6 ms·

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

by 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.

by 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.