3 ms·
In general, I agree, but there is a cost to such regulation in the sense that it would make banks more wary to lend to legitimate borrowers on the promise of fu
by jjxw 11y ago
In general, I agree, but there is a cost to such regulation in the sense that it would make banks more wary to lend to legitimate borrowers on the promise of future basic income payments. Making it illegal to seize basic income assets in the event of default creates a classic adverse selection problem where bad actors will have incentives to attempt to take a loan.
That being said, the point of a basic income in the first place is to introduce financial stability to all households so any costs associated with preventing lending on basic income collateral may be societally optimal.
- icebraining 11y agoAdverse selection happens when the borrower knows more than the loaner, no? Why would that happen here? Banks and other credit institutions already force you to prove that you have assets and/or income; here they would do the exact same thing, just disregarding the BI.
- jjxw 11y agoAh, you are correct. The term I was actually looking for is moral hazard. The reason why banks require evidence of ability to repay the loan is because, without them, there would be a huge incentive for borrowers to take loans without paying them back. This is where the adverse selection comes in - the information asymmetry results from the borrowers knowing what their intent for the loan is and the incentive to mislead the lender. This leads to lenders being more wary (and implementing requirements) when issuing loans.
- desireco42 11y agoMaybe you didn't read it completely or I was not clear, I would just make it illegal to lend money expecting it to be paid by basic income. Anyone getting basic income should be completely free to spend it any way they want. That is essential.
- dawnbreez 11y ago>Anyone getting basic income should be completely free to spend it any way they want. Such as to pay off a loan? Therein lies the problem: if you make it illegal to lend money explicitly based on BI, and the debtor pays with BI, who is liable? And if someone is liable, is the debtor truly free to spend BI as they wish? If nobody is liable, then what stops me from claiming that my BI is instead my paycheck, and then taking a loan based on it?