A recent Swiss proposal for a basic income guarantee has sparked interest from commentators on both the left and right. In a discussion of libertarian arguments for the proposal, Bleeding Heart Libertarians blogger Matt Zwolinski suggests that the classical liberal economist Friedrich Hayek supported a basic income guarantee. He relies on a quote from Volume 3 of Hayek’s Law, Legislation and Liberty:
The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born (p 395).
A number of writers, including Zwolinski, his fellow blogger at Bleeding Heart Libertarians, Kevin Vallier and Julie Novak of the Institute of Public Affairs seem to interpret this as a proposal for the government to pay every citizen a basic income, regardless of their income, assets or willingness to work. I think this is a misinterpretation of Hayek’s position. What Hayek actually proposed was a means tested scheme restricted to those who are unable to earn a living in the market.
What is a basic income guarantee?
Unlike most current welfare or social assistance payments, a basic income guarantee is both universal and unconditional. For those prepared to live on the low income it provides, the basic income guarantee offers an alternative to paid work. In a post at the Cato Institute’s Libertarianism.org, Zwolinski writes:
A Basic Income Guarantee involves something like an unconditional grant of income to every citizen. So, on most proposals, everybody gets a check each month. “Unconditional” here means mostly that the check is not conditional on one’s wealth or poverty or willingness to work.
Zwolinski says ‘something like’ because some basic income proposals like Charles Murray’s come with restrictions. In Murray’s plan, recipients must be 21 or over and not be in prison.
Hayek’s guaranteed minimum
While it’s true that Hayek supported a minimum income as a safety net for people who are unable to earn a living in the market, there is no reason to think he supported a universal or unconditional payment. The guaranteed minimum Hayek had in mind would be means tested and targeted to widows, the elderly, people with disabilities and others who were unable to earn a living through paid work.
Hayek’s rationale for a guaranteed minimum is to provide citizens with security against destitution. In Volume 3 of Law, Legislation and Liberty, Hayek argues that in pre-market societies people lived as members of small groups that shared resources. A large scale market society separates people from these groups and makes them vulnerable to misfortunes such as illness and disability. In the paragraph immediately before the one Zwolinski quotes, Hayek writes:
The problem here is chiefly the fate of those who for various reasons cannot make their living in the market, such as the sick, the old, the physically or mentally defective, the widows and orphans— that is all people suffering from adverse conditions which may affect anyone and against which most individuals cannot alone make adequate provision but in which a society that has reached a certain level of wealth can afford to provide for all (p 395).
So when, in the next paragraph, he refers to the "assurance of a certain minimum income for everyone" he isn’t suggesting that government pay every citizen a basic income regardless of their ability to provide for themselves. Instead he is suggesting that government provide every citizen with an assurance that their income will not fall below a certain minimum for reasons beyond their control.
Perhaps the clearest evidence that Hayek intended the guaranteed minimum for people who are unable to work, rather than those who choose not to, appears in an appendix to his last book, The Fatal Conceit (1988). Complaining that socialism "has taught many people that they possess claims irrespective of performance, irrespective of participation", he writes:
I do not question any individual’s right voluntarily to withdraw from civilisation. But what ‘entitlements’ do such persons have? Are we to subsidise their hermitages? There cannot be any entitlement to be exempted from the rules on which civilisation rests. We may be able to assist the weak and disabled, the very young and old, but only if the sane and adult submit to the impersonal discipline which gives us means to do so (p 153).
Given this statement it seems unlikely that Hayek would have supported an unconditional payment that supported people who chose not to work. In a much earlier work, The Road to Serfdom (1944), he argued that wealthy societies could provide citizens with security against severe physical privation but questioned "whether those who thus rely on the community should indefinitely enjoy all the same liberties as the rest."
Later on Hayek also argued against universal support. For example, in his 1960 book The Constitution of Liberty, he insisted that services and payments should be targeted on the basis of need:
The assurance of an equal minimum for all in distress presupposes that this minimum is provided only on proof of need and that nothing which is not paid for by personal contribution is given without such proof. The wholly irrational objection to a "means test" for services which are supposed to be based on need has again and again led to the absurd demand that all should be assisted irrespective of need, in order that those who really need help should not feel inferior.
… There can be no principle of justice in a free society that confers a right to "non-deterrent" or "non-discretionary" support irrespective of proved need (p 303-304).
Hayek’s position on the guaranteed minimum was consistent throughout his career
Rather than interpreting the comments in Volume 3 of Hayek’s Law, Legislation and Liberty about the "assurance of a certain minimum income for everyone" as a call for basic income guarantee, I think it makes more sense to read them as a restatement of a position he developed much earlier. Hayek outlined his position on a guaranteed minimum in his 1944 book The Road to Serfdom, clarified it in a 1945 radio interview and restated in The Constitution of Liberty (1960) and in Volumes 2 and 3 or Law, Legislation and Liberty (1976 & 1979).
In The Road to Serfdom Hayek writes that "there can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody." In a 1945 radio interview he clarified his position by saying he supported the assurance of a minimum income rather than a guarantee of particular things. He also suggested that Unemployment Insurance largely achieved this. (p 114).
Hayek argued that government needed to give individuals security against destitution in order to preserve the free market system. As he wrote in The Road to Serfdom, "Some security is essential if freedom is to be preserved, because most men are willing to bear the risk which freedom inevitably involves only so long as that risk is not too great" (p 137).
In the The Constitution of Liberty he restated an argument he made in The Road to Serfdom — that there are two kinds of security and that government can provide only one:
The first of these is security against severe physical privation, the assurance of a given minimum of sustenance for all; and the second is the assurance of a given standard of life, which is determined by comparing the standard enjoyed by a person or a group with that of others. The distinction, then, is that between the security of an equal minimum income for all and the security of a particular income that a person is though to deserve.
In Volume 2 of Law, Legislation and Liberty, Hayek restated his support for a minimum income guarantee:
There is no reason why in a free society government should not assure to all protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need to descend. To enter into such an insurance against extreme misfortune may well be in the interest of all; or it may be felt to be a clear moral duty of all to assist, within the organized community, those who cannot help themselves. So long as such a uniform minimum income is provided outside the market to all those who, for any reason, are unable to earn in the market an adequate maintenance, this need not lead to a restriction of freedom, or conflict with the Rule of Law (p 249).
In 1978, the same year Hayek completed Volume 3 of Law, Legislation and Liberty, Hayek restated his position in an interview:
… once you have reached a certain level of wealth, I think it’s in the common interest of all citizens to be assured that if their widows or their children by some circumstances become unable to support themselves, they would be assured of a certain very low minimum, which on current standards would be miserable but still would secure them against extreme deprivations. But beyond that I don’t think we can do anything.
It’s clear from this and other comments that Hayek meant the guaranteed minimum to protect people from absolute poverty. In Volume 2 of Law, Legislation and Liberty Hayek suggested that, thanks to classical liberalism, 19th century England had already reached the stage where it could guarantee a minimum level of support. In a footnote (p 340) he quoted from an 1850 article by Nassau Senior:
… to guarantee subsistence to all, to proclaim that no man, whatever be his vices or even his crimes., shall die of hunger or cold, is a promise that in the state of civilisation of England, or of France, can be performed not merely with safety, but with advantage, because the gift of mere subsistence may be subjected to conditions which no one will voluntarily accept (p 275).
It may be that Hayek believed that the guaranteed minimum needed to be low in order to prevent people from dropping out of the labour market. Or it could be he imagined that people claiming the minimum income would have to provide evidence that they were making an effort to find work or were unable to work. If so, his guaranteed minimum would not be all that different to the social assistance schemes operating in many developed nations today.
Did Hayek support a basic income guarantee?
Zwolinski is right to argue that a basic income guarantee is compatible with the kind of classical liberalism Hayek supported. But it seems unlikely that Hayek himself supported a basic income guarantee.
Hayek’s goal is to protect individuals from absolute poverty that occurs for reasons outside their control. Hayek argued that in a well functioning free market system, the labour market would protect almost everyone who was capable of work. In Volume 2 of Law, Legislation and Liberty he argued that: "Nobody capable of useful work need today lack food and shelter in the advanced countries" (p 297). Unemployment insurance could protect workers from short term loss of income due to job loss, leaving the guaranteed minimum to take care of people who are unable to work.
So it seems to me that Hayek’s proposal for a guaranteed minumum is closer to current social assistance schemes than it is to the Swiss basic income proposal. Hayek did not support a basic income guarantee.
Note on references: Page numbers refer to the following editions of Hayek’s works:
The Road to Serfdom, Routledge Classics, London (2001)
The Constitution of Liberty, Chicago University Press, Chicago (1960)
Law, Legislation and Liberty: A new statement of the liberal principles of justice and political economy, Routledge Classics, London (2013)
The Fatal Conceit: The errors of socialism (The collected works of Friedrich August Hayek Volume I), Routledge, London (1988)
Hayek on Hayek: An autobiographical dialogue, University of Chicago Press, Chicago (1994)