The AGI Social Contract

Frédéric Bastiat wrote "The Law" in 1850, and it remains the most ruthless takedown of government overreach ever penned. His argument is surgical: law exists for exactly one purpose; to protect life, liberty, and property. Not to engineer outcomes. Not to redistribute wealth. Not to pick winners and losers.

The moment law becomes a tool to take from one person and give to another, even with the noblest intentions, it transforms into what Bastiat called "legal plunder."

This isn't abstract philosophy. It's the operating system question for every society: Is law a defensive perimeter around individual rights, or is it a weapon to reshape the world?

Bastiat's answer is uncompromising. The law should be a shield, never a sword. Once you arm the state with the power to confiscate and redistribute, you've corrupted the entire system. It doesn't matter if you're taxing the rich to feed the poor, subsidizing industries to create jobs, or implementing tariffs to protect domestic producers. The moment coercion enters the equation, you've crossed the line from protection to plunder.

The brilliance of Bastiat's framework is that it doesn't require you to be heartless about poverty or indifferent to suffering. He's not arguing against charity; he's arguing against forced charity.

When law tries to "do good" by forcibly taking from one group to help another; even if it's in the name of fairness or equality...it's already crossed the line. Bastiat has zero patience for using the state as a tool for redistribution, no matter how noble the excuse.

Because once you accept that premise, you've opened a door that can never be closed. You've established the principle that the law can legitimately confiscate and transfer. And if that's legitimate for one purpose, it's legitimate for any purpose someone can justify.

Legal Plunder: The Taxation Weapon

Let's get concrete. Modern tax systems are masterclasses in legal plunder. They're Byzantine by design; thousands of pages of code, exceptions stacked on loopholes, rates that vary by income bracket, business type, investment vehicle, geographic location, family status, and political favor.

In the United States, you have employees paying effective rates around 40-50% when you factor in federal, state, payroll, and local taxes. Meanwhile, corporations navigate through depreciation schedules, R&D credits, offshore structures, and carried interest provisions that can bring their effective rates down to single digits...or zero.

Small businesses face different rules than large enterprises. Real estate investors play a different game than wage earners. The wealthy hire armies of accountants to legally minimize their burden while the middle class has theirs withheld automatically.

Bastiat would call this exactly what it is: a rigged game where the law has become a tool for manipulation rather than protection.

The moment you weaponize taxation to target one group—like the rich—to benefit another, you've hijacked the law. In Bastiat's eyes, taxation should only fund essential protection; defense of life, liberty, property. When taxation becomes a tool to engineer outcomes; whether social welfare or economic equality; it's coercion.

You're no longer protecting rights; you're using the law to redistribute wealth.

The standard defense runs like this: "We need progressive taxation to fund essential services and reduce inequality." But unpack that logic and you'll find the corruption Bastiat warned about.

You're saying the law should treat people differently based on their economic status. You're saying it's legitimate to force some to contribute more because they've accumulated more wealth. You're saying the state is entitled to engineer economic outcomes through differential legal treatment.

That's a social engineering apparatus with a legal facade.

For Bastiat, the moment you tax one person differently to engineer society, you've made the law a tool of force. It stops protecting everyone equally and starts favoring some.

He'd say it's no different than legal theft, just dressed up. Whether you're taxing the rich more or taxing some industry more to pay for something else, it's a violation of liberty. You don't fix inequality by shifting wealth through law; you just corrupt the law. The law should never be a tool to level outcomes, only to protect equal rights; and nothing beyond that.

The Bastiat Ideal: One Rule for All

Bastiat's alternative is stark in its simplicity. If you must tax at all, make it uniform and transparent. Everyone pays the same rate; whether you're a billionaire tech founder or someone working paycheck to paycheck. No special breaks. No targeted penalties. No loopholes engineered for those with political connections.

Let's say 25% flat rate across the board. Rich or poor, business or individual, domestic or foreign income; 25%. Period.

The immediate objection: "But that's regressive! Poor people can't afford to lose 25% of their income!"

Bastiat's response would be uncompromising: fairness means equal treatment under law, not equal outcomes. If you're taxing, make it the same proportion for everyone; no favoritism, no targeting. If it's 20 or 25%, fine, but it applies across the board...whether you're a billionaire or someone scraping by. In his eyes, equality means the law never bends to hit one group harder. He's not interested in soaking the rich or sparing the poor; just one simple, universal rule.

The moment you start adjusting the law to compensate for economic differences, you've turned it into a redistributive tool. And once you've done that, you've opened Pandora's box. Because if it's legitimate to tax the rich more to help the poor, then it's equally legitimate to tax any group more to benefit any other group you favor.

The principle is gone.

Here's what most people miss: Bastiat isn't optimizing for revenue collection or social outcomes. He's optimizing for the integrity of law itself.

He's saying that a corrupt legal system; even one that achieves some humanitarian goals; is worse than a clean system that might seem harsh, because corruption of the law corrupts everything downstream.

Would a flat 25% system generate the same revenue as our current progressive monstrosity?

There'd definitely be a difference. Right now, the system is progressive; some pay way more than 25%, others pay far less or even zero. A flat 25% would shift the burden.

High earners would probably pay less than they do now, while lower earners might pay more. The total revenue might be similar or could vary depending on the actual income distribution. But Bastiat wouldn't care about the net balance; he'd say the point is fairness in the rule, not tweaking outcomes.

Why Governments Reject This

So why doesn't any government adopt this? Because politicians are in the business of promising to fix things.

From Bastiat's lens, it's simple: politicians meddle with tax laws because they're chasing power. They promise to fix things; redistribute wealth, boost growth, win favor with certain voters. But Bastiat would call that a façade. They aren't fixing economic outcomes, they're picking winners and losers. The economy is too complex to centrally engineer, and these tweaks just distort incentives.

So why do they do it? Because every government thinks they know better; and that's the hubris he warns against.

You don't win elections by saying "I'll protect your rights and get out of the way." You win by promising targeted benefits: tax breaks for your industry, subsidies for your region, credits for your family situation, penalties for your competitors.

Every election becomes an auction where voters sell their preference to whoever offers the best deal. And the currency of that auction is the law itself; twisted, bent, and weaponized to favor some at the expense of others.

Bastiat would say this is inevitable once you accept the premise that law can legitimately be used to redistribute. Because if law is a tool for reshaping outcomes, then democracy becomes a battle over who controls that tool. The majority (or the politically organized) will always vote to plunder the minority (or the politically diffuse).

Take the current U.S. system.

Businesses—small and large—have different laws when it comes to tax. They don't pay their fair share. Large enterprises can work around tax through legal structures. Individuals and employees face different rules. They pay around 50% when you add it all up.

Bastiat would throw that whole system in the bin. He didn't care if you were a giant corporation or the average worker; if the law treated you differently, he'd call it unjust. His ideal outcome is one flat system; no special breaks for big businesses, no heavier burdens on individuals. Everyone pays the same proportionate tax, with no loopholes.

All these different rules; where employees get hit harder while big players navigate around; are exactly what corrupts the law. Fairness is everyone being equally protected, not equally manipulated.

Competition and Productivity Under Bastiat's Law

The law isn't a tool to tinker with outcomes for different groups. It's just a protective barrier; same rules, same protections, no playing favorites. Once you start fiddling with the law to shape different groups' outcomes, you've lost that neutrality.

The law's job is to get out of the way; protect rights equally and leave the rest to the individuals and businesses themselves.

In Bastiat's world, productivity thrives when people and businesses are free from interference.

When the law doesn't play favorites, no one wastes energy lobbying for special treatment. Instead, everyone knows they're playing the same game. That certainty fuels innovation and hard work. You win by being better, not by gaming the system. People flourish when the law protects liberty and property, and leaves the rest up to them.

But here's the crucial point: Bastiat's equality before the law doesn't mean equal outcomes or equal abilities. It means everyone faces the same rules. Without favoritism, competition becomes real; people win by creating better products, services, or ideas, not by getting special breaks. Equality before the law sets the stage for unequal outcomes based on merit. The best rise to the top because the playing field isn't rigged. That's the competitive engine he's after.

How Far We Are From This Vision

Let's be blunt: we're miles away from Bastiat's vision. Modern systems are tangled in special rules, loopholes, and lobbying. Governments routinely tweak tax codes or regulations to favor certain industries, redistribute wealth, or influence behavior. Bastiat's vision of a minimalist, neutral law is a distant ideal. In reality, we've got layers of complexity; sometimes for good reasons, other times not; but it's far from that pure, hands-off framework he idealized.

And historically?

We've never seen it. Bastiat's ideal was more of a philosophical benchmark than a fully realized historical model. Some early laissez-faire periods; like parts of 19th-century Britain or early America; flirted with minimal government, but even they had regulations, tariffs, and special interests. No nation ever fully embodied Bastiat's pure, neutral law. It's more of a guiding north star than a lived reality.

This is why his framework matters even more now. Because we're about to face a transformation that will test every assumption about law, property, and redistribution.

The AGI Disruption: When Cognition Becomes Cheap

Now we're in 2026, and we're staring at a transformation that makes every previous economic shift look incremental. Artificial General Intelligence isn't just another technology; it's the moment when cognition becomes a commodity.

Think about what that means. For all of human history, intelligence has been the ultimate scarce resource. You needed smart people to design products, manage operations, write code, analyze data, create content, provide services, make decisions. Human cognitive capacity was the bottleneck on everything.

AGI breaks that constraint. Suddenly you have agents that can think, reason, create, and execute at superhuman speed and scale. The economic implications are staggering.

We're moving into 2026, moving towards AGI and embracing productivity as a whole. The theory is once we reach AGI, a country's productivity will skyrocket. Obviously, those countries that are ready to embrace it. The theory says that advanced countries can get to a level of productivity where agents are doing pretty much everything.

We are moving towards an agent-to-agent economy rather than human-to-human economy. And that's much faster and more productive.

Countries that embrace this; call them Tier 1 nations...will see productivity explode. Not 10% improvements. Not even 10x. We're talking about potential 100x to 1000x increases in output per capita. Because you're no longer limited by human work hours, human attention spans, or human cognitive capacity.

Machines negotiating with machines. Systems orchestrating systems. Humans in the loop only for strategic decisions and final approvals. This is the landscape shift that changes everything.

We will get to a point where specific countries; these tier one countries; can become so productive and abundant that they can pretty much pay a universal basic income (UBI) to every citizen in their country.

The UBI Temptation and Bastiat's Response

Here's the question: If AGI creates this abundance, and governments can afford to pay everyone UBI, are we getting to Bastiat's vision of law?

The answer is an unequivocal no. It would be a different beast altogether.

Bastiat didn't envision the state redistributing wealth, even in abundance. If AI-driven productivity leads to a universal basic income, that's still the state distributing resources. Bastiat would call that legal plunder. His vision was no interference; no matter how wealthy the nation. So even with abundant AGI productivity, if the state collects and redistributes, that's not his neutral law. You'd have productivity, sure, but it'd be a different social contract; one Bastiat would critique mercilessly.

He believed charity should be voluntary, not legally enforced. Any redistribution; even to help the vulnerable; breaks his vision of law.

The natural response from most governments will be Universal Basic Income. The logic seems airtight: AGI creates massive abundance, most jobs become obsolete, so the state should collect the surplus and redistribute it to everyone as a basic income. Everyone gets a check. Problem solved.

From a humanitarian perspective, it's compelling. From a Bastiat perspective, it's legal plunder at civilization scale.

Because here's what UBI really means: the state positions itself as the intermediary between AI productivity and human welfare. It collects the value through taxation (taking from those who own or operate AI) and distributes it to everyone else (giving to those who don't). The law becomes a massive redistribution engine.

Bastiat would call this the ultimate corruption. Not because the outcomes are necessarily bad; abundance is good, security is good; but because you've institutionalized the principle that the state can confiscate and redistribute. You've made legal plunder the foundation of your economic system.

The Incentive Trap of UBI

Let's think through the second-order effects of a UBI-funded-by-AI-taxation system:

First: You've created a permanent class distinction between AI owners and UBI recipients. The owners have actual assets generating value. The recipients have a state-granted allowance. That's not equality; that's dependency.

Second: You've given the state total control over the distribution. It decides how much UBI you get, under what conditions, with what strings attached. It can adjust it based on behavior, compliance, or political favor. You're one policy change away from conditional welfare.

Third: You've eliminated the connection between contribution and reward. In Bastiat's framework, property rights matter because they link effort to outcome. You work, you create, you earn, you own. UBI severs that link. You exist, you get paid. That might sound compassionate, but it's actually dehumanizing. It treats people as dependents rather than agents.

Fourth: You've created a political battleground over the distribution formula. How much UBI? Who qualifies? Do citizens get more than non-citizens? Do families get more than singles? Do disabled people get more than able-bodied? Every election becomes a negotiation over the size of the check. And that turns politics into pure redistribution warfare.

Fifth: You've centralized power in whoever controls AI taxation and UBI distribution. That's likely to be the federal government in most nations. Which means you've made the government the most powerful economic actor in society. Not the most productive; just the most powerful. That's a recipe for corruption and authoritarianism.

This is the trap. UBI solves the immediate problem; how do you prevent mass unemployment and poverty in an AGI world; but it creates a system that Bastiat would recognize as fundamentally corrupt.

The Novel Synthesis: AGI Property Rights Dividend

So here's the question that matters: Can we combine AGI abundance with Bastiat's vision? Can we honor his core principles while addressing the economic transformation ahead?

Here's the edgy angle, the novel synthesis: AGI-generated abundance lets us honor Bastiat's core principle without traditional redistribution.

Instead of taxation and redistribution, every citizen could have a stake in AI productivity; like owning a piece of a national AI fund. The more productive AGI agents are, the more your personal share grows. In that world, the state isn't redistributing wealth; people are just benefiting from their share of the AI-driven market. That would align Bastiat's property-based liberty with AI-driven abundance, creating prosperity without the state's heavy hand.

How This Could Work: The Implementation

Let's get concrete about implementation, because theoretical frameworks mean nothing if they're not executable.

Foundation: Establish a constitutional or legislative framework that treats AI productivity as a shared national resource; similar to how some nations treat natural resources like oil or minerals in sovereign wealth funds. The key is that this happens at the formation stage, not through expropriation. You're defining property rights from the beginning, not seizing them after the fact.

Initial Allocation: Every citizen receives an equal share allocation at birth or citizenship. These shares are non-transferable to prevent concentration... you can't sell them, you can't gift them, they can't be seized for debt. They're a fundamental property right tied to citizenship.

Revenue Stream: As AI agents perform work; whether it's generating content, analyzing data, automating processes, or delivering services—the economic value flows through the fund structure. This could be structured as licensing fees, usage fees, or profit shares depending on the implementation.

Dividend Distribution: Quarterly or annual distributions based on fund performance. Unlike UBI where the government decides the amount arbitrarily, this is tied directly to AI productivity. More productive AI economy = larger distributions. You're not getting a handout; you're getting returns on your property.

Governance: Shareholders (citizens) have voting rights on major fund decisions. Which AI projects to invest in, what allocation strategies to pursue, how to balance growth versus distribution. This creates a direct democratic feedback loop between citizens and AI development priorities.

Taxation: Here's where we return to Bastiat. The government still needs revenue for basic functions; defense, courts, contract enforcement. But now it taxes economic activity at a flat rate across all sources. Your AI dividend income? Taxed at 25%. Your labor income? Taxed at 25%. Corporate profits? Taxed at 25%. One rate, no exceptions, no games.

The Advantages: Why This Framework Works

This framework has several powerful features that honor Bastiat while addressing AGI reality:

Liberty Preservation: No one is dependent on state redistribution. Every citizen has actual property rights generating income. The state's role is purely defensive; protecting those rights, not distributing resources. This is the core Bastiat principle maintained.

Incentive Alignment: Because dividends are tied to AI productivity, everyone has an interest in maximizing AI capability and deployment. You want the AI economy to grow because your personal returns grow with it. This creates positive rather than extractive political dynamics. Citizens become advocates for AI advancement, not opponents fearing displacement.

Dignity Through Ownership: There's a fundamental psychological difference between receiving a government check and receiving dividends from your property. One is charity. The other is ownership. That difference matters for human agency and social cohesion. You're not a dependent; you're an owner participating in the economy.

Scalability: This framework works at any scale of AI productivity. Whether AI increases productivity 10x or 1000x, the distribution mechanism stays the same. Your share percentage doesn't change, but the absolute value of the dividend scales with the economy. The system doesn't break under abundance.

Political Neutrality: Because allocation is equal and automatic, it's not a political football. No one is debating how much UBI you deserve or whether you qualify based on your behavior, citizenship status, or political favor. You're a citizen, you have shares, you get dividends. The law is neutral; exactly what Bastiat demanded.

Global Competitiveness: Nations that adopt this framework become magnets for AI development. Because developers and companies aren't facing punitive taxation to fund redistribution; they're operating in a clean, flat-tax environment where the only constraint is protecting property rights. This attracts talent and capital.

Voluntary Charity Preserved: If some citizens want to help others beyond their dividends, they can voluntarily share or donate. Charity remains voluntary, not coerced through taxation. This honors Bastiat's distinction between voluntary assistance and legal plunder.

The Hard Questions and Downsides

But let's not pretend this is frictionless. This framework faces real challenges:

Initial Ownership and Historical Inequality: If we're allocating equal shares going forward, what about existing AI infrastructure and companies? Do we expropriate current AI assets to seed the fund? That would violate property rights; exactly what we're trying to protect. Or do we start from scratch, meaning early adopters maintain their advantage? How do you transition without creating two classes: legacy AI owners with massive head starts, and new citizens with nominal shares?

Understanding and Financial Literacy: Would everyone truly understand their "stake"? Complex financial instruments have historically excluded or exploited those without sophisticated understanding. How do you ensure citizens grasp what their shares represent and can make informed decisions about governance? The risk is creating a system where only the financially literate benefit while others essentially forfeit their voice.

The Safety Net Gap: Without traditional welfare, what happens to those who fall through the cracks before dividends become substantial? In the transition period; which could be years or decades; people still need support. Do we maintain existing welfare systems temporarily? But then we're back to legal plunder during the transition. Or do we accept that some will suffer in service of long-term principle?

Concentration Through Other Means: Even with non-transferable shares, wealth concentration could occur through control of the governance mechanisms. Those with more education, time, or resources could dominate voting and decision-making, effectively controlling everyone's shares. You'd need robust democratic protections, which brings its own complexity.

International Competition: If other nations adopt UBI models and can promise immediate income security while your nation is building out property rights infrastructure, you might lose citizens to migration. The political pressure to "just give people money now" could be overwhelming, especially in democracies.

Definition of AI Productivity: What counts as AI-generated value? Is it only pure AI agents, or does it include human-AI hybrid work? How do you measure and attribute value in a world where humans and AI are deeply integrated? The accounting challenges are non-trivial.

Enforcement and Property Rights Protection: The whole framework depends on robust enforcement of property rights. But if the AI fund becomes so valuable that it represents most national wealth, the political temptation to raid it for other purposes becomes massive. You'd need constitutional-level protections that withstand democratic pressure.

The Philosophical Tension

Here's the deeper tension: Does this honor Bastiat's spirit of voluntary ownership, or does it just reinvent inequality in a new form?

Bastiat was adamant that property rights should be earned through labor, creation, or voluntary exchange. In this framework, you're granted shares simply by citizenship; a form of collective ownership that Bastiat might see as suspiciously close to the collectivism he opposed.

On the other hand, if AI productivity is built on centuries of accumulated knowledge, infrastructure, and social capital that all citizens contributed to (even indirectly through their ancestors), then perhaps equal distribution of shares is actually recognizing a form of collective property right that predates any individual AI development.

This is where the philosophy gets genuinely difficult. Bastiat wanted clean property rights; you make it, you own it. But AI is different. It's built on data from everyone, trained on human knowledge accumulated over generations, running on infrastructure funded by collective investment. Who "made" that? The engineers? The investors? Society collectively?

One could argue that equal distribution of AI dividend shares is actually the most Bastiat-compatible approach because it recognizes that the inputs to AI came from the collective human enterprise. But one could equally argue it's a violation because it grants ownership without individual creation or exchange.

This tension doesn't have a clean resolution. But it's worth wrestling with because the alternative—state-controlled UBI redistribution; is unambiguously against Bastiat's principles. At least the property rights approach attempts to honor his framework even if it stretches it.

The Implementation Reality

Let's be honest about implementation. This would be extraordinarily difficult to execute.

You'd need:

• Constitutional amendments protecting AI dividend shares as property rights
• Legislation defining the fund structure and governance
• International coordination to prevent regulatory arbitrage
• Massive public education campaigns to build understanding
• Technological infrastructure to manage shares and distributions
• Political will to resist the easier path of traditional UBI
• Protection against inevitable attempts to raid the fund for other purposes

Most governments will take the easy route: tax AI heavily, redistribute through UBI, call it progress. It's politically simpler, requires less structural change, and delivers immediate gratification to voters.

But the easy route creates dependency, centralizes power, and corrupts the law—exactly what Bastiat warned against. The hard route; building property rights infrastructure; honors principles but demands patience and sophistication that democratic politics rarely rewards.

Where This Leads: Two Futures

We're facing a fork in the road as AGI productivity becomes reality.

Most nations will choose Path One. It's easier, faster, and more politically expedient.

But for those nations willing to do the hard work of Path Two, the payoff could be profound: a system where AI abundance creates prosperity without corrupting the law, where citizens are owners rather than dependents, and where Bastiat's vision finally becomes reality in an era of technological abundance.

The Core Question

The question this essay poses is whether liberty can coexist with AGI-driven abundance.

The conventional wisdom says abundance enables redistribution. Once we have enough, we can afford to be generous through state programs. This is the UBI logic.

But Bastiat would flip that: abundance enables liberty. Once we have enough, we no longer need the state to redistribute. We can structure property rights so everyone participates in abundance directly.

The difference is profound. In the first vision, the state is the provider and citizens are recipients. In the second vision, citizens are owners and the state is the protector.

Which vision we choose will determine not just economic outcomes but the nature of human agency in the AI era.