5 ms·

What I want to know is whether Basic Income implemented with our current housing and laws about land ownership will just run afoul of the Henry George Theorem:

What I want to know is whether Basic Income implemented with our current housing and laws about land ownership will just run afoul of the Henry George Theorem: https://en.wikipedia.org/wiki/Henry_George_theorem https://en.wikipedia.org/wiki/Henry_George_theorem IE, the aggregate value of public spending in an area tends to soak into the land value -- give everybody $X,000 a year and the landlords will dutifully raise annual rents by $X,000.

gizmo686 11y ago
The Henry George Theorem talks about spending on public goods.
- larsiusprime 11y ago
  How is giving a blanket benefit to every citizen in an area not a public good?
  - robto 11y ago
    A public good is a technical term in economics. One useful way of categorizing goods is to place them along two axes - excludability and rivalry. Public goods are categorized non-excludable and non-rival. Non-excludable means you can't stop people who don't pay for the good from consuming it - like clean air. Non-rival means that one person's consumption of a good does not affect another person's. Digital goods are typically non-rival. A cash transfer doesn't really meet these conditions - it's excludable, in that you can restrict access to citizens or to whomever. And it's rival - there are only so many dollars to go around. That said, I think inflation is a very real concern for any basic income scheme.
    - boxy310 11y ago
      Agreed. Another way of looking at it is that a pure cash exchange would filter through the market demand for all goods, and as a result the nominal value of all goods would increase through the mechanism of inflation, not just land rents per the Henry George Theorem. However, there is an input consideration of identifying where this cash infusion is coming from, whether from printing money or from selling accrued assets on the open market (as what the YCombinator crew would probably be doing, if they don't already have liquid assets devoted to this endeavor).
  - deleted 11y ago
    [deleted]
- nwah1 11y ago
  True, although it aligns with the Law of Rent. And the Law of Rent is what shows that, when there is no freely available land, then land value gains tend to nullify any nominal increases in wages or interest from production. The only caveat is that there are other possible "rentiers" that can capture the rent before it winds up in land. Such as patents, barriers to entry, etc. But exclusive use of land is the first and most basic barrier to entry.
richardwhiuk 11y ago
Partially it will, but mostly it won't, because it won't be an aggregate change, as you will need to increase taxes to the middle and upper income thresholds in order to pay it. It also is being given people, not directly to the area, so if rents are raised in one area, people can move away from it. This isn't the case with infrastructure improvements such as road/rail/schools/electricity improvements. The likely effect will be that cheap housing will increase in price, but it will be bounded by moderate housing (i.e. for those people who don't see a real terms change in their post-tax/benefits income). The other point, is that that the sector most dramatically affected by this will be the homeless and unemployed. An interesting question is to what extent the basic income should be linked to inflation and differential cost of living (e.g. should it be more for people who live in San Francisco as San Francisco is expensive, or should it be equal because we don't care where people live).
- loumf 11y ago
  Linked to inflation is a must, I would think. The CoL problem is currently "solved" in Unemployment and Social Security by tying it to past wages (which probably correlate with this). I think we do need to replicate that in some way. A similar metric might be to tie it to the minimum wage of a region, which will hopefully capture inflation and CoL.
rhino369 11y ago
Won't that only work if the land is in high demand?
- bufordsharkley 11y ago
  It works as long as the land isn't effectively free. The theorem's theoretical basis is pretty spherical-cow: a government that governs land centered on a single point with people trying to minimize distance to the space. (Which is to say, it models best to the idea of a city-state rather than a federal government.)
logfromblammo 11y ago
I think it will. To avoid it, a significant portion of Basic Income would have to be paid out as goods and services vouchers with redemption limits. Rather than getting $50 a day as cash, you might get 4 nutritionally balanced but generally unpalatable meal rations, two payment vouchers for one day in one state-owned 250 sq.ft. housing capsule, 30 kWh of metered electricity, 100 gallons of potable water, 10 Gb of network bandwidth, etc. But you put redemption limits in place so that you can't use vouchers to pay for more than 1000 sq.ft. of capsules, 60 kWh of electricity, 200 gallons of water, or 20 Gb of electricity per day. It places limits on the amount of benefit any single person could suck out of the system at the expense of everyone else in it. The state would also have to be a major wholesale buyer for those things, and sometimes also set up and spin off new competitive suppliers, otherwise the incumbent suppliers might be able to jack up the price and capture a portion of the benefits intended for the end consumer. Taxes and subsidies have a different mechanism of action economically than the entry of a new supplier firm.
- taurath 11y ago
  If the basic tenants and studies that have called basic income into the forefront are to be believed (and the actual spectre of central state control that people are afraid of in some circumstances is real, and it is), the best way to benefit people in need is to give them cash. Most of the time, people spend it on things they need. If they don't, they are either suffering from a mental or addiction issue and need treatment, or they made mistakes and its their own damn fault, and nobody needs to pity them.
  - logfromblammo 11y ago
    But on a grand scale, where everybody knows that everyone is getting the same amount of free money, the market adjusts accordingly, within minutes. You can give 20 people $100 each to spend as they see fit, and it wouldn't affect the price of a Happy Meal. But if you give 100000 people $100 each, you can bet that the price of that food is going up a bit, just because more people can more easily afford a higher price. Subsidy affects market equilibria differently than using the same amount of resources to lower costs or increase supplier firms, or do industry-advocacy advertising.
bcheung 11y ago
Will it cause inflation, probably. But they don't have to live in the most expensive areas. They can move to a cheaper area. There will be places above and below the inflation curve. Housing is the largest expense so other things would not be affected as much.

gizmo686 11y ago

The Henry George Theorem talks about spending on public goods.

larsiusprime 11y ago
How is giving a blanket benefit to every citizen in an area not a public good?
- robto 11y ago
  A public good is a technical term in economics. One useful way of categorizing goods is to place them along two axes - excludability and rivalry. Public goods are categorized non-excludable and non-rival. Non-excludable means you can't stop people who don't pay for the good from consuming it - like clean air. Non-rival means that one person's consumption of a good does not affect another person's. Digital goods are typically non-rival. A cash transfer doesn't really meet these conditions - it's excludable, in that you can restrict access to citizens or to whomever. And it's rival - there are only so many dollars to go around. That said, I think inflation is a very real concern for any basic income scheme.
  - boxy310 11y ago
    Agreed. Another way of looking at it is that a pure cash exchange would filter through the market demand for all goods, and as a result the nominal value of all goods would increase through the mechanism of inflation, not just land rents per the Henry George Theorem. However, there is an input consideration of identifying where this cash infusion is coming from, whether from printing money or from selling accrued assets on the open market (as what the YCombinator crew would probably be doing, if they don't already have liquid assets devoted to this endeavor).
- deleted 11y ago
  [deleted]
nwah1 11y ago
True, although it aligns with the Law of Rent. And the Law of Rent is what shows that, when there is no freely available land, then land value gains tend to nullify any nominal increases in wages or interest from production. The only caveat is that there are other possible "rentiers" that can capture the rent before it winds up in land. Such as patents, barriers to entry, etc. But exclusive use of land is the first and most basic barrier to entry.

richardwhiuk 11y ago

Partially it will, but mostly it won't, because it won't be an aggregate change, as you will need to increase taxes to the middle and upper income thresholds in order to pay it. It also is being given people, not directly to the area, so if rents are raised in one area, people can move away from it. This isn't the case with infrastructure improvements such as road/rail/schools/electricity improvements. The likely effect will be that cheap housing will increase in price, but it will be bounded by moderate housing (i.e. for those people who don't see a real terms change in their post-tax/benefits income). The other point, is that that the sector most dramatically affected by this will be the homeless and unemployed. An interesting question is to what extent the basic income should be linked to inflation and differential cost of living (e.g. should it be more for people who live in San Francisco as San Francisco is expensive, or should it be equal because we don't care where people live).

loumf 11y ago
Linked to inflation is a must, I would think. The CoL problem is currently "solved" in Unemployment and Social Security by tying it to past wages (which probably correlate with this). I think we do need to replicate that in some way. A similar metric might be to tie it to the minimum wage of a region, which will hopefully capture inflation and CoL.

rhino369 11y ago

Won't that only work if the land is in high demand?

bufordsharkley 11y ago
It works as long as the land isn't effectively free. The theorem's theoretical basis is pretty spherical-cow: a government that governs land centered on a single point with people trying to minimize distance to the space. (Which is to say, it models best to the idea of a city-state rather than a federal government.)

logfromblammo 11y ago

I think it will. To avoid it, a significant portion of Basic Income would have to be paid out as goods and services vouchers with redemption limits. Rather than getting $50 a day as cash, you might get 4 nutritionally balanced but generally unpalatable meal rations, two payment vouchers for one day in one state-owned 250 sq.ft. housing capsule, 30 kWh of metered electricity, 100 gallons of potable water, 10 Gb of network bandwidth, etc. But you put redemption limits in place so that you can't use vouchers to pay for more than 1000 sq.ft. of capsules, 60 kWh of electricity, 200 gallons of water, or 20 Gb of electricity per day. It places limits on the amount of benefit any single person could suck out of the system at the expense of everyone else in it. The state would also have to be a major wholesale buyer for those things, and sometimes also set up and spin off new competitive suppliers, otherwise the incumbent suppliers might be able to jack up the price and capture a portion of the benefits intended for the end consumer. Taxes and subsidies have a different mechanism of action economically than the entry of a new supplier firm.

taurath 11y ago
If the basic tenants and studies that have called basic income into the forefront are to be believed (and the actual spectre of central state control that people are afraid of in some circumstances is real, and it is), the best way to benefit people in need is to give them cash. Most of the time, people spend it on things they need. If they don't, they are either suffering from a mental or addiction issue and need treatment, or they made mistakes and its their own damn fault, and nobody needs to pity them.
- logfromblammo 11y ago
  But on a grand scale, where everybody knows that everyone is getting the same amount of free money, the market adjusts accordingly, within minutes. You can give 20 people $100 each to spend as they see fit, and it wouldn't affect the price of a Happy Meal. But if you give 100000 people $100 each, you can bet that the price of that food is going up a bit, just because more people can more easily afford a higher price. Subsidy affects market equilibria differently than using the same amount of resources to lower costs or increase supplier firms, or do industry-advocacy advertising.

bcheung 11y ago

Will it cause inflation, probably. But they don't have to live in the most expensive areas. They can move to a cheaper area. There will be places above and below the inflation curve. Housing is the largest expense so other things would not be affected as much.