5 ms·

Can you explain to me, because I've never understood fully, how if we give everyone some lump sum amount (which I agree is the desirable vs. means testing etc.)

by PKop 10y ago

Can you explain to me, because I've never understood fully, how if we give everyone some lump sum amount (which I agree is the desirable vs. means testing etc.), how it won't result in inflation of prices whereby it will be the equivalent of dropping money out of a helicopter, everyone gets equal cut.... prices rise correspondingly, and real purchasing power does not change at all?

keebEz 10y ago
More demand does not always result in higher prices. Price depends on the elasticity of supply for all of the different goods as well. Some might increase, while others wouldn't.
- tonyedgecombe 10y ago
  Probably the most significant cost for most people is housing and that does seem to have an in-elastic supply. My guess is this is where the money will go. We have seen an element of this in the UK where housing benefit largely ended up in the laps of landlords.
  - aianus 10y ago
    If you don't need a job, you don't have to live in the city with everyone else. There's plenty of cheap empty land you could live on.
    - jdavis703 10y ago
      There are other reasons to live in a city besides a job. I imagine that as we move toward a "jobless" future cultural and scientific output will increase, and you'll still want to be around the people who are doing the "cool stuff."
      - aianus 10y ago
        You'll want to, but you won't be able to afford it. In a future with UBI the city will be for employed people only.
      - ebalit 10y ago
        But you will have the choice. Also, I imagine that a jobless future will be heavily automated. Cheap autonomous transportation might expand the housing area with sustainable commute. Even more so if you can work remotely part-time and shorter hours.
      - aninhumer 10y ago
        But when you're not spending 40+ hours a week working, an hour long journey to do cool stuff isn't as big a deal. And besides, I think a most of the other people doing cool stuff will want cheaper accommodation as well, and over time particular kinds of cool stuff will congregate in different smaller towns.
  - Bartweiss 10y ago
    Elizabeth Warren of all people has focused on this as a problem in the US also. The move from single-income to double-income families produced far less than a doubled standard of living, but it drove housing prices sky high. It's an interesting natural experiment for what we might see with UBI programs (which act a lot like adding a 'free' wage-earner to each household).
mjevans 10y ago
Let's for a moment make a thought experiment. Everyone just magically has enough money to buy 'the basics', but can't use the money for anything else, in fact they never see the total. What happens the the price of 'the basics' then? What happens when everyone can afford to not be wanting? There are probably 'better' basics, for example penthouse apartments, but those will are all already above basic, so buying caviar or high end steak might be off the table. What would happen if demand is just met? The money would need to be spent anyway, these are basics. Not having spent it would result in what? More crime, more jail time, worse medical outcomes? All of that sounds like expense to the population at large, in the form of emergencies that use social safety nets. I think the argument for UBI / BIG is that it identifies the root cause of the expenses and attempts to just fix the problem (by, for example, having a basic minimum of housing, or in the case of areas where housing costs too much; causing more housing to be built).
- tdfx 10y ago
  I think the other poster's argument is that the price of the basics will be artificially inflated as those sellers know that low income/basic income people have additional money to spend on required items. The price of a penthouse apartment will not increase, but a slumlord that knows the government will be mailing checks to everyone would certainly have no qualms with raising the rent by a few hundred dollars to accommodate the extra income he knows his tenants have available. EDIT: To add to this, it's worth pointing out that many corner stores in low income neighborhoods already take advantage of peoples' lack of access to easy transportation to charge unusually high prices for common convenience store items. It's already more expensive to be poor, and I think basic income would just increase the predatory practices that are already happening.
  - nikdaheratik 10y ago
    I agree that it's hard to say what would happen with regards to rent seekers, but corner stores aren't in the same situation. Their increased costs are either due to the rents being increased by the person who owns the building, or the simple fact that they do not have economies of scale so they end up with higher prices on the items that don't expire quickly in order to make a profit as they won't make much off of gasoline or milk, for example. There are plenty of discount stores that are working their way in, e.g. Dollar General, Family Dollar, but they don't have control over the rents either and in alot of larger cities they also are facing opposition from the small businesses that would be out of business since they would have no chance of competing on price at that point. Whether having every small bodega or other small retail shop replaced by 7-11, Dollar General, Family Dollar, etc. and yet another avenue for access to the middle class shutdown is worth the affordable prices for everyone else is debatable. I can see both sides of this anyways.
deleted 10y ago
[deleted]
aninhumer 10y ago
If prices rise in perfect proportion to the new income, that means there's something severely restricting supply, otherwise price competition would force them down again. Or alternatively the stores could compete by offering better service, in which case people benefit from that.
billmalarky 10y ago
The money doesn't come off the printing press out of thin air, it's a redistribution of wealth. That is, additional wealth (or currency which is an abstraction of wealth) isn't created, it is redistributed. That wealth can be used to consume the same amount of goods/services that it could have before the redistribution, but now many users get to make those consumption choices instead of one or few. Yes, this redistribution will have a massive impact on the _pricing_ of different goods and services within an overall market. However, total wealth (ability to consume in aggregate) will remain the same within that market.
matt4077 10y ago
Inflation has more to do with the amount of money in circulation. If you finance with taxes and not debt, the value would stay constant. But a bit of inflation may not be the worst thing – the current almost-deflation is a lot worse and both private and public debts could finally be lowered. Unfortunately, it's a pretty imprecise mechanisms and there are some people that suffer disproportionally such as those around retirement age getting fixed pensions.

by PKop 10y ago

keebEz 10y ago

More demand does not always result in higher prices. Price depends on the elasticity of supply for all of the different goods as well. Some might increase, while others wouldn't.

tonyedgecombe 10y ago
Probably the most significant cost for most people is housing and that does seem to have an in-elastic supply. My guess is this is where the money will go. We have seen an element of this in the UK where housing benefit largely ended up in the laps of landlords.
- aianus 10y ago
  If you don't need a job, you don't have to live in the city with everyone else. There's plenty of cheap empty land you could live on.
  - jdavis703 10y ago
    There are other reasons to live in a city besides a job. I imagine that as we move toward a "jobless" future cultural and scientific output will increase, and you'll still want to be around the people who are doing the "cool stuff."
    - aianus 10y ago
      You'll want to, but you won't be able to afford it. In a future with UBI the city will be for employed people only.
    - ebalit 10y ago
      But you will have the choice. Also, I imagine that a jobless future will be heavily automated. Cheap autonomous transportation might expand the housing area with sustainable commute. Even more so if you can work remotely part-time and shorter hours.
    - aninhumer 10y ago
      But when you're not spending 40+ hours a week working, an hour long journey to do cool stuff isn't as big a deal. And besides, I think a most of the other people doing cool stuff will want cheaper accommodation as well, and over time particular kinds of cool stuff will congregate in different smaller towns.
- Bartweiss 10y ago
  Elizabeth Warren of all people has focused on this as a problem in the US also. The move from single-income to double-income families produced far less than a doubled standard of living, but it drove housing prices sky high. It's an interesting natural experiment for what we might see with UBI programs (which act a lot like adding a 'free' wage-earner to each household).

mjevans 10y ago

Let's for a moment make a thought experiment. Everyone just magically has enough money to buy 'the basics', but can't use the money for anything else, in fact they never see the total. What happens the the price of 'the basics' then? What happens when everyone can afford to not be wanting? There are probably 'better' basics, for example penthouse apartments, but those will are all already above basic, so buying caviar or high end steak might be off the table. What would happen if demand is just met? The money would need to be spent anyway, these are basics. Not having spent it would result in what? More crime, more jail time, worse medical outcomes? All of that sounds like expense to the population at large, in the form of emergencies that use social safety nets. I think the argument for UBI / BIG is that it identifies the root cause of the expenses and attempts to just fix the problem (by, for example, having a basic minimum of housing, or in the case of areas where housing costs too much; causing more housing to be built).

tdfx 10y ago
I think the other poster's argument is that the price of the basics will be artificially inflated as those sellers know that low income/basic income people have additional money to spend on required items. The price of a penthouse apartment will not increase, but a slumlord that knows the government will be mailing checks to everyone would certainly have no qualms with raising the rent by a few hundred dollars to accommodate the extra income he knows his tenants have available. EDIT: To add to this, it's worth pointing out that many corner stores in low income neighborhoods already take advantage of peoples' lack of access to easy transportation to charge unusually high prices for common convenience store items. It's already more expensive to be poor, and I think basic income would just increase the predatory practices that are already happening.
- nikdaheratik 10y ago
  I agree that it's hard to say what would happen with regards to rent seekers, but corner stores aren't in the same situation. Their increased costs are either due to the rents being increased by the person who owns the building, or the simple fact that they do not have economies of scale so they end up with higher prices on the items that don't expire quickly in order to make a profit as they won't make much off of gasoline or milk, for example. There are plenty of discount stores that are working their way in, e.g. Dollar General, Family Dollar, but they don't have control over the rents either and in alot of larger cities they also are facing opposition from the small businesses that would be out of business since they would have no chance of competing on price at that point. Whether having every small bodega or other small retail shop replaced by 7-11, Dollar General, Family Dollar, etc. and yet another avenue for access to the middle class shutdown is worth the affordable prices for everyone else is debatable. I can see both sides of this anyways.

deleted 10y ago

[deleted]

aninhumer 10y ago

If prices rise in perfect proportion to the new income, that means there's something severely restricting supply, otherwise price competition would force them down again. Or alternatively the stores could compete by offering better service, in which case people benefit from that.

billmalarky 10y ago

The money doesn't come off the printing press out of thin air, it's a redistribution of wealth. That is, additional wealth (or currency which is an abstraction of wealth) isn't created, it is redistributed. That wealth can be used to consume the same amount of goods/services that it could have before the redistribution, but now many users get to make those consumption choices instead of one or few. Yes, this redistribution will have a massive impact on the _pricing_ of different goods and services within an overall market. However, total wealth (ability to consume in aggregate) will remain the same within that market.

matt4077 10y ago

Inflation has more to do with the amount of money in circulation. If you finance with taxes and not debt, the value would stay constant. But a bit of inflation may not be the worst thing – the current almost-deflation is a lot worse and both private and public debts could finally be lowered. Unfortunately, it's a pretty imprecise mechanisms and there are some people that suffer disproportionally such as those around retirement age getting fixed pensions.