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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 sp

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.
  - mamon 10y ago
    No, debt won't be paid off, because the only realistic way of financing UBI is generating more debt through government bonds. And that, just like Quantitive Easing, will only create another market bubble followed by another financial crisis.
    - smogcutter 10y ago
      Maybe yes maybe no, but that's unrelated to people paying off their credit cards. Funding an expense like that with bonds really only makes sense to me if you expect it to result in growth (in which case its not necessarily a problem), but even in that case it sounds very inflationary. More so than UBI itself. I'm no good at macro though, and will happily say that at this point I'm arguing out of my depth, along with anyone who makes an argument without numbers behind it.

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.
- mamon 10y ago
  No, debt won't be paid off, because the only realistic way of financing UBI is generating more debt through government bonds. And that, just like Quantitive Easing, will only create another market bubble followed by another financial crisis.
  - smogcutter 10y ago
    Maybe yes maybe no, but that's unrelated to people paying off their credit cards. Funding an expense like that with bonds really only makes sense to me if you expect it to result in growth (in which case its not necessarily a problem), but even in that case it sounds very inflationary. More so than UBI itself. I'm no good at macro though, and will happily say that at this point I'm arguing out of my depth, along with anyone who makes an argument without numbers behind it.