6 ms·

The one thing I don't get about the Basic Income push is . . . what will be done about inflation? With more and more money chasing the same amount of resources,

by Kinnard 10y ago

The one thing I don't get about the Basic Income push is . . . what will be done about inflation? With more and more money chasing the same amount of resources, goods, and services, basic income would push up the overall price-level and undo itself by pricing out those who live at the basic income level . . . am I missing something?

intopieces 10y ago
This is my question as well. If the UBI is $1000/month, doesn't that become the new $0? But, this is what I figure, not being an economist, and just being someone who really wants UBI to be a thing: With an influx of cash, people will be able to buy more, which creates incentives for actors in the market to create more products to eat up the new cash. More products = competition, which keeps prices low. Plus, people already have in mind how much they want to spend for a certain item. Take, for example, peanut butter. Rather than raising the price, the makers do things like decrease the amount of the product in the jar through redesigned packaging. Just my pet theory. What I wonder is for things with terrible competition (rent, for example) what prevents those markets from just gobbling up the gains.
- Koshkin 10y ago
  > doesn't that become the new $0? I don't think so... Because $10,000 will not be the same as ten times zero. (Or, will it?)
- Kalium 10y ago
  Is it perhaps possible that your hypothesis might not account particularly well for inflation? One cannot pump cash arbitrarily into an economy with a limited amount of value. Past a certain point, the scarcity of money changes. If the UBI was $1,000,000/mo, I expect rents everywhere might soar and bread might cost $10k a loaf. There's more money, but the scarcity of goods doesn't change, so what happens is everything sprouts a couple of extra zeros. This is what runaway inflation can look like.
- malloryerik 10y ago
  Indeed rent can gobble up the gains. Look at how it has gobbled up the gains in the SF Bay Area.
2noame 10y ago
I'm the author of this piece for the WEF, and have written an entire separate piece specifically about inflation and rising cost concerns. Link: https://medium.com/basic-income/wouldnt-unconditional-basic-income-just-cause-massive-inflation-fe71d69f15e7 https://medium.com/basic-income/wouldnt-unconditional-basic-... Basically, more and more money only chases the same amount of goods if the UBI does not exist as a transfer of existing money from top to bottom and middle as described in this piece, and instead exists as continual expansion of the monetary supply through newly created money. Additionally, UBI does not eliminate forces of market competition. In fact, I argue it will even increase competition through increased entrepreneurship. It would be really stupid to raise your prices in a competitive market where your competitor does not raise prices, or even lowers them. As a quick example, every year when Alaskans get their dividend checks, there are a lot of sales as businesses compete for that money. It would be a really stupid business in Alaska that increases its prices every time the dividend is distributed, in the knowledge people have more money to spend. You may also find this argument interesting as well in regards to concerns of technological deflation: https://medium.com/emergent-culture/an-exciting-new-idea-in-basic-income-b1b7bf622845 https://medium.com/emergent-culture/an-exciting-new-idea-in-...
- _rpd 10y ago
  Your argument that rent won't rise to absorb most of any additional income relies on low-income people moving out of high demand areas to super-affordable "Google Homes" in remote ex-burbs and formerly rural towns. I think you're fighting history, culture and even human nature on this one. If the Great Basic Income Migration doesn't occur, and if basic income is indexed to inflation, or worse, to a local 'cost of living', then you are deliberately engineering a hyper-inflationary spiral that will make Venezuela's seem tame by comparison.
  - malloryerik 10y ago
    As has been said before on HN, a land value tax could solve this problem with a basic income.
    - 10y ago
johngalt 10y ago
It is not that simple. Often increased demand can lower prices. Economies of scale and all that. For example if you cut total airline passengers to 10% of current numbers, over time prices would stabilize at a much higher level for an individual ticket. I would imagine that the 'bottom' of the market would grow significantly. As businesses targetted UBI recipients. UBI communities established in cheaplandville, midwesternstate. Not to say that there wouldn't be unproductive market distortions. Primarily people leaving the workforce to live on basic. Who chooses to work pest control when the alternative is basic? It would also further stratify the rich/poor divide.

by Kinnard 10y ago

intopieces 10y ago

This is my question as well. If the UBI is $1000/month, doesn't that become the new $0? But, this is what I figure, not being an economist, and just being someone who really wants UBI to be a thing: With an influx of cash, people will be able to buy more, which creates incentives for actors in the market to create more products to eat up the new cash. More products = competition, which keeps prices low. Plus, people already have in mind how much they want to spend for a certain item. Take, for example, peanut butter. Rather than raising the price, the makers do things like decrease the amount of the product in the jar through redesigned packaging. Just my pet theory. What I wonder is for things with terrible competition (rent, for example) what prevents those markets from just gobbling up the gains.

Koshkin 10y ago
> doesn't that become the new $0? I don't think so... Because $10,000 will not be the same as ten times zero. (Or, will it?)
Kalium 10y ago
Is it perhaps possible that your hypothesis might not account particularly well for inflation? One cannot pump cash arbitrarily into an economy with a limited amount of value. Past a certain point, the scarcity of money changes. If the UBI was $1,000,000/mo, I expect rents everywhere might soar and bread might cost $10k a loaf. There's more money, but the scarcity of goods doesn't change, so what happens is everything sprouts a couple of extra zeros. This is what runaway inflation can look like.
malloryerik 10y ago
Indeed rent can gobble up the gains. Look at how it has gobbled up the gains in the SF Bay Area.

2noame 10y ago

I'm the author of this piece for the WEF, and have written an entire separate piece specifically about inflation and rising cost concerns. Link: https://medium.com/basic-income/wouldnt-unconditional-basic-income-just-cause-massive-inflation-fe71d69f15e7 https://medium.com/basic-income/wouldnt-unconditional-basic-... Basically, more and more money only chases the same amount of goods if the UBI does not exist as a transfer of existing money from top to bottom and middle as described in this piece, and instead exists as continual expansion of the monetary supply through newly created money. Additionally, UBI does not eliminate forces of market competition. In fact, I argue it will even increase competition through increased entrepreneurship. It would be really stupid to raise your prices in a competitive market where your competitor does not raise prices, or even lowers them. As a quick example, every year when Alaskans get their dividend checks, there are a lot of sales as businesses compete for that money. It would be a really stupid business in Alaska that increases its prices every time the dividend is distributed, in the knowledge people have more money to spend. You may also find this argument interesting as well in regards to concerns of technological deflation: https://medium.com/emergent-culture/an-exciting-new-idea-in-basic-income-b1b7bf622845 https://medium.com/emergent-culture/an-exciting-new-idea-in-...

_rpd 10y ago
Your argument that rent won't rise to absorb most of any additional income relies on low-income people moving out of high demand areas to super-affordable "Google Homes" in remote ex-burbs and formerly rural towns. I think you're fighting history, culture and even human nature on this one. If the Great Basic Income Migration doesn't occur, and if basic income is indexed to inflation, or worse, to a local 'cost of living', then you are deliberately engineering a hyper-inflationary spiral that will make Venezuela's seem tame by comparison.
- malloryerik 10y ago
  As has been said before on HN, a land value tax could solve this problem with a basic income.
  - 10y ago

johngalt 10y ago

It is not that simple. Often increased demand can lower prices. Economies of scale and all that. For example if you cut total airline passengers to 10% of current numbers, over time prices would stabilize at a much higher level for an individual ticket. I would imagine that the 'bottom' of the market would grow significantly. As businesses targetted UBI recipients. UBI communities established in cheaplandville, midwesternstate. Not to say that there wouldn't be unproductive market distortions. Primarily people leaving the workforce to live on basic. Who chooses to work pest control when the alternative is basic? It would also further stratify the rich/poor divide.