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One factor that would be lost in a controlled, basic income test is the inflation effect. Implemented on a national scale, cost inflation of basic consumer need

One factor that would be lost in a controlled, basic income test is the inflation effect. Implemented on a national scale, cost inflation of basic consumer needs is a near certainty. On a controlled test of 1000 people inflation would be nearly impossible to achieve without localizing the test to an absurd degree. I could see this test could serving as a dataset for calculating anticipated inflation rates on a national scale. If money is sent out via a trackable card instead of raw cash, you could begin to extrapolate where this basic income spends would be going, be it consumer products, bills, etc.

notahacker 9y ago
I like the thought behind the trackable card idea, but most participants are going to have other income and savings too, so what you're really learning from them is what spending they're willing to share with people who've given them money to track how it's spent. Even if it was people's entire household budget being tracked, it'd be difficult to draw too many inferences from spending in the absence of price pressures driven by everyone else having UBI too.
eric_b 9y ago
Yep, basic consumer staple price inflation is something I never see addressed with any satisfaction when people are talking about UBI. Housing prices and rent will assuredly rise proportionally to the basic income amount if this were to be implemented nationally, so wouldn't pumping all this money in basically just have the effect of increasing inequality?
- billmalarky 9y ago
  >Housing prices and rent will assuredly rise proportionally to the basic income amount if this were to be implemented nationally, so wouldn't pumping all this money in basically just have the effect of increasing inequality? Unlikely. UBI removes the connection between location and income. As a result you can move to somewhere incredibly cheap to live since there's no need to be in an in demand market in order to have a nice job. Housing is really quite cheap in the US. With Real Estate you pay for the location not the actual land or building. Of course people won't necessarily want to move away from their "hip" city, but UBI is "basic" and if you want to stay in a high demand area you will have to supplement UBI with work. As for basic consumables, demand is unlikely to go up for these fundamental goods because people are _already_ consuming them at their basic required levels under the current system (toilet paper, eggs, milk, bread, chicken, beans, rice, birth control, etc).
  - bduerst 9y ago
    If people in every location have their income increased, then the housing prices inflate in every location. Saying, "People can just move" is missing the point. It isn't that they can't afford to live where they are now, it's that BI will be absorbed by price inflation everywhere.
    - tomp 9y ago
      I think it's you who's missing the point. A big reason for the current rise in real estate prices is urbanisation (centralisation of population in big urban centers) - e.g. London, NY, SF, and plenty other cities. (The other reason is foreign investments, but I'd argue the investment comes after the initial rise in prices, simply because real estate is perceived as a good investment opportunity.) This urbanisation is to a large extent driven by the fact that the most high-paying jobs are available in these cities, which consequently also increases the availability of lower-paying jobs. I.e. people move to cities to succeed/earn money. If you remove the last implication - if people can earn a living without moving to big, overpopulated cities - then arguably the concentration of population would drop and the "bubble" would pop/deflate.
      - bduerst 9y ago
        You're assuming that there can only be one cause of real estate price increases. Housing prices are a function of income elasticity - raising the income for everyone will raise housing prices for everyone. Note - this is not the only way that real estate prices can increase (as you described urbanization), but it is one that BI would cause.
        billmalarky 9y ago
        >raising the income for everyone will raise housing prices for everyone This is a truism but incorrect in the context of this conversation. UBI does not increase incomes for everyone. It is a wealth redistribution. Many will see their income fall, especially initially, in order to prop up the incomes of the poor and those who decide to live solely off UBI.
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billmalarky 9y ago
Inflation is a result of the money supply growing faster than the national wealth it represents. Example: US goods & services increase in value 5% but the Fed increases the money supply by 8% leads to inflation - the money/value abstraction is out of sync in such a way that money represents less value. Wealth redistributions don't cause inflation. The money abstraction still represents the same amount of wealth, it just changes who can choose how to use that money to consume. That said, you'll probably see some radical pricing changes in the market from the new system, but probably not as much as you would expect because UBI will be so limited at first, the money will be spent on absolute necessities that people are already consuming under the current system (ie demand won't go up for toilet paper and basic consumables, and UBI isn't enough for luxury goods).
- bduerst 9y ago
  That's one cause of inflation. Another cause is raising the income for everyone (i.e. minimum wage, etc.). There exist goods and services with prices that are a function of income-elasticity, meaning that they inflate with the more money that people make (e.g. housing). This is one of the reasons that many welfare programs are targeted spending, like food stamps or medicaid.
  - billmalarky 9y ago
    Arbitrarily raising wages for everyone is the same as increasing the money supply without increasing the underlying value it represents (which causes inflation). UBI does not do this. It doesn't "increase" the amount of money floating around, it simply redistributes a portion of the created wealth from one population (the rich) to the total population. UBI money isn't pulled out of thin air, it's taken from one group (via taxation) and distributed. Of course prices for certain goods and services will change as a result of this wealth distribution, but to suggest global inflation will occur (ie the value that money represents decreasing within the complete system) is incorrect. Furthermore, while I obviously can't say for certain, I imagine prices for fundamental goods will not change drastically simply because UBI doesn't provide enough money for real discretionary spending. The goods/services you consume under a UBI program you already would be consuming at the same rate under the current system.
unholiness 9y ago
Currently we have an economy that motivates companies to spend 1000x more capital developing innovations for a consumer with 1000x more buying power. Basic income introduces a source of capital that motivates companies to innovate in that area of "basic consumer needs", i.e. things needed by the majority of people, not the majority of dollars. You're right that the short-term effect of this is indeed inflation on the prices of these needs, but the long-term effect is larger portion of the economy dedicated to filling basic needs instead of superfluous luxuries.
pg314 9y ago
> Implemented on a national scale, cost inflation of basic consumer needs is a near certainty. How so? Is there are large number of consumers that are currently not able to satisfy their current basic needs? Otherwise aggregate demand will stay the same and on the supply side nothing changed, so there is no reason why prices would change.
- zanny 9y ago
  Its also worth noting that inflation only happens like that when demands cannot be met. IE fixed quantity of goods that cannot grow, being demanded more and more over time. That is not how basic necessities work at all. If you increase the profit margin in almost any food crop or raw material by a few fractions of a percent you see dramatic investment in sating that demand because its an extremely safe profit center.
- taysic 9y ago
  Why do you think nothing would change on the supply side? There are plenty of low income workers that would quit their jobs, driving their wages up - thereby either driving up the cost of goods or reducing supply. Unless of course the goods are shipped from nonUBI countries
  - pg314 9y ago
    Good point, I hadn't considered those second order effects. > There are plenty of low income workers that would quit their jobs, driving their wages up I don't think we have enough information currently to unequivocally state that. How many low income workers would quit? It's not like many people in better paying jobs reduce their working hours up to a point where they make the equivalent amount of money as a UBI. How many currently unemployed people would be picking up the slack? > thereby either driving up the cost of goods or reducing supply. Labor costs are a small part of the price of basic goods. I couldn't find much good information, but e.g. [1] says that for fresh fruit and vegetables a 40% increase of labor costs amounts to a 4% increase for consumers. [1] https://migration.ucdavis.edu/rmn/more.php?id=2005 https://migration.ucdavis.edu/rmn/more.php?id=2005
ralmeida 9y ago
On a first moment, possibly. After that, we would see how free the market really is. If it's reasonably free, the market will self-correct and prices will decrease. A thought experiment: you have a business; now everyone has money; then prices rise "together"; so market distribution remains the same; you decide to reduce your price to the old price and your competitors don't. Now you get customers from your competitors that you didn't have before. The amount that this happens depends, naturally, on how free the markets involved are (if free at all).
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notahacker 9y ago

I like the thought behind the trackable card idea, but most participants are going to have other income and savings too, so what you're really learning from them is what spending they're willing to share with people who've given them money to track how it's spent. Even if it was people's entire household budget being tracked, it'd be difficult to draw too many inferences from spending in the absence of price pressures driven by everyone else having UBI too.

eric_b 9y ago

Yep, basic consumer staple price inflation is something I never see addressed with any satisfaction when people are talking about UBI. Housing prices and rent will assuredly rise proportionally to the basic income amount if this were to be implemented nationally, so wouldn't pumping all this money in basically just have the effect of increasing inequality?

billmalarky 9y ago
>Housing prices and rent will assuredly rise proportionally to the basic income amount if this were to be implemented nationally, so wouldn't pumping all this money in basically just have the effect of increasing inequality? Unlikely. UBI removes the connection between location and income. As a result you can move to somewhere incredibly cheap to live since there's no need to be in an in demand market in order to have a nice job. Housing is really quite cheap in the US. With Real Estate you pay for the location not the actual land or building. Of course people won't necessarily want to move away from their "hip" city, but UBI is "basic" and if you want to stay in a high demand area you will have to supplement UBI with work. As for basic consumables, demand is unlikely to go up for these fundamental goods because people are _already_ consuming them at their basic required levels under the current system (toilet paper, eggs, milk, bread, chicken, beans, rice, birth control, etc).
- bduerst 9y ago
  If people in every location have their income increased, then the housing prices inflate in every location. Saying, "People can just move" is missing the point. It isn't that they can't afford to live where they are now, it's that BI will be absorbed by price inflation everywhere.
  - tomp 9y ago
    I think it's you who's missing the point. A big reason for the current rise in real estate prices is urbanisation (centralisation of population in big urban centers) - e.g. London, NY, SF, and plenty other cities. (The other reason is foreign investments, but I'd argue the investment comes after the initial rise in prices, simply because real estate is perceived as a good investment opportunity.) This urbanisation is to a large extent driven by the fact that the most high-paying jobs are available in these cities, which consequently also increases the availability of lower-paying jobs. I.e. people move to cities to succeed/earn money. If you remove the last implication - if people can earn a living without moving to big, overpopulated cities - then arguably the concentration of population would drop and the "bubble" would pop/deflate.
    - bduerst 9y ago
      You're assuming that there can only be one cause of real estate price increases. Housing prices are a function of income elasticity - raising the income for everyone will raise housing prices for everyone. Note - this is not the only way that real estate prices can increase (as you described urbanization), but it is one that BI would cause.
      - billmalarky 9y ago
        >raising the income for everyone will raise housing prices for everyone This is a truism but incorrect in the context of this conversation. UBI does not increase incomes for everyone. It is a wealth redistribution. Many will see their income fall, especially initially, in order to prop up the incomes of the poor and those who decide to live solely off UBI.
deleted 9y ago
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- deleted 9y ago
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billmalarky 9y ago

Inflation is a result of the money supply growing faster than the national wealth it represents. Example: US goods & services increase in value 5% but the Fed increases the money supply by 8% leads to inflation - the money/value abstraction is out of sync in such a way that money represents less value. Wealth redistributions don't cause inflation. The money abstraction still represents the same amount of wealth, it just changes who can choose how to use that money to consume. That said, you'll probably see some radical pricing changes in the market from the new system, but probably not as much as you would expect because UBI will be so limited at first, the money will be spent on absolute necessities that people are already consuming under the current system (ie demand won't go up for toilet paper and basic consumables, and UBI isn't enough for luxury goods).

bduerst 9y ago
That's one cause of inflation. Another cause is raising the income for everyone (i.e. minimum wage, etc.). There exist goods and services with prices that are a function of income-elasticity, meaning that they inflate with the more money that people make (e.g. housing). This is one of the reasons that many welfare programs are targeted spending, like food stamps or medicaid.
- billmalarky 9y ago
  Arbitrarily raising wages for everyone is the same as increasing the money supply without increasing the underlying value it represents (which causes inflation). UBI does not do this. It doesn't "increase" the amount of money floating around, it simply redistributes a portion of the created wealth from one population (the rich) to the total population. UBI money isn't pulled out of thin air, it's taken from one group (via taxation) and distributed. Of course prices for certain goods and services will change as a result of this wealth distribution, but to suggest global inflation will occur (ie the value that money represents decreasing within the complete system) is incorrect. Furthermore, while I obviously can't say for certain, I imagine prices for fundamental goods will not change drastically simply because UBI doesn't provide enough money for real discretionary spending. The goods/services you consume under a UBI program you already would be consuming at the same rate under the current system.

unholiness 9y ago

Currently we have an economy that motivates companies to spend 1000x more capital developing innovations for a consumer with 1000x more buying power. Basic income introduces a source of capital that motivates companies to innovate in that area of "basic consumer needs", i.e. things needed by the majority of people, not the majority of dollars. You're right that the short-term effect of this is indeed inflation on the prices of these needs, but the long-term effect is larger portion of the economy dedicated to filling basic needs instead of superfluous luxuries.

pg314 9y ago

> Implemented on a national scale, cost inflation of basic consumer needs is a near certainty. How so? Is there are large number of consumers that are currently not able to satisfy their current basic needs? Otherwise aggregate demand will stay the same and on the supply side nothing changed, so there is no reason why prices would change.

zanny 9y ago
Its also worth noting that inflation only happens like that when demands cannot be met. IE fixed quantity of goods that cannot grow, being demanded more and more over time. That is not how basic necessities work at all. If you increase the profit margin in almost any food crop or raw material by a few fractions of a percent you see dramatic investment in sating that demand because its an extremely safe profit center.
taysic 9y ago
Why do you think nothing would change on the supply side? There are plenty of low income workers that would quit their jobs, driving their wages up - thereby either driving up the cost of goods or reducing supply. Unless of course the goods are shipped from nonUBI countries
- pg314 9y ago
  Good point, I hadn't considered those second order effects. > There are plenty of low income workers that would quit their jobs, driving their wages up I don't think we have enough information currently to unequivocally state that. How many low income workers would quit? It's not like many people in better paying jobs reduce their working hours up to a point where they make the equivalent amount of money as a UBI. How many currently unemployed people would be picking up the slack? > thereby either driving up the cost of goods or reducing supply. Labor costs are a small part of the price of basic goods. I couldn't find much good information, but e.g. [1] says that for fresh fruit and vegetables a 40% increase of labor costs amounts to a 4% increase for consumers. [1] https://migration.ucdavis.edu/rmn/more.php?id=2005 https://migration.ucdavis.edu/rmn/more.php?id=2005

ralmeida 9y ago

On a first moment, possibly. After that, we would see how free the market really is. If it's reasonably free, the market will self-correct and prices will decrease. A thought experiment: you have a business; now everyone has money; then prices rise "together"; so market distribution remains the same; you decide to reduce your price to the old price and your competitors don't. Now you get customers from your competitors that you didn't have before. The amount that this happens depends, naturally, on how free the markets involved are (if free at all).

deleted 9y ago
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