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There's a significant difference between what happens when you give an intervention to part of a population and all of it. Specifically, the overall system they

There's a significant difference between what happens when you give an intervention to part of a population and all of it. Specifically, the overall system they're a part of will respond differently. Take education, for example. It's pretty obvious that getting a college degree will help any one individual out - everyone applies for jobs, and employers will look favorably on those with a college degree. The calculus changes when you make it way easier for everyone to get a college degree, since employers can't prefer everyone. I have a similar worry about UBI and other anti-poverty interventions. If the system is set up to squeeze the poor until they are inches away from starving or rioting, then an extra $500/yr will help any individual stuck there out by quite a lot. If you give everyone in that situation an extra $500/yr, I'm worried that what'll happen is that it gets sucked up by various landlords and rentiers. There's historical precedent for it, too - the lives of the American poor were not substantially improved by the vast amounts of excess wealth and productivity that let almost everyone off the farms.

DougN7 10y ago
Very well said - agree completely. It's all supply and demand. Giving everyone more of something will drive up demand. Prices will rise until equilibrium is reached again.
- hx87 10y ago
  UBIs are presumably funded by taxes though, which take at least as much money out of circulation as it puts back in. Given the prevailing climate of weak consumption and overinvestment/savings glut that's likely to continue as long as the process of automation and outsource to low-labor-cost countries does, increasing demand isn't a bad thing at all.
  - DougN7 10y ago
    That's an interesting thought. If automation and outsourcing keep happening, that should decrease the tax base as fewer people have work. That means less money to go to UBI. That sounds like a completely separate problem.
    - hx87 10y ago
      That's because taxing "work" is a silly idea when most work is done by machines and/or cheap foreigners. In the former case you tax wealth/production, and in the latter you tax imports.
- ThrustVectoring 10y ago
  Note that this is not necessarily an equilibrium where the welfare recipients are no better off. It depends on the negotiation position of the direct recipients compared to those that can extort wealth from them. If they've got no choice but to stay in a jurisdiction that has a police force that writes extortionate tickets backed up by a modern-day debtor's prison, the police system is going to squeeze that out of them. If it's straightforward to just pack up and leave to Montana or something, the police system won't push most people to that point. (Or they will, and it won't matter, because the people they're squeezing will be better off and in Montana.)
  - DougN7 10y ago
    But shouldn't that already be happening now? The poor today are already making a whole lot more than they were 100 years ago. The problem is inflation kept up (or passed) their increased income. I think the same will happen with UBI. It's kind of like the new Monopoly money in the modern version of the game -- they added a bunch of 0's to the end of the bill's value, but it didn't change anything.
    - ThrustVectoring 10y ago
      It's not inflation that I'm talking about. It's how much money goes to rent, or payday loans, or parking tickets, or court fees, or overdraft fees, or any other nickel-and-diming that claws wealth from the poor. There's a class of economic actors that can make life miserable for the poor unless they're given money, and if the poor have more money, the profit-maximizing price goes up and these rentiers wind up with the windfall.
- smogcutter 10y ago
  I'm not convinced that UBI would be canceled out by inflation (although I agree with GP that it would likely be captured by landlords). This is all extremely speculative, but my intuition is that in the population where UBI would have the most impact on spending power, the money would mostly replace or pay down debt rather than become new demand. Meanwhile you’re replacing almost all need-based aid, so for many people actual incomes aren’t rising as much as it seems. Then further up the scale, the smaller a portion of your income UBI represents the more of it will be invested/saved rather than spent. Maybe you take a vacation you otherwise wouldn’t, or replace your car a little sooner, but most of it is going towards the mortgage, retirement account or the kids college fund. So I obviously don’t have any numbers for this, and I’m not saying UBI is the answer or necessarily even a good idea. But I see no reason to believe the outcomes wouldn’t be way more complex than just pushing up a demand curve.
  - DougN7 10y ago
    But if UBI is the new norm, sooner or later all of the debt is paid off. Then what? Similarly with savings - after a few years of savings, people feel comfortable and want to live a little, and start spending. It might take a while, but I don't believe that the supply and demand effect will not occur.
    - smogcutter 10y ago
      The point isn't just that debt would be paid off. It’s that consumption would remain at a similar level, except instead of being funded by a combination of debt and aid it’s funded by UBI. For sure there'd be some inflation, I just wouldn't expect it to erase gains. After all, UBI would have to be funded by taxes in some form, so it’s not really “new” money entering the economy. On the other hand wouldn’t be surprised by a quick spike in rent, home prices and private college tuition. I have no idea whether UBI would actually be a good move, but it’s a lot of fun to game this stuff out. For example I wouldn’t be surprised if it led to better wages & conditions for unskilled labor, and maybe suppressed wages for higher earners. If you’re in a minimum wage job, UBI gives you a lot of leverage - you can quit without facing starvation. Companies would have to do more to attract and retain unskilled labor. On the other hand when you’ve got a mortgage, payments on the lexus and kids in private school, leaving your job to live on UBI alone isn’t really an option. Could also be that UBI lets you eliminate the minimum wage entirely and let the market sort it out.
linkregister 10y ago
> the lives of the American poor were not substantially improved by the vast amounts of excess wealth and productivity that let almost everyone off the farms. While it's likely that the opportunity to escape poverty is lower today than in the past, objectively things are far better today for the poor than at the turn of the 20th century when the U.S. economy was transitioning away from being heavily agrarian [1]. At that time, the poor had far less leisure, food security, and sanitation. I agree with the general sentiment of your comment; I am highly skeptical of UBI and assert that its extreme expense is not practical. Likewise, countries that offer free or low-cost college don't enjoy increased enrollment by students of low-income families [2]. 1. http://www.theatlantic.com/international/archive/2014/01/a-report-card-for-humanity-1900-2050/282928/ http://www.theatlantic.com/international/archive/2014/01/a-r... 2. http://www.reuters.com/article/us-education-oecd-idUSKBN0H41VW20140909 http://www.reuters.com/article/us-education-oecd-idUSKBN0H41...
- ThrustVectoring 10y ago
  I think we have a roughly equivalent picture of what changed for the poor, just different words to describe it. The actual work necessary to keep everyone fed and clothed fell by a factor of at least twenty, while the lot of the poor improved by something like a factor of two to five. They're far better off, sure, but far below the 1:1 ratio that non-systematic analysis will often assume for anti-poverty interventions.
- greysphere 10y ago
  Sorry, where does article [2] show a lack of correlation between low-cost college and low-income enrollment? The only comment that seemed relevant was the following, which implied the opposite: "In addition to less educational mobility, the United States, along with Japan, Germany, Austria and Estonia, has "less equitable access" to higher education, meaning that it's harder for people with lower socioeconomic status to attend college, the OECD's Schleicher said. That contrasts with countries such as Finland, Ireland, Australia and the Netherlands, which have both more equitable access to education and higher educational mobility, he said."
  - 10y ago
Mz 10y ago
Thank you for commenting. Poverty has more to do with a lack of rights, lack of knowledge, lack of connections, lack of opportunity, etc. Those things lead to a lack of money. Giving people money does not tend to resolve those issues, but resolving those issues leads to more money. I think the UBI is a terrible idea. It is a theoretically easy answer. In reality, it would do more harm than good, for a great many reasons.
- xg15 10y ago
  Giving people money does not tend to resolve those issues Didn't the study in this article hint at the exact opposite though?
  - Mz 10y ago
    Housing assistance is not the same thing as cash. Also, assisting poor families so they can raise their kids with more stability is not the same thing as just handing out money. The US needs to be doing a lot more for families than it currently does. We also need to actively work to solve the extreme lack of affordable housing generally. I don't understand how you are confusing housing assistance for poor families with minor children with just giving people money. These are very different things. Edit: I will add that we need to be doing more for families simply because they have minor children, completely unrelated to their income level. One of the problems in the US is that so much assistance is tied to being poor. This creates the nightmare situation we have where you have to continue to fail so you can continue to qualify for assistance. Assistsnce should be based on having human needs -- like a medical crisis or a dependent child or a handicap -- not on your income or lack thereof. This approach is generally more common in Europe and it is a more effective social safety net than one defined mostly by income level.
- mjevans 10y ago
  You are correct in that UBI alone won't magically solve the problem. I've thought that the primary goal for UBI is an attempt to solve wealth distribution inequality. Other things that also help with that issue are providing basic subsistence at a rate that the market is free to undercut; ideally also affordable with UBI. That would allow for competition, but provides a price cap for the market as well. If you say X cannot go above Y, or else the government will find a way to address this social need that society is not, then you can encourage competition while limiting predatory impacts.
deleted 10y ago
[deleted]
SilasX 10y ago
Winston Churchill gave the example of the time some do-gooders wanted to help the poor by buying out a bridge and eliminating the tolls. Afterward, rents went up by about the exact cost of daily use of the bridge. http://www.landvaluetax.org/current-affairs-comment/winston-churchill-said-it-all-better-then-we-can.html http://www.landvaluetax.org/current-affairs-comment/winston-...
zackmorris 10y ago
This is the old "raising everyone's income creates inflation" argument that is unfounded. Yes, there is the supply and demand curve that shows prices increasing with increasing wages. But those graphs don't show the percentage increase wrt incomes, which must be less than 100% because wages are less than 100% of the cost of a good or service (think about it). So rising incomes benefit buyers more than sellers. Since the wealthy control the means of production, it's easy to see where this notion came from. Inflation comes from printing money. Please stop conflating it with increases in demand or production (which is deflationary anyway under a constant money supply). I'm no economist and I'm not arguing the long-term monkey business that rent seekers will inflict on the poor, but that's a separate issue from simply giving people more money or a UBI. EDIT: Upon further thought I realized that increasing supply causing deflation is as untrue as increasing demand causing inflation.
- ThrustVectoring 10y ago
  I'm not making the inflation argument, perhaps I should have been more clear on that. I'm arguing against looking like you're helping the poor when the entire net result is giving rent-seekers more fat to squeeze.
  - zackmorris 10y ago
    Ah ok that's definitely an issue also, didn't mean to make assumptions.
naveen99 10y ago
degrees aren't education. More education for all is better and not a zero some game. Everyone knowing how to read and write and program is better than only some knowing. Everyone having some basic understanding of physiology enough to know when to seek medical care is better than some not knowing. There is a shortage of education in the world. Same with money and wealth. Computers have been getting cheaper making everyone wealthy. I don't care that google still has more computing power than me. I care that I have a 1000x more computing power for the price I had to pay 10 years ago. More wealth for everyone is good. Imagine if some fairy gave everyone 1gigawatt of power. It would be a net benefit to everyone. Landlords provide a service. The state also collects property tax which is similar to rent in exchange for some services. Lives of american poor are absolutely better than their farming ancestors.

DougN7 10y ago

Very well said - agree completely. It's all supply and demand. Giving everyone more of something will drive up demand. Prices will rise until equilibrium is reached again.

hx87 10y ago
UBIs are presumably funded by taxes though, which take at least as much money out of circulation as it puts back in. Given the prevailing climate of weak consumption and overinvestment/savings glut that's likely to continue as long as the process of automation and outsource to low-labor-cost countries does, increasing demand isn't a bad thing at all.
- DougN7 10y ago
  That's an interesting thought. If automation and outsourcing keep happening, that should decrease the tax base as fewer people have work. That means less money to go to UBI. That sounds like a completely separate problem.
  - hx87 10y ago
    That's because taxing "work" is a silly idea when most work is done by machines and/or cheap foreigners. In the former case you tax wealth/production, and in the latter you tax imports.
ThrustVectoring 10y ago
Note that this is not necessarily an equilibrium where the welfare recipients are no better off. It depends on the negotiation position of the direct recipients compared to those that can extort wealth from them. If they've got no choice but to stay in a jurisdiction that has a police force that writes extortionate tickets backed up by a modern-day debtor's prison, the police system is going to squeeze that out of them. If it's straightforward to just pack up and leave to Montana or something, the police system won't push most people to that point. (Or they will, and it won't matter, because the people they're squeezing will be better off and in Montana.)
- DougN7 10y ago
  But shouldn't that already be happening now? The poor today are already making a whole lot more than they were 100 years ago. The problem is inflation kept up (or passed) their increased income. I think the same will happen with UBI. It's kind of like the new Monopoly money in the modern version of the game -- they added a bunch of 0's to the end of the bill's value, but it didn't change anything.
  - ThrustVectoring 10y ago
    It's not inflation that I'm talking about. It's how much money goes to rent, or payday loans, or parking tickets, or court fees, or overdraft fees, or any other nickel-and-diming that claws wealth from the poor. There's a class of economic actors that can make life miserable for the poor unless they're given money, and if the poor have more money, the profit-maximizing price goes up and these rentiers wind up with the windfall.
smogcutter 10y ago
I'm not convinced that UBI would be canceled out by inflation (although I agree with GP that it would likely be captured by landlords). This is all extremely speculative, but my intuition is that in the population where UBI would have the most impact on spending power, the money would mostly replace or pay down debt rather than become new demand. Meanwhile you’re replacing almost all need-based aid, so for many people actual incomes aren’t rising as much as it seems. Then further up the scale, the smaller a portion of your income UBI represents the more of it will be invested/saved rather than spent. Maybe you take a vacation you otherwise wouldn’t, or replace your car a little sooner, but most of it is going towards the mortgage, retirement account or the kids college fund. So I obviously don’t have any numbers for this, and I’m not saying UBI is the answer or necessarily even a good idea. But I see no reason to believe the outcomes wouldn’t be way more complex than just pushing up a demand curve.
- DougN7 10y ago
  But if UBI is the new norm, sooner or later all of the debt is paid off. Then what? Similarly with savings - after a few years of savings, people feel comfortable and want to live a little, and start spending. It might take a while, but I don't believe that the supply and demand effect will not occur.
  - smogcutter 10y ago
    The point isn't just that debt would be paid off. It’s that consumption would remain at a similar level, except instead of being funded by a combination of debt and aid it’s funded by UBI. For sure there'd be some inflation, I just wouldn't expect it to erase gains. After all, UBI would have to be funded by taxes in some form, so it’s not really “new” money entering the economy. On the other hand wouldn’t be surprised by a quick spike in rent, home prices and private college tuition. I have no idea whether UBI would actually be a good move, but it’s a lot of fun to game this stuff out. For example I wouldn’t be surprised if it led to better wages & conditions for unskilled labor, and maybe suppressed wages for higher earners. If you’re in a minimum wage job, UBI gives you a lot of leverage - you can quit without facing starvation. Companies would have to do more to attract and retain unskilled labor. On the other hand when you’ve got a mortgage, payments on the lexus and kids in private school, leaving your job to live on UBI alone isn’t really an option. Could also be that UBI lets you eliminate the minimum wage entirely and let the market sort it out.

linkregister 10y ago

> the lives of the American poor were not substantially improved by the vast amounts of excess wealth and productivity that let almost everyone off the farms. While it's likely that the opportunity to escape poverty is lower today than in the past, objectively things are far better today for the poor than at the turn of the 20th century when the U.S. economy was transitioning away from being heavily agrarian [1]. At that time, the poor had far less leisure, food security, and sanitation. I agree with the general sentiment of your comment; I am highly skeptical of UBI and assert that its extreme expense is not practical. Likewise, countries that offer free or low-cost college don't enjoy increased enrollment by students of low-income families [2]. 1. http://www.theatlantic.com/international/archive/2014/01/a-report-card-for-humanity-1900-2050/282928/ http://www.theatlantic.com/international/archive/2014/01/a-r... 2. http://www.reuters.com/article/us-education-oecd-idUSKBN0H41VW20140909 http://www.reuters.com/article/us-education-oecd-idUSKBN0H41...

ThrustVectoring 10y ago
I think we have a roughly equivalent picture of what changed for the poor, just different words to describe it. The actual work necessary to keep everyone fed and clothed fell by a factor of at least twenty, while the lot of the poor improved by something like a factor of two to five. They're far better off, sure, but far below the 1:1 ratio that non-systematic analysis will often assume for anti-poverty interventions.
greysphere 10y ago
Sorry, where does article [2] show a lack of correlation between low-cost college and low-income enrollment? The only comment that seemed relevant was the following, which implied the opposite: "In addition to less educational mobility, the United States, along with Japan, Germany, Austria and Estonia, has "less equitable access" to higher education, meaning that it's harder for people with lower socioeconomic status to attend college, the OECD's Schleicher said. That contrasts with countries such as Finland, Ireland, Australia and the Netherlands, which have both more equitable access to education and higher educational mobility, he said."
- 10y ago

Mz 10y ago

Thank you for commenting. Poverty has more to do with a lack of rights, lack of knowledge, lack of connections, lack of opportunity, etc. Those things lead to a lack of money. Giving people money does not tend to resolve those issues, but resolving those issues leads to more money. I think the UBI is a terrible idea. It is a theoretically easy answer. In reality, it would do more harm than good, for a great many reasons.

xg15 10y ago
Giving people money does not tend to resolve those issues Didn't the study in this article hint at the exact opposite though?
- Mz 10y ago
  Housing assistance is not the same thing as cash. Also, assisting poor families so they can raise their kids with more stability is not the same thing as just handing out money. The US needs to be doing a lot more for families than it currently does. We also need to actively work to solve the extreme lack of affordable housing generally. I don't understand how you are confusing housing assistance for poor families with minor children with just giving people money. These are very different things. Edit: I will add that we need to be doing more for families simply because they have minor children, completely unrelated to their income level. One of the problems in the US is that so much assistance is tied to being poor. This creates the nightmare situation we have where you have to continue to fail so you can continue to qualify for assistance. Assistsnce should be based on having human needs -- like a medical crisis or a dependent child or a handicap -- not on your income or lack thereof. This approach is generally more common in Europe and it is a more effective social safety net than one defined mostly by income level.
mjevans 10y ago
You are correct in that UBI alone won't magically solve the problem. I've thought that the primary goal for UBI is an attempt to solve wealth distribution inequality. Other things that also help with that issue are providing basic subsistence at a rate that the market is free to undercut; ideally also affordable with UBI. That would allow for competition, but provides a price cap for the market as well. If you say X cannot go above Y, or else the government will find a way to address this social need that society is not, then you can encourage competition while limiting predatory impacts.

deleted 10y ago

[deleted]

SilasX 10y ago

Winston Churchill gave the example of the time some do-gooders wanted to help the poor by buying out a bridge and eliminating the tolls. Afterward, rents went up by about the exact cost of daily use of the bridge. http://www.landvaluetax.org/current-affairs-comment/winston-churchill-said-it-all-better-then-we-can.html http://www.landvaluetax.org/current-affairs-comment/winston-...

zackmorris 10y ago

This is the old "raising everyone's income creates inflation" argument that is unfounded. Yes, there is the supply and demand curve that shows prices increasing with increasing wages. But those graphs don't show the percentage increase wrt incomes, which must be less than 100% because wages are less than 100% of the cost of a good or service (think about it). So rising incomes benefit buyers more than sellers. Since the wealthy control the means of production, it's easy to see where this notion came from. Inflation comes from printing money. Please stop conflating it with increases in demand or production (which is deflationary anyway under a constant money supply). I'm no economist and I'm not arguing the long-term monkey business that rent seekers will inflict on the poor, but that's a separate issue from simply giving people more money or a UBI. EDIT: Upon further thought I realized that increasing supply causing deflation is as untrue as increasing demand causing inflation.

ThrustVectoring 10y ago
I'm not making the inflation argument, perhaps I should have been more clear on that. I'm arguing against looking like you're helping the poor when the entire net result is giving rent-seekers more fat to squeeze.
- zackmorris 10y ago
  Ah ok that's definitely an issue also, didn't mean to make assumptions.

naveen99 10y ago

degrees aren't education. More education for all is better and not a zero some game. Everyone knowing how to read and write and program is better than only some knowing. Everyone having some basic understanding of physiology enough to know when to seek medical care is better than some not knowing. There is a shortage of education in the world. Same with money and wealth. Computers have been getting cheaper making everyone wealthy. I don't care that google still has more computing power than me. I care that I have a 1000x more computing power for the price I had to pay 10 years ago. More wealth for everyone is good. Imagine if some fairy gave everyone 1gigawatt of power. It would be a net benefit to everyone. Landlords provide a service. The state also collects property tax which is similar to rent in exchange for some services. Lives of american poor are absolutely better than their farming ancestors.