4 ms·

Have there been any studies on the impact to prices on staple foods? Because if everyone can afford food and basic items for living, does that mean the prices

Have there been any studies on the impact to prices on staple foods? Because if everyone can afford food and basic items for living, does that mean the prices for these items will go sky high? Especially as supply will be short of demand?

probablybroken 10y ago
Price inflation of basic necessities is my major concern with BI schemes, I get the impression that noone really wants to discuss the other systems such as price fixing, and nationalisation of many services that would need to be deployed in parallel with basic income to prevent this from happening.
- jerf 10y ago
  Because for all that some people may still vigorously claim otherwise, we all have pretty much come to grips with the fact that Communism doesn't work. If BI only works with price fixing and extensive nationalization, that's equivalent to saying it doesn't work. "Price fixing and extensive nationalization" has been tried. A lot. The signal is pretty clear. (Note my "if". I'm only giving an "A -> B" statement, I'm not claiming A itself must be true.)
  - probablybroken 10y ago
    I'd say that the single minded pursuit of any political ideology to it's logical conclusion has been proven not to work. I think this applies in both perceived directions.
  - ssharp 10y ago
    If you strip away the shell-game effect in BI (working people pay in $x and get back <$x) and remove unknown economic issues like inflation, you end up with essentially the welfare system the U.S. has today. We provide the poor with subsidized food, medical, housing, child care, etc. We provide the elderly with income streams and medical care. We provide income for the permanently disabled. I'm not so sure an expanded welfare system and single-payer healthcare isn't a better alternative than BI. BI seems to support a privileged ideal that "I shouldn't have to work in order to pursue my interests" that I'm not certain fits into any sort of healthy capitalist economy.
GordonS 10y ago
Someone please correct me if I'm wrong, but I seem to recall Indian colleagues telling me that the India government sets maximum prices for certain basic foodstuffs, such as rice or flour?
- kranner 10y ago
  That's only in so-called 'fair price shops'. In practical terms they run out of (or claim to run out of) foodgrains before demand is met. This subsidised material is then sold for a profit illicitly. The same scam happens in e.g. subsidised medicines. https://en.wikipedia.org/wiki/Public_distribution_system https://en.wikipedia.org/wiki/Public_distribution_system
  - jerf 10y ago
    Even if there wasn't any fraud involved, the expected result of forcing prices for the end-consumer below the market price is shortages for the end-consumer. Since people often tend to mentally model the non-end-consumer part of the chain as having infinite supply (since in their day-to-day lives it appears to be the case) in their mind, that is often counter-intuitive. It may be easier to understand the flip side of the same principle, which is that if you hold the price above the market price, you'll end up with excesses left unsold, because insufficient numbers of consumers want to buy at that price. Since this is phrased in terms of the end-consumers not wanting to spend more than they want to, it's less counter-intuitive, and perhaps less politically offensive to some's sensibilities. But it's the exact same effect.
deleted 10y ago
[deleted]
drabiega 10y ago
You seem to be assuming that supply won't grow to accommodate expected demand, could you elaborate on why?
- nashashmi 10y ago
  I have seen this happen in Pakistan during the years of Musharraf's presidency. The economy was moving up and more investments were coming in. More money was flowing. The prices of local products went up, especially food. Of course, more foreign products also made their way into the country. Some people were profiting from this movement, but the people who were poor could not benefit and they sunk deeper and went hungrier. The supply of food was never able to meet demand, so prices are still high even now. Income never went up as much to compensate for the higher prices. Something about the mechanics of price setting got stuck somewhere. It is difficult to say where though: policy, trade, corruption, inflation, deflation, waste, or maybe it was technological limits. But the answer is more complicated than supply will grow to meet demand. My theory is that a stagnant poor economy brought greater equilibrium to wealth distribution. When the economic conditions were sustained, people achieved social efficiencies in trying to save the supply of products and squeeze more out of less. When the economy exploded, waste increased, and demand was never met, either for reasons where people switched trades and could not switch back, excessive trade costs kept prices high, or maybe prices only go down in times of recession. If I reversed the question now though, I would ask why cannot current prices go down to accommodate for greater demand (even if the demand is financially weak).
  - drabiega 10y ago
    The changes you describe are very different than something like introducing BI and I would expect them to do pretty much what you describe. Prices are very sensitive to the distribution of income, so while external capital investment may increase demand for labor and increase agricultural productivity, it also skews production away from agriculture. This is also the answer to your closing question: Since those who need the basic foodstuffs are financially weak and becoming increasingly so as the proportion of income shifts away from them, the proportion of capacity allocated to producing food for them decreases. In a UBI scheme, the exact opposite happens. The allocation of income is shifted downwards, so the allocation of production shifts accordingly.
bryanlarsen 10y ago
Why would demand for staple foods shoot up? Sure, there's some hunger in India, but AFAICT most people are already getting most of the calories they need. If anything, I would would think demand for basic staples would go down as people switch away from the cheapest of foods to better ones.
- addicted 10y ago
  > Sure, there's some hunger in India, but AFAICT most people are already getting most of the calories they need. I'm pretty sure this is very wrong. Quick search brought up the following: http://www.worldhunger.org/2015-world-hunger-and-poverty-facts-and-statistics/ http://www.worldhunger.org/2015-world-hunger-and-poverty-fac... > Hunger continues to take its largest toll in Southern Asia, which includes the countries of India, Pakistan and Bangladesh. The estimate of 276 million chronically undernourished people in 2014–16 is only marginally lower than the number in 1990– 92.
  - bryanlarsen 10y ago
    Assuming that "chronically undernourished" means they're only consuming half the calories they need, and given that rice is a global commodity, that means an increase of demand of ~2%. That's insignificant compared to supply shocks caused by weather which can affect supply +/- 50%.
  - pkaye 10y ago
    The average calorie intake in India is 2360. (https://en.wikipedia.org/wiki/List_of_countries_by_food_energy_intake https://en.wikipedia.org/wiki/List_of_countries_by_food_ener...) The minimum recommend is 1800. That means either a vast number have an adequate calorie intake or there are a few "Bill Gates of calorie intake" in India. I think the first is more likely.
  - gumby 10y ago
    Worse, India (the nation) wastes a huge percentage of the food grown due to poor infrastructure (bad roads, limited refrigeration in the godowns, etc). Also it's expensive to be poor: poor people in every country have to make a lot of bad-in-the-long-term tradeoffs due to transaction costs and loss of economies of scale (e.g. can't afford the savings of bulk buying). When people have an opportunity reduce their base survival worry there's a chance they can fix some of the bigger problems. I don't think the Maslow hierarchy is terribly insightful but it's the right argument here: some problems are simply unfixable when you are busy worrying that you will starve to death.
perfunctory 10y ago
"Because if everyone can afford food and basic items for living", the economic collapse is unavoidable. How did we develop this notion that the economy can function well only when a portion of the population balances on the edge of starvation.
- Frondo 10y ago
  Cynical answer: because the people who benefit most from the status quo tend to be the people who either own media or can get their ideas out into the media most easily...
- eli_gottlieb 10y ago
  >How did we develop this notion that the economy can function well only when a portion of the population balances on the edge of starvation. "Pure ideology", a belief that's more moral than factual. You see, we have to discipline the lower classes into working hard, therefore they must live on the edge of starvation, therefore not attaining this disciplined state will inevitably collapse the economy. The causal connection is conjured from air to support the desired policy.
austincheney 10y ago
No. You need to understand the economics of commodities opposed to individualized goods for this to really make sense. Greater access to a commodity will often reduce its costs as it means greater consumption and increased market penetration to satisfy (and thus stabilize) its demand and thus development.

probablybroken 10y ago

Price inflation of basic necessities is my major concern with BI schemes, I get the impression that noone really wants to discuss the other systems such as price fixing, and nationalisation of many services that would need to be deployed in parallel with basic income to prevent this from happening.

jerf 10y ago
Because for all that some people may still vigorously claim otherwise, we all have pretty much come to grips with the fact that Communism doesn't work. If BI only works with price fixing and extensive nationalization, that's equivalent to saying it doesn't work. "Price fixing and extensive nationalization" has been tried. A lot. The signal is pretty clear. (Note my "if". I'm only giving an "A -> B" statement, I'm not claiming A itself must be true.)
- probablybroken 10y ago
  I'd say that the single minded pursuit of any political ideology to it's logical conclusion has been proven not to work. I think this applies in both perceived directions.
- ssharp 10y ago
  If you strip away the shell-game effect in BI (working people pay in $x and get back <$x) and remove unknown economic issues like inflation, you end up with essentially the welfare system the U.S. has today. We provide the poor with subsidized food, medical, housing, child care, etc. We provide the elderly with income streams and medical care. We provide income for the permanently disabled. I'm not so sure an expanded welfare system and single-payer healthcare isn't a better alternative than BI. BI seems to support a privileged ideal that "I shouldn't have to work in order to pursue my interests" that I'm not certain fits into any sort of healthy capitalist economy.

GordonS 10y ago

Someone please correct me if I'm wrong, but I seem to recall Indian colleagues telling me that the India government sets maximum prices for certain basic foodstuffs, such as rice or flour?

kranner 10y ago
That's only in so-called 'fair price shops'. In practical terms they run out of (or claim to run out of) foodgrains before demand is met. This subsidised material is then sold for a profit illicitly. The same scam happens in e.g. subsidised medicines. https://en.wikipedia.org/wiki/Public_distribution_system https://en.wikipedia.org/wiki/Public_distribution_system
- jerf 10y ago
  Even if there wasn't any fraud involved, the expected result of forcing prices for the end-consumer below the market price is shortages for the end-consumer. Since people often tend to mentally model the non-end-consumer part of the chain as having infinite supply (since in their day-to-day lives it appears to be the case) in their mind, that is often counter-intuitive. It may be easier to understand the flip side of the same principle, which is that if you hold the price above the market price, you'll end up with excesses left unsold, because insufficient numbers of consumers want to buy at that price. Since this is phrased in terms of the end-consumers not wanting to spend more than they want to, it's less counter-intuitive, and perhaps less politically offensive to some's sensibilities. But it's the exact same effect.

deleted 10y ago

[deleted]

drabiega 10y ago

You seem to be assuming that supply won't grow to accommodate expected demand, could you elaborate on why?

nashashmi 10y ago
I have seen this happen in Pakistan during the years of Musharraf's presidency. The economy was moving up and more investments were coming in. More money was flowing. The prices of local products went up, especially food. Of course, more foreign products also made their way into the country. Some people were profiting from this movement, but the people who were poor could not benefit and they sunk deeper and went hungrier. The supply of food was never able to meet demand, so prices are still high even now. Income never went up as much to compensate for the higher prices. Something about the mechanics of price setting got stuck somewhere. It is difficult to say where though: policy, trade, corruption, inflation, deflation, waste, or maybe it was technological limits. But the answer is more complicated than supply will grow to meet demand. My theory is that a stagnant poor economy brought greater equilibrium to wealth distribution. When the economic conditions were sustained, people achieved social efficiencies in trying to save the supply of products and squeeze more out of less. When the economy exploded, waste increased, and demand was never met, either for reasons where people switched trades and could not switch back, excessive trade costs kept prices high, or maybe prices only go down in times of recession. If I reversed the question now though, I would ask why cannot current prices go down to accommodate for greater demand (even if the demand is financially weak).
- drabiega 10y ago
  The changes you describe are very different than something like introducing BI and I would expect them to do pretty much what you describe. Prices are very sensitive to the distribution of income, so while external capital investment may increase demand for labor and increase agricultural productivity, it also skews production away from agriculture. This is also the answer to your closing question: Since those who need the basic foodstuffs are financially weak and becoming increasingly so as the proportion of income shifts away from them, the proportion of capacity allocated to producing food for them decreases. In a UBI scheme, the exact opposite happens. The allocation of income is shifted downwards, so the allocation of production shifts accordingly.

bryanlarsen 10y ago

Why would demand for staple foods shoot up? Sure, there's some hunger in India, but AFAICT most people are already getting most of the calories they need. If anything, I would would think demand for basic staples would go down as people switch away from the cheapest of foods to better ones.

addicted 10y ago
> Sure, there's some hunger in India, but AFAICT most people are already getting most of the calories they need. I'm pretty sure this is very wrong. Quick search brought up the following: http://www.worldhunger.org/2015-world-hunger-and-poverty-facts-and-statistics/ http://www.worldhunger.org/2015-world-hunger-and-poverty-fac... > Hunger continues to take its largest toll in Southern Asia, which includes the countries of India, Pakistan and Bangladesh. The estimate of 276 million chronically undernourished people in 2014–16 is only marginally lower than the number in 1990– 92.
- bryanlarsen 10y ago
  Assuming that "chronically undernourished" means they're only consuming half the calories they need, and given that rice is a global commodity, that means an increase of demand of ~2%. That's insignificant compared to supply shocks caused by weather which can affect supply +/- 50%.
- pkaye 10y ago
  The average calorie intake in India is 2360. (https://en.wikipedia.org/wiki/List_of_countries_by_food_energy_intake https://en.wikipedia.org/wiki/List_of_countries_by_food_ener...) The minimum recommend is 1800. That means either a vast number have an adequate calorie intake or there are a few "Bill Gates of calorie intake" in India. I think the first is more likely.
- gumby 10y ago
  Worse, India (the nation) wastes a huge percentage of the food grown due to poor infrastructure (bad roads, limited refrigeration in the godowns, etc). Also it's expensive to be poor: poor people in every country have to make a lot of bad-in-the-long-term tradeoffs due to transaction costs and loss of economies of scale (e.g. can't afford the savings of bulk buying). When people have an opportunity reduce their base survival worry there's a chance they can fix some of the bigger problems. I don't think the Maslow hierarchy is terribly insightful but it's the right argument here: some problems are simply unfixable when you are busy worrying that you will starve to death.

perfunctory 10y ago

"Because if everyone can afford food and basic items for living", the economic collapse is unavoidable. How did we develop this notion that the economy can function well only when a portion of the population balances on the edge of starvation.

Frondo 10y ago
Cynical answer: because the people who benefit most from the status quo tend to be the people who either own media or can get their ideas out into the media most easily...
eli_gottlieb 10y ago
>How did we develop this notion that the economy can function well only when a portion of the population balances on the edge of starvation. "Pure ideology", a belief that's more moral than factual. You see, we have to discipline the lower classes into working hard, therefore they must live on the edge of starvation, therefore not attaining this disciplined state will inevitably collapse the economy. The causal connection is conjured from air to support the desired policy.

austincheney 10y ago

No. You need to understand the economics of commodities opposed to individualized goods for this to really make sense. Greater access to a commodity will often reduce its costs as it means greater consumption and increased market penetration to satisfy (and thus stabilize) its demand and thus development.