6 ms·

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

by 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.
        bduerst 9y ago
        Universal Basic Income (UBI) at it's core increases income for everyone - universally. What you're thinking about is a negative income tax or some other BI that is disproportionately weighted.
        tangent128 9y ago
        A universal income increase is not a universal net income increase, if taxes on non-UBI income become more progressive at the same time.
        billmalarky 9y ago
        At a glance (and because of the name) it appears that way, but it does not universally increase income, it gives everyone universal access to basic income. Many people (the wealthy) will have their net income (income after taxes) go down considerably in a UBI system. For example, everyone gets $12k a year in UBI income, however funding such a system will require a fairly stiff tax increase (this is how the wealth redistribution will occur), so for high earners, their $12k in UBI will be negatively offset by the increase in taxes. As an extreme example, someone earning $1MM annually will get the $12k UBI same as everyone else, but an (example) increase in the top income bracket from 39.6% to 60% will cause them to pay $118646.4 more in taxes resulting in their net income under a UBI system to go down (-$118646.40 taxes + $12000 ubi) $106646.40.
  - billmalarky 9y ago
    This is a misunderstanding of how both macro inflation occurs (money supply growing faster than true value of wealth it abstracts), and how price is set (supply and demand). UBI does not "create" new money and just give it to everyone (which would cause inflation). It's a wealth redistribution. That is, many people will see their income go down under UBI (probably most HN readers for example). The money supply will represent the same amount of wealth, what changes is who owns that wealth and as a result who decides how to use that wealth to consume. Regarding price changes, price is set by the amount of a good/service demanded by consumers, and the supply of the good/service created by suppliers. High discretionary income does cause the demand for certain goods/services to go up (especially luxuries), but UBI is so basic at $1k per month it won't make much of a change in the demand curve because the type of goods/services that will be consumed by someone living on UBI are so fundamental they are already consuming these goods at the same rate under the current system. So far as housing is concerned, UBI will pretty much "explode" the supply of acceptable housing for people living solely on UBI since they get access to housing in the entire US instead of having it constrained to locations where they could conceivably "make a living." I'm sure you realize what happens when supply increases drastically but demand stays somewhat constant (everyone has to live somewhere and you can only live in one place at once) -- the price of housing on avg will plummet considerably for UBI'ers.
    - bduerst 9y ago
      >UBI does not "create" new money and just give it to everyone (which would cause inflation). It's a wealth redistribution. UBI is Universal Basic Income, meaning that income is increased for everyone universally. Nobody is claiming that money is created out of thin air. What you're thinking about is a negative income tax or some other disproportionately weighted welfare program.
      - billmalarky 9y ago
        Not true see https://news.ycombinator.com/item?id=15306562 https://news.ycombinator.com/item?id=15306562
        9y ago
  - zanny 9y ago
    Figures put 14-20 million unoccupied houses in the US. A lot of those are just rich people buying valuable real estate and hoarding it as a store of value, but a lot of them are also in locations where nobody who would want to buy them can afford to live because there is no work available. There are thousands of ghost towns in rural America which depopulated for a wide variety of reasons since the 70s but all could be cheaply renewed if people could survive living there without guaranteed constant employment. So its not that the whole housing market just moves up the value of UBI and nothing changes. UBI introduces a new market of houses that currently are unsellable and rotting. Those are obviously not a long term solution, but the existence of UBI and the economic pressure it produces will incentivize builders to develop the cheapest possible living conditions to supply to people living on UBI. That almost certainly would be an entirely new model of building - constructing for density, but without the limitations of building in already densely populated areas.
    - bduerst 9y ago
      The unoccupied homes in the U.S. is primarily due to banks holding onto foreclosed properties. You could say, "This is a problem with the current financial system," which it is, but it's not a problem that UBI will solve. If UBI is enacted, then prices will still inflate and people who purchase foreclosed homes at auction will continue to do so today, because they will also have the same increase in income as everyone else.
      - maxerickson 9y ago
        The net increase in income won't be the same for everyone. If UBI is funded by printing money, people with assets will see them devalue through inflation (people with no assets won't have this loss). If UBI is funded by taxes, it's likely to be progressive. So sure, the high income people get the UBI check. And a bigger tax bill to go with it.
        bduerst 9y ago
        If you assume UBI is based on an income tax, then that's not universal basic income, that's negative income tax. Even so, if you hypothetically see a decrease in income for 3% of the population and an increase in income for 97%, you still have inflation. 100% of the population purchases housing, which is income-elastic, meaning housing prices will increase because 97% of the population's income will increase.
- greedo 9y ago
  So you expect people to relocate from California to Detroit... Good luck with that happening.
deleted 9y ago
[deleted]
- deleted 9y ago
  [deleted]

by eric_b 9y ago

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.
      - bduerst 9y ago
        Universal Basic Income (UBI) at it's core increases income for everyone - universally. What you're thinking about is a negative income tax or some other BI that is disproportionately weighted.
        tangent128 9y ago
        A universal income increase is not a universal net income increase, if taxes on non-UBI income become more progressive at the same time.
        billmalarky 9y ago
        At a glance (and because of the name) it appears that way, but it does not universally increase income, it gives everyone universal access to basic income. Many people (the wealthy) will have their net income (income after taxes) go down considerably in a UBI system. For example, everyone gets $12k a year in UBI income, however funding such a system will require a fairly stiff tax increase (this is how the wealth redistribution will occur), so for high earners, their $12k in UBI will be negatively offset by the increase in taxes. As an extreme example, someone earning $1MM annually will get the $12k UBI same as everyone else, but an (example) increase in the top income bracket from 39.6% to 60% will cause them to pay $118646.4 more in taxes resulting in their net income under a UBI system to go down (-$118646.40 taxes + $12000 ubi) $106646.40.
- billmalarky 9y ago
  This is a misunderstanding of how both macro inflation occurs (money supply growing faster than true value of wealth it abstracts), and how price is set (supply and demand). UBI does not "create" new money and just give it to everyone (which would cause inflation). It's a wealth redistribution. That is, many people will see their income go down under UBI (probably most HN readers for example). The money supply will represent the same amount of wealth, what changes is who owns that wealth and as a result who decides how to use that wealth to consume. Regarding price changes, price is set by the amount of a good/service demanded by consumers, and the supply of the good/service created by suppliers. High discretionary income does cause the demand for certain goods/services to go up (especially luxuries), but UBI is so basic at $1k per month it won't make much of a change in the demand curve because the type of goods/services that will be consumed by someone living on UBI are so fundamental they are already consuming these goods at the same rate under the current system. So far as housing is concerned, UBI will pretty much "explode" the supply of acceptable housing for people living solely on UBI since they get access to housing in the entire US instead of having it constrained to locations where they could conceivably "make a living." I'm sure you realize what happens when supply increases drastically but demand stays somewhat constant (everyone has to live somewhere and you can only live in one place at once) -- the price of housing on avg will plummet considerably for UBI'ers.
  - bduerst 9y ago
    >UBI does not "create" new money and just give it to everyone (which would cause inflation). It's a wealth redistribution. UBI is Universal Basic Income, meaning that income is increased for everyone universally. Nobody is claiming that money is created out of thin air. What you're thinking about is a negative income tax or some other disproportionately weighted welfare program.
    - billmalarky 9y ago
      Not true see https://news.ycombinator.com/item?id=15306562 https://news.ycombinator.com/item?id=15306562
      - 9y ago
- zanny 9y ago
  Figures put 14-20 million unoccupied houses in the US. A lot of those are just rich people buying valuable real estate and hoarding it as a store of value, but a lot of them are also in locations where nobody who would want to buy them can afford to live because there is no work available. There are thousands of ghost towns in rural America which depopulated for a wide variety of reasons since the 70s but all could be cheaply renewed if people could survive living there without guaranteed constant employment. So its not that the whole housing market just moves up the value of UBI and nothing changes. UBI introduces a new market of houses that currently are unsellable and rotting. Those are obviously not a long term solution, but the existence of UBI and the economic pressure it produces will incentivize builders to develop the cheapest possible living conditions to supply to people living on UBI. That almost certainly would be an entirely new model of building - constructing for density, but without the limitations of building in already densely populated areas.
  - bduerst 9y ago
    The unoccupied homes in the U.S. is primarily due to banks holding onto foreclosed properties. You could say, "This is a problem with the current financial system," which it is, but it's not a problem that UBI will solve. If UBI is enacted, then prices will still inflate and people who purchase foreclosed homes at auction will continue to do so today, because they will also have the same increase in income as everyone else.
    - maxerickson 9y ago
      The net increase in income won't be the same for everyone. If UBI is funded by printing money, people with assets will see them devalue through inflation (people with no assets won't have this loss). If UBI is funded by taxes, it's likely to be progressive. So sure, the high income people get the UBI check. And a bigger tax bill to go with it.
      - bduerst 9y ago
        If you assume UBI is based on an income tax, then that's not universal basic income, that's negative income tax. Even so, if you hypothetically see a decrease in income for 3% of the population and an increase in income for 97%, you still have inflation. 100% of the population purchases housing, which is income-elastic, meaning housing prices will increase because 97% of the population's income will increase.
greedo 9y ago
So you expect people to relocate from California to Detroit... Good luck with that happening.

deleted 9y ago

[deleted]

deleted 9y ago
[deleted]