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It would work for a certain period of time until inflation catches up. You could keep raising the basic income to keep pace, but it would require raising it mo

by spork12 10y ago

It would work for a certain period of time until inflation catches up. You could keep raising the basic income to keep pace, but it would require raising it more every time and sooner than the last time (exponential). Inflation can be quite damaging because not everything inflates at the same rate. For example salaries are pretty slow to inflate compared to the prices for things like gas or food. This is why a mason could afford to buy a car outright on their salary in the 1950s but almost everyone needs an auto loan to buy a car today. You could try to stop inflation using price controls but this almost always leads to supply shortages. For an example look at rent ceilings in NYC, or the way grocery stores functioned in eastern bloc socialist countries. They had plenty of cash and prices were very cheap but there was nothing on the shelves to buy. tl;dr Basic income would just create a new $0 mark.

0xfaded 10y ago
My hunch is that costs of services will increase while consumables remain flat. Australia has a complex minimum wage system, but 20 AUD is typical and on the order of 15 USD. The result is that services such house cleaners, laundromats and car detailing are order 3 times expensive as in the US, however produce and imported goods (Australia continues to systematically kill off its domestic manufacturing capability) are more or less comparable with US prices. Maybe its just a SV thing, but having my (share) house maintained by an army of Latinos for a fraction of my income makes me feel incredibly uneasy. The other one that gets me are the car washes along El Camino where white people drink coffee as their cars are tended to by Latinos. Basic income will kill businesses that rely on cheap labour, as suddenly incremental incentive to work will be minimal at $9/hour (why work only to double my anual income?). To restore the incentive wages will also need to rise, and the net result will be more expensive services accessed by a smaller percentage of the highest earners.
- skybrian 10y ago
  I think that depends on how unpleasant the job is. Doubling your income sounds pretty good, actually. On the margin, basic income gives people a bit more freedom to make their own choices. I think the price for services in Silicon Valley would go up, but I suspect more because people can take basic income with them when moving somewhere cheaper. With the extra money, low wage/low cost places are likely to become more popular.
jjawssd 10y ago
Only if new money was introduced into the closed loop system instead of being redistributed within the system
- spork12 10y ago
  New money would most definitely have to be introduced. In the US we introduce new money into the system every year by having a fed govt budget deficit.
  - jjawssd 10y ago
    This isn't a necessary condition, it's just the easier route to take politically, and if there is one thing we can agree upon, its that our new administration doesn't give a damn about criticism, so we at least stand a chance with such a proposal.
  - stale2002 10y ago
    Then don't do that. Take the money away from someone else, with taxes.
skybrian 10y ago
Inflation comes from too much money chasing too few goods. How it works is different in each market. Real estate in big cities is supply-constrained but many other goods and services aren't, given time to adjust. In particular, there's little reason to believe that basic income would be bad for Walmart. They'd sell more and their workers would be better off. There's no reason for price controls and they wouldn't help.
- spork12 10y ago
  Having an artificial force in a market economy almost always leads to unintended side effects. The inequity has to resolve itself somewhere.
  - skybrian 10y ago
    There will be many effects (some positive, some negative) but I think you need to use your imagination more, and don't assume that what we have today is somehow natural. On the margin this is increased freedom, security, and buying power for people at the bottom. How they would use it is hard to predict, but I think we can look at retirees to get some idea about which areas of the country become more popular.
thephyber 10y ago
While I don't disagree that inflation would affect the purchasing power of a UBI, I think you discount the fact that a fairly significant percentage of the US is already on some form of safety net or welfare program. Whether it be "food stamps" (vouchers for food, reimbursed as governments like a UBI), SSDI disability (fixed payments due to work disability or structural changes in an industry), unemployment insurance payments (temporary fixed payments), Social Security (long-term fixed payments), Section 8 housing (vouchers for housing), etc, there are plenty of examples where the issues you raise are already affecting the recipients. I've heard anecdotally that many doctors have ceased accepting MedicAid (suggesting that medical inflation has already outpaced the government's ability to reimburse). I think your argument should focus more on why the UBI is not any better than the morass of existing programs, some of which have disincentives for people getting off of the program. I'm not yet convinced is is either better or worse, but I don't think inflation is a deal-killer for UBI because it's already an existing issue in currently running programs.

by spork12 10y ago

0xfaded 10y ago

My hunch is that costs of services will increase while consumables remain flat. Australia has a complex minimum wage system, but 20 AUD is typical and on the order of 15 USD. The result is that services such house cleaners, laundromats and car detailing are order 3 times expensive as in the US, however produce and imported goods (Australia continues to systematically kill off its domestic manufacturing capability) are more or less comparable with US prices. Maybe its just a SV thing, but having my (share) house maintained by an army of Latinos for a fraction of my income makes me feel incredibly uneasy. The other one that gets me are the car washes along El Camino where white people drink coffee as their cars are tended to by Latinos. Basic income will kill businesses that rely on cheap labour, as suddenly incremental incentive to work will be minimal at $9/hour (why work only to double my anual income?). To restore the incentive wages will also need to rise, and the net result will be more expensive services accessed by a smaller percentage of the highest earners.

skybrian 10y ago
I think that depends on how unpleasant the job is. Doubling your income sounds pretty good, actually. On the margin, basic income gives people a bit more freedom to make their own choices. I think the price for services in Silicon Valley would go up, but I suspect more because people can take basic income with them when moving somewhere cheaper. With the extra money, low wage/low cost places are likely to become more popular.

jjawssd 10y ago

Only if new money was introduced into the closed loop system instead of being redistributed within the system

spork12 10y ago
New money would most definitely have to be introduced. In the US we introduce new money into the system every year by having a fed govt budget deficit.
- jjawssd 10y ago
  This isn't a necessary condition, it's just the easier route to take politically, and if there is one thing we can agree upon, its that our new administration doesn't give a damn about criticism, so we at least stand a chance with such a proposal.
- stale2002 10y ago
  Then don't do that. Take the money away from someone else, with taxes.

skybrian 10y ago

Inflation comes from too much money chasing too few goods. How it works is different in each market. Real estate in big cities is supply-constrained but many other goods and services aren't, given time to adjust. In particular, there's little reason to believe that basic income would be bad for Walmart. They'd sell more and their workers would be better off. There's no reason for price controls and they wouldn't help.

spork12 10y ago
Having an artificial force in a market economy almost always leads to unintended side effects. The inequity has to resolve itself somewhere.
- skybrian 10y ago
  There will be many effects (some positive, some negative) but I think you need to use your imagination more, and don't assume that what we have today is somehow natural. On the margin this is increased freedom, security, and buying power for people at the bottom. How they would use it is hard to predict, but I think we can look at retirees to get some idea about which areas of the country become more popular.

thephyber 10y ago

While I don't disagree that inflation would affect the purchasing power of a UBI, I think you discount the fact that a fairly significant percentage of the US is already on some form of safety net or welfare program. Whether it be "food stamps" (vouchers for food, reimbursed as governments like a UBI), SSDI disability (fixed payments due to work disability or structural changes in an industry), unemployment insurance payments (temporary fixed payments), Social Security (long-term fixed payments), Section 8 housing (vouchers for housing), etc, there are plenty of examples where the issues you raise are already affecting the recipients. I've heard anecdotally that many doctors have ceased accepting MedicAid (suggesting that medical inflation has already outpaced the government's ability to reimburse). I think your argument should focus more on why the UBI is not any better than the morass of existing programs, some of which have disincentives for people getting off of the program. I'm not yet convinced is is either better or worse, but I don't think inflation is a deal-killer for UBI because it's already an existing issue in currently running programs.