourselves more effectively, we can reduce waste and get more out for less put in.

This type of efficiency — in simple terms; getting more out for less put in — is the sort most people will be familiar with and is known as ‘technical efficiency’ or ‘productive efficiency.’

This is the type of efficiency that is often referred to by employers, whether they are manufacturers, service providers or government departments. Again, when efficiency is mentioned in news reports, this is often the sort of efficiency they are referring to.

And Basic Income could help very considerably to improve our productive efficiency, because it can give people the financial support they may need to be able to take up educational and training opportunities — thus potentially increasing their productivity.

There is, however, another type of efficiency which is often ignored, but which is incredibly important. This other type of efficiency is known as ‘allocative efficiency.’ Allocative efficiency is concerned with whether our scarce resources are being allocated to their best possible uses. Are resources being allocated to where they will do the most good?

And whilst a lot of attention is paid to productive efficiency, it is allocative efficiency which is, in many ways, far more important.

A simple example will demonstrate the difference between productive efficiency and allocative efficiency. Productive efficiency is: How can we best set up factories to make smartphones? Allocative efficiency is: Should we be allocating our scarce and valuable resources to making smartphones in the first place? Is there actually a better use for those resources than making smartphones?

Our global economy expends vast resources on designing, manufacturing, distributing and using modern smartphones. It’s all very well asking whether these phones could be made slightly more efficiently, but this shouldn’t stop us seriously considering the question of whether we should be designing, manufacturing, distributing and using them in such vast numbers — or at all. Are smartphones really being mainly used for productive or beneficial purposes — or are they mainly just being used as a means of wasting time and distracting people from the things they know they really ought to be getting on with?

If productive efficiency is concerned with how we achieve certain things, allocative efficiency is concerned with the much bigger question of what we are achieving and what we ought to be trying to achieve — as individuals, as a society and as a species.

As a species, we have huge productive capabilities. We can produce huge quantities of goods and services. We are, however, using vast resources in order to make those products and we’re wasting much of those resources along the way — that’s productive inefficiency.

Even more worryingly, however, we may be over-producing many goods and services which do us little or no good, or may even be harming us . And we spend a lot of our time and energies on activities of little real value. That’s allocative inefficiency. Our valuable resources could perhaps be made far better use of if they were allocated elsewhere.

Now, I’m a strong supporter of Basic Income and it’s my hope that Basic Income could have a hugely positive impact on the allocative efficiency of our entire society.

With a Basic Income to support them, financial pressures on people should be less severe — and they will have the security of knowing that, whatever career choices they make, Basic Income will be there to support them.

If they want to change career, for example, they’ll have Basic Income to support them whilst they receive training or struggle through the early years of a new business venture.

And what this means is that people will have more freedom to sit back and assess their lives and ask themselves: What is it I want to do with my life? What is it I want to achieve?

And some people are going to think to themselves; ‘You know what? This isn’t really a very worthwhile job. I’m going to find something better to do. I’m going to find a job which makes me feel I am doing something more worthwhile — something I really enjoy and which I feel is genuinely helping people.

Often, people don’t put all that much thought into considering whether their work is actually make a positive contribution to the society they live in. Understandably, they’re too distracted by everyday financial pressures.

People work to earn money for essentials, but their jobs and lives involve so much stress, that they spend on luxuries — from cappuccinos to smartphones to new cars — as a way of incentivising themselves to be able to carry on with the working lives they don’t honestly find all that inspiring.

Basic Income, however, gives people a way to escape from that mindset. It gives them the chance to reassess and perhaps redirect their working lives, so they are more fulfilled and have less need of treats and distractions.

And once people have managed to redirect their working lives in more fulfilling directions, they may be more inclined to reassess the way they spend the rest of their time and energies — and how they spend their money.

And some people — perhaps a lot of people — are going to say to themselves; ‘You know what? I don’t really want to be spending so much time on my smartphone. And I’m not going to leap at buying a new one quite so often.’

In such ways, Basic Income could help make us much more efficient as a society — wasting fewer resources on unimportant distractions and allocating more of our valuable resources, including our precious time, to things we feel really matter.

Basic Income could unlock a path to far greater efficiency. Indeed, it may be the our current lack of a Basic Income system is one of the major factors holding up improvements in efficiency across our entire societies.