5 ms·

I wonder what basic income would do to cost of living? If everyone ends up with x amount of guaranteed income, does the cost of living eventually rise by the sa

by TrevorJ 11y ago

I wonder what basic income would do to cost of living? If everyone ends up with x amount of guaranteed income, does the cost of living eventually rise by the same amount across the board and basically negate it? It seems like rent-seeking behavior would come in to play here.

jdmichal 11y ago
I often have the same inclination of thought with regards to university education and government-guaranteed student loans. If I'm a university executive, and I know that the average student can afford $X, and I know the average student can also receive a guaranteed $Y in student loans... Why would I not set my price at $(X+Y) and take the full rent that I can?
- soperj 11y ago
  Only works if every university does the same thing.
  - amelius 11y ago
    Can you explain why "price creep" will not occur, i.e., universities increasing their prices with small amounts (say $10 a year), so that eventually, all of them will end up at (X+Y)$ ?
  - TrevorJ 11y ago
    According to a study be the federal reserve, it actually is happening right now. Education isn't a commodity product so this kind of pricing doesn't require collusion between different schools.
- TrevorJ 11y ago
  A cursory search leads me to believe this may actually be happening: http://www.bloomberg.com/news/articles/2015-07-09/why-is-college-tuition-rising-blame-student-loans-fed-says http://www.bloomberg.com/news/articles/2015-07-09/why-is-col... http://www.businessadministrationinformation.com/news/study-shows-the-impact-of-student-loans-on-tuition-increases http://www.businessadministrationinformation.com/news/study-...
johnrob 11y ago
Inflation is the obvious issue here IMO. If basic income is X, then X really just becomes the new zero. We either need to provide products themselves (free food, housing, healthcare) or somehow lock the price of those things. I suspect both of those tactics will have identical challenges in terms of implementation though.
- mjevans 11y ago
  I continue to believe that the best way of 'locking' a price is to ensure that the market remains with the correct supply to buyer ratio. As an example: to decrease the cost of rent in a city, an increase in rent-able locations and attached commercial business and non-retail jobs need to be in those locations. This is also related to suggestions that say controlling medical care could be achieved by allowing more agents at all (doctors or not) to be able to treat obvious conditions. I agree that in the short term the suggestion would be viable, were it not for regulations; however I think that artificial diagnosis neural networks will probably achieve adoption before the regulations catch up.
simonh 11y ago
I think the cost of a lot of basic goods and services would fall. Employers would only need to offer relatively modest wages because the marginal value of those wages would be so much higher. This could drive down labour costs without driving down net pay for low wage workers. Basically a worker on $1,000/Mo now might be on $600/mo basic income and $600 wage after (fantasy numbers). This could make low wage workers much more affordable for employers leading to more employment and cheaper goods and services, leading to lower cost of living. A win for employees, won for employers and win for customers. Of course this is an idealised scenario, it would all need to be funded from higher overall taxation.
- honksillet 11y ago
  This is exactly wrong. The cost basic goods would increase. Basic Income would immediately have an inflationary effect as the money supply for these good would be expanded drastically. The Employer would not see as much benefit as you'd think as presumably he would be amongst the class of people/entities (including the middle class, upper class, and corporation) which would be paying for this indirectly in the form of taxes. Alternatively, if Basic income is debt finance (and not financed directly through taxes), incurring more debt also has inflationary effects.
  - fnordfnordfnord 11y ago
    It may or may not be wrong. There will definitely be some inflation, but there will also be an equilibrium. It is also a possibility that if the UBI is adjusted accordingly, that the relative costs of things will remain roughly the same. As for whether employers will benefit, recognize that demand will also increase when those who were formerly impoverished begin consuming things. It is direct and distributed economic stimulus.
  - simonh 11y ago
    I don't suppose it's guaranteed that the overall incomes of the lowest earners would actualy increase though. Maybe they would, but it's possible wages will fall and rents will rise to cancel that out. You may well be right about employers. Basic income isn't going to wish away all the problems of the poor. The main benefits are likely to be a simpler, fairer and more efficient benefits system and more opportunities for employment.
overcast 11y ago
Of course it does, it's the same thing with minimum wage increases. When businesses have to pay all of their employees more, that just doesn't come out of their pockets. Price increases across the board are passed down to customers.
- cwe 11y ago
  But businesses won't have to pay employees more. If anything, they can pay less because the UBI covers it. See @simonh's comment [0] to parent. [0] https://news.ycombinator.com/item?id=10982605 https://news.ycombinator.com/item?id=10982605
ascorbic 11y ago
The money for the basic income comes from taxation. Even though everyone would get it, higher tax rates on people with middle or high incomes would mean they were no better off, or worse off. This isn't supposed to be a way to make everyone $x per month better off, it's a way to change incentives and replace welfare.
- marknutter 11y ago
  What I'm curious about is what's stopping a large portion of the population from simply quitting their jobs to live off basic income, thus decreasing the potential pool from which taxes to pay for basic income can be extracted? If it really worked out like you say it would, where people with middle or high incomes are no better off, I wonder what they would think when suddenly large swathes of the population are able to live off the dole without busting their humps.
  - learc83 11y ago
    >thus decreasing the potential pool from which taxes to pay for basic income can be extracted. Basic income proposals usually work something like this (numbers all made up, but close to those I've seen): Each person gets something around the poverty level (say $10k -$15k per year). The taxes that are raised to pay for it would increase gradually based on income up so that it would be a wash for someone making $55k a year, and once you start making more than $75k a year, you start paying more. If you look at those numbers anyone who decides they can live off of the basic income was unlikely to have been making enough to pay any federal income tax at all, much less enough to have been contributing to the extra UBI tax. > where people with middle or high incomes are no better off, I wonder what they would think when suddenly large swathes of the population are able to live off the dole without busting their humps. They will be living off the dole at the poverty level, not living middle class lifestyles.
    - marknutter 11y ago
      But remember, living off the dole also means not contributing anything back to society. These people could be doing something of value, but are incentivized not to.
petra 11y ago
In competitive markets - short term you'll see inflation, long term prices come close to production costs(which are unaffected by inflation). But it may different for housing and uncomeptitive markets.

by TrevorJ 11y ago

jdmichal 11y ago

I often have the same inclination of thought with regards to university education and government-guaranteed student loans. If I'm a university executive, and I know that the average student can afford $X, and I know the average student can also receive a guaranteed $Y in student loans... Why would I not set my price at $(X+Y) and take the full rent that I can?

soperj 11y ago
Only works if every university does the same thing.
- amelius 11y ago
  Can you explain why "price creep" will not occur, i.e., universities increasing their prices with small amounts (say $10 a year), so that eventually, all of them will end up at (X+Y)$ ?
- TrevorJ 11y ago
  According to a study be the federal reserve, it actually is happening right now. Education isn't a commodity product so this kind of pricing doesn't require collusion between different schools.
TrevorJ 11y ago
A cursory search leads me to believe this may actually be happening: http://www.bloomberg.com/news/articles/2015-07-09/why-is-college-tuition-rising-blame-student-loans-fed-says http://www.bloomberg.com/news/articles/2015-07-09/why-is-col... http://www.businessadministrationinformation.com/news/study-shows-the-impact-of-student-loans-on-tuition-increases http://www.businessadministrationinformation.com/news/study-...

johnrob 11y ago

Inflation is the obvious issue here IMO. If basic income is X, then X really just becomes the new zero. We either need to provide products themselves (free food, housing, healthcare) or somehow lock the price of those things. I suspect both of those tactics will have identical challenges in terms of implementation though.

mjevans 11y ago
I continue to believe that the best way of 'locking' a price is to ensure that the market remains with the correct supply to buyer ratio. As an example: to decrease the cost of rent in a city, an increase in rent-able locations and attached commercial business and non-retail jobs need to be in those locations. This is also related to suggestions that say controlling medical care could be achieved by allowing more agents at all (doctors or not) to be able to treat obvious conditions. I agree that in the short term the suggestion would be viable, were it not for regulations; however I think that artificial diagnosis neural networks will probably achieve adoption before the regulations catch up.

simonh 11y ago

I think the cost of a lot of basic goods and services would fall. Employers would only need to offer relatively modest wages because the marginal value of those wages would be so much higher. This could drive down labour costs without driving down net pay for low wage workers. Basically a worker on $1,000/Mo now might be on $600/mo basic income and $600 wage after (fantasy numbers). This could make low wage workers much more affordable for employers leading to more employment and cheaper goods and services, leading to lower cost of living. A win for employees, won for employers and win for customers. Of course this is an idealised scenario, it would all need to be funded from higher overall taxation.

honksillet 11y ago
This is exactly wrong. The cost basic goods would increase. Basic Income would immediately have an inflationary effect as the money supply for these good would be expanded drastically. The Employer would not see as much benefit as you'd think as presumably he would be amongst the class of people/entities (including the middle class, upper class, and corporation) which would be paying for this indirectly in the form of taxes. Alternatively, if Basic income is debt finance (and not financed directly through taxes), incurring more debt also has inflationary effects.
- fnordfnordfnord 11y ago
  It may or may not be wrong. There will definitely be some inflation, but there will also be an equilibrium. It is also a possibility that if the UBI is adjusted accordingly, that the relative costs of things will remain roughly the same. As for whether employers will benefit, recognize that demand will also increase when those who were formerly impoverished begin consuming things. It is direct and distributed economic stimulus.
- simonh 11y ago
  I don't suppose it's guaranteed that the overall incomes of the lowest earners would actualy increase though. Maybe they would, but it's possible wages will fall and rents will rise to cancel that out. You may well be right about employers. Basic income isn't going to wish away all the problems of the poor. The main benefits are likely to be a simpler, fairer and more efficient benefits system and more opportunities for employment.

overcast 11y ago

Of course it does, it's the same thing with minimum wage increases. When businesses have to pay all of their employees more, that just doesn't come out of their pockets. Price increases across the board are passed down to customers.

cwe 11y ago
But businesses won't have to pay employees more. If anything, they can pay less because the UBI covers it. See @simonh's comment [0] to parent. [0] https://news.ycombinator.com/item?id=10982605 https://news.ycombinator.com/item?id=10982605

ascorbic 11y ago

The money for the basic income comes from taxation. Even though everyone would get it, higher tax rates on people with middle or high incomes would mean they were no better off, or worse off. This isn't supposed to be a way to make everyone $x per month better off, it's a way to change incentives and replace welfare.

marknutter 11y ago
What I'm curious about is what's stopping a large portion of the population from simply quitting their jobs to live off basic income, thus decreasing the potential pool from which taxes to pay for basic income can be extracted? If it really worked out like you say it would, where people with middle or high incomes are no better off, I wonder what they would think when suddenly large swathes of the population are able to live off the dole without busting their humps.
- learc83 11y ago
  >thus decreasing the potential pool from which taxes to pay for basic income can be extracted. Basic income proposals usually work something like this (numbers all made up, but close to those I've seen): Each person gets something around the poverty level (say $10k -$15k per year). The taxes that are raised to pay for it would increase gradually based on income up so that it would be a wash for someone making $55k a year, and once you start making more than $75k a year, you start paying more. If you look at those numbers anyone who decides they can live off of the basic income was unlikely to have been making enough to pay any federal income tax at all, much less enough to have been contributing to the extra UBI tax. > where people with middle or high incomes are no better off, I wonder what they would think when suddenly large swathes of the population are able to live off the dole without busting their humps. They will be living off the dole at the poverty level, not living middle class lifestyles.
  - marknutter 11y ago
    But remember, living off the dole also means not contributing anything back to society. These people could be doing something of value, but are incentivized not to.

petra 11y ago

In competitive markets - short term you'll see inflation, long term prices come close to production costs(which are unaffected by inflation). But it may different for housing and uncomeptitive markets.