The problems of unemployment and poverty have been around, to some degree, since the dawn of civilization. They seem to be intractable. Thankfully, efforts to solve them continue and recently, an idea has been gaining support that is intended to combat these very real economic concerns. This idea is called universal basic income, or sometimes simply basic income. It involves every individual of a nation receiving a sum of money that would suffice to fund their fundamental needs each and every year. In some versions of it the basic income replaces existing welfare payments. In some versions the basic income is gradually pruned to zero for individuals of increasing wealth. In some versions, both occur. However it is detailed, its sympathetic intentions are clear in that the problems of unemployment and poverty need to be addressed.

My hope is that this idea gains no further traction in our economic and social conversations. I contend that basic income falls into a category I call ‘good-hearted bad ideas.’ It is only gaining traction because we are, culturally, at a loss to see how capitalism itself can solve the problems of unemployment and poverty. In fact, many people believe that capitalism itself causes these problems. First let me address the perils of UBI and then I will address the perceived failings of capitalism.

The most obvious downside to UBI is the disincentive to work inherent in it. If everyone can have a livable ‘wage’ without entering the competition of our economy, only the more ambitious among us would choose to be employed. Assuming a low end job paid only marginally more than UBI, why would someone choose to submit to the whims of a boss and give up the freedom in their day?

This naturally leads to the second peril of UBI; inflation. As low end wages were forced to rise to make employment more attractive, a traditional form of wage/price spiral would be initiated. People who claim this inflation cycle would not be triggered, through a more modest UBI or whatever, are being, I will assume, willfully ignorant of human nature. Fundamentally, a UBI that doesn’t provide a livable ‘wage’ is not solving the problem of poverty. And the wage/price spiral will be triggered regardless, although an at admittedly more subdued level. However, if it is reduced below what would be a living wage, the UBI will not have achieved its goals.

The third peril of UBI is that it is an expensive proposition. It will require a significant portion of government revenue to fulfill. Among all the responsibilities that government funds must be used for; defense, law enforcement, infrastructure, regulation, debt, and welfare, it seems clear that if welfare spending were to rise in proportion to the rest (UBI replaces welfare, remember), infrastructure spending would be most vulnerable to cut-backs. Or else our tax burdens would have to rise. But the economic development of a nation is best achieved by improving its infrastructure. So UBI could easily end up having a perverse impact on our national strength.

UBI is a good-hearted bad idea because implementing it will briefly feel like we have addressed the long standing tragedies of poverty and unemployment, but in the long run, it will solve neither, and likely create problems of its own making.

Now it is appropriate to speak to the failings of capitalism as we know it. Yes, desperate poverty, stress from unemployment, bankruptcy from having bad luck in one’s health, are all either created or exacerbated by the way we practice economics. And we do practice capitalism. But we don’t practice it very well. My book, A True Free Market, covers this in more and approachable detail, including what’s needed to really solve desperate poverty and unemployment. I fear we are on the verge of making a mistake. It is premature to give up on capitalism.

The bottom line is we, as a culture, don’t appreciate that a free market can only work as capitalist ideals would have it when the root conditions for it exist. When we don’t recognize the root conditions, we make laws that alter them, then ask a free market to work regardless. And we get angry when it fails, marching into political camps to either defend the free market or to denigrate it. We also sometimes impose a free market onto natural circumstances where it could never work, and try to makes laws to force it to work, still inevitably to fail. Anger rises as people feel disappointment, or even pain. So those two camps grow ever larger.

Today we have a political environment that seems to prove this out. Some people are so passionate for capitalism that they think it is always the answer. Some people are so passionate against capitalism they think it is never the answer. But it is our own ignorance or stupidity that creates the vast number of unfortunate folk who many of us dismissively call ‘the takers.’ If we are willing to look, we can see that many of them are there because we have given them the wrong laws to create fair opportunity. I find people are not typically lazy about their own wellbeing. But they can feel resigned or hopeless.

Poverty and unemployment are worthy of our best efforts, as a society, to solve. They are a blight on the American dream, and on capitalism worldwide. So if we are going to make the effort, let’s choose a path to solve them for the long run and not address them in a way that predictably replaces them with new problems down the road. Let’s focus on the fundamentals required for a truly free market. Don’t be alarmed! A true free market is quite humane, securing dignity for poor and rich alike. Human nature is everywhere and always the same. The right rules for capitalism only need to follow what is in us. Lasting economic solutions are right under our noses.