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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.
  - nashashmi 10y ago
    > allocation of income is shifted downwards, so the allocation of production shifts accordingly Your explanation makes a lot of sense. It points to the lack of distribution of income as the culprit behind hunger and poverty. But it also narrows the premise in which UBI works: 1) when money is not printed artificially to fulfill UBI, and 2) when financial energy is taken away from more affluent portions of the economy. This seems like adding another element of fragility vulnerable to manipulation in an already complex economic system.

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.
- nashashmi 10y ago
  > allocation of income is shifted downwards, so the allocation of production shifts accordingly Your explanation makes a lot of sense. It points to the lack of distribution of income as the culprit behind hunger and poverty. But it also narrows the premise in which UBI works: 1) when money is not printed artificially to fulfill UBI, and 2) when financial energy is taken away from more affluent portions of the economy. This seems like adding another element of fragility vulnerable to manipulation in an already complex economic system.