13 ms·

The latest experiment in basic income will be coming to Stockton, California

98 points by weston 9y ago

nfriedly 9y ago
When residents don't want to move away, they'll call it "Stockton Syndrome" :P
rothbardrand 9y ago
One of the things about UBI is that these pilot programs aren't UBI, because they aren't universal. Giving a segment of the population free money is going to benefit that segment, no question. Welfare and Quantitative Easing are both examples of that. But when you make it universal, my economics intuition says that the effect will be washed out by a commensurate rise in prices. Or put another way, you can subsidize the few at the expense of the many, but you can't subsidize the many at their own expense and have it result in a positive effect.
- mcbruiser3 9y ago
  net result being an increase in taxes on many (or at least mid-to-high earners) with zero benefits to society, only a built-in voting block for those who enable this edit: if I wanted upvotes I'd jump on the socialism/communism bandwagon. I feel sorry for the future if this is the prevailing thought :(
  - uoaei 9y ago
    Being able to eschew shitty soul-sucking jobs in favor of real personal development is "zero benefit"?
    - maxerickson 9y ago
      They are arguing that access to the economy without the exchange of productivity will not create the opportunity for personal development, that the cost of basic goods and housing will rise to absorb any universal payment.
    - imron 9y ago
      How many people will engage in real personal development, and how many people will just spend more time on Netflix and Facebook?
      - mistercow 9y ago
        There will be some of each, but either one results in more jobs for everybody else.
    - mcbruiser3 9y ago
      who lives on $500 a month? and the economy will simply adjust to absorb this increase anyway, so hence my comment about zero benefits. also, for young people at least, "shitty" jobs build character, which seems ever more critical these days. after working a "shitty" job for a little while, a person may be motivated to better themselves, or at least get a better job.
      - freeone3000 9y ago
        9.8% of the USA lives on $6,000 a year or less, according to the IRS. So, about 10% of the population lives on $500 a month. This isn't targeted to young people, though it will benefit them. This is also targeted at displaced workers, low-skill workers, and the upcoming tens of thousands marginalized out of the workforce by increasing automation. There's not really a PATH for people to move from shitty job to non-shitty job anymore. There simply aren't enough good jobs for every adult.
        greedo 9y ago
        B.S. They may "earn" $6k or less per year, but they're not living on that. There's EITC, welfare, disability, etc etc. When I was a student, I "lived" on $500/month, but that was because I was a damn student working part time waiting tables. Had I been fully employed, my annual income would have been much higher.
- ThrustVectoring 9y ago
  >you can't subsidize the many at their own expense and have it result in a positive effect. You can if it changes local incentives to cause a better overall outcome. For example, a tragedy-of-the-commons situation can be improved by having each over-user give up their share of use to a monopolist whose subsidies replace the lost income. This is explicitly one of the goals of replacing the current social safety nets with UBI. The social safety net as it stands has some extraordinarily shitty incentives. The effective marginal rate on income can exceed 100% in some situations, where income-based phase-outs of benefits are higher than the extra money you make. When I worked pizza delivery, my boss at one time had to scramble to figure out how to decline a pay raise that made her ineligible for childcare subsidies that cost more than the increase in take-home pay. >But when you make it universal, my economics intuition says that the effect will be washed out by a commensurate rise in prices. This is why a university degree isn't what it used to be, IMO, and why I oppose the college subsidies people are talking about. The net effect is that an undergraduate degree basically becomes what a high school degree is right now.
  - aaron-lebo 9y ago
    Sorry to be annoying on this topic, but: This is explicitly one of the goals of replacing the current social safety nets with UBI. UBI can't replace social safety nets. It's impossible. 12k for every adult is 3 trillion dollars, which almost always assumes cutting other programs. What about healthcare? I bet most would rather have comprehensive health coverage instead of 12k every year, but you can't have both. In the US we have neither. You'd have to lose safety nets to make UBI work, financially. If you can show otherwise, do you mind explaining it?
    - lovich 9y ago
      part of our high healthcare costs are from not using a universal system. Other Western countries are achieving same or better outcomes with far less costs. I do agree that UBI will not work if we leave some of the things we consider basics now, such as food, housing, or(in my opinion) basic healthcare to be provided by competitive corporations, then we are essentially just going to be putting the money in their pockets
- fenwick67 9y ago
  I agree that these studies need to use the area's whole population to be complete. They should give these a try in a more insular area, like a big town the middle of nowhere in Wyoming, for these studies. They would have a more isolated economy.
- yellowstuff 9y ago
  Sure, if you simply gave everyone $1 for every dollar they already have, all you do is double prices and change nothing of substance. But I think the pro-UBI argument would be that you don't need to increase the money supply to do it. About 60% of Federal spending is on Social Security, Medicare and Medicaid. Reducing the spending on these programs, and other inefficient transfers such as welfare and disability will pay for much of UBI, and the rest is paid for by raising taxes. The net outcome is that rich people will pay a bit more to the government than they do now, poor people get a bit more than they do now, but the major effects are 1) inefficient bureaucracy is eliminated, 2) bad incentives are eliminated (such as disability payments forbidding any gainful employment, and 3) the stigma of welfare payments is removed when everyone gets them. I don't think this will work in the US because 1) there's no political will to reduce existing entitlement programs and 2) there's a lot of resentment in the working class against recipients of entitlements, and 3) racism. However, the argument that UBI will fail because it requires printing money is probably wrong.
  - bigtunacan 9y ago
    How is UBI any different from welfare if it is what you describe? From your description, it actually sounds worse. As I read it, it sounds sort of like this. 1) Reduce Social Security (so steal people's retirement money that they paid in...) 2) Reduce Medicare / Medicaid (The group of people that receive these are often the one's least likely to be able to afford medical care (the poor & the eldery) while simultaneously being the one's most likely to need such care (at least the elderly)).
  - mechagodzilla 9y ago
    I disagree with your premise that doubling the number of dollars everyone has would simply double prices. If you take someone that has $1 million in the bank, and magically make that $2 million, they almost certainly won't double all of their expenditures (they probably wouldn't change what they spend at all on a wide variety of categories - food or clothing, for instance). Rising inequality means that lack of demand is actually a big issue, since we're transferring income from people that would readily increase consumption, given more income, to people that will largely sit on that money. Globally speaking, our factories could easily produce more goods without raising prices much, if any. I believe a UBI would effectively be a transfer of wealth from people that have lots of money (but don't spend it) to people that don't have lots of money (but would readily spend more if they had it), but it wouldn't be the zero-sum game that people often assume it would, just by virtue of our productive capacity not being nearly maxed out.
- nicholas73 9y ago
  Are you going to eat more food with UBI? Probably not. Are food prices going to rise if others eat more food? No, we have spare capacity for food production. Also, a bigger topic, but supply and demand is not linear like they teach in school. Food prices are fairly cheap and stable in America because of excess capacity plus the fact that producers face thin margins plus spoilage. It will take a lot before prices move "commensurately". This is just one example.
- andrewla 9y ago
  The "commensurate rise in prices" is the tricky part. I think what you would see would be a percentage increase in prices corresponding to the average percentage increase in income. Since UBI is a flat amount, not tied to income, that average percentage is going to be so close to 0 as to be completely irrelevant. Even if it's not close to 0, for low-income (or UBI-only income) households especially, the marginal increase in income should be significantly higher than the marginal increase in prices.
- dragonwriter 9y ago
  UBI is giving a segment an increase in income (unless you are just printing money for it, which no one has proposed), since money comes from increased taxes or decreased existing spending somewhere else; there are, compared to the status quo ante, a segment of net gainers and one of net losers (with, most likely, a smooth continuum between.) So it's not actually different from the limited implementations in the way you paint it (it's different in other important ways, but not that one.)
- eru 9y ago
  https://medium.com/basic-income/why-land-value-tax-and-universal-basic-income-need-each-other-42ba999f7322 https://medium.com/basic-income/why-land-value-tax-and-unive... is a great article on how to do basic income. The problem is not so much general price rises, as rises in rent.
  - sokoloff 9y ago
    Exactly. If I had an idea that countrywide UBI was coming at a meaningful level, I'd buy as much cheap housing stock as I could get my hands on as I believe UBI would result in net household formation and net demand for low-end rental housing.
- stult 9y ago
  Well, you're not giving UBI to everyone. Just the people who don't earn more than UBI level. For everyone else, UBI becomes like the standard deduction under the current US system.
  - erentz 9y ago
    No. You give UBI to everyone. And you also tax everyone’s income, usually with a flat tax.
    - dredmorbius 9y ago
      s/flat/progressive/
    - stult 9y ago
      Ok. So think about what that actually means. You get a payment from the government for $1000 once a month. Then they take $2000 in taxes from your paycheck once a month. Net, you paid $1000 in taxes. For you, it is indistinghuisable from a system where you paid $1000 less in taxes because of lower rates. UBI functions like the standard deduction for your purposes, except insofar as it is refundable if your income and thus taxes owed drops below the UBI level, whereas a traditional refundable tax credit is refundable only after the return is filed, once per year. You can relabel the account balances however you want, but the underlying economic reality is the same for people earning income taxable above the UBI amount. You are paying more to the government than you are receiving. For people near or right on that level, they simply have an accelerated refund schedule.
- ChuckMcM 9y ago
  If I am understanding your argument, it is a sort of 'thermodynamics' argument against UBI. It argues that there exists a fixed supply of capital and that transfer payments funded by taxes are always counter balanced by an increases in prices to keep capital supplies in balance. If that isn't a correct interpretation of your argument, then the rest of this won't make a lot of sense. The reason this sort of thermodynamics arguments fails for me is that the economy isn't really the amount of cash flowing through it, rather cash is a proxy for GDP not the economy itself. GDP is a function of productivity and effort. In simpler terms we can have our fictional worker 'Bob' who is anxious and fearful so he scrapes along with a minimum wage job that he hates, versus 'Alt-Bob' who is engaged and excited about his career and is building a future retirement nest egg. With the same 'worker population' of '1' we get two very different GDPs. One theory is that UBI will make the anxious Bob less anxious and fearful and able to make better choices about their future. If you look at some of the work on how people who are anxious about the amount of money they have a hard time making good choices I refer you to the book 'Scarcity: Why having so little means so much.' it is a good read in general because it applies to anything, even 'free time' as a resource.
  - wtvanhest 9y ago
    I think an easier way to think about the OP's point is that if you offer every person $1,000 a month (UBI), prices to live their exact same life style will increase by $1,000/month. The net change will be zero. There is an argument that while costs go up $1,000, if a true life changing event occurs, let's say sickness or entrepurship happen, maybe the person can scale down their life style from ramen to unflavored ramen and not be as bad off as with no UBI.
  - gigs 9y ago
    If the justification for this is rising housing costs, then giving people free money to pay the high rents is just going to cause housing to be even more expensive. We've already tried this experiment. It's called financial aid for college. Tuition prices just keep tracking federal aid increases. http://college.usatoday.com/2015/08/20/report-federal-aid-rising-tuition/ http://college.usatoday.com/2015/08/20/report-federal-aid-ri... If they gave the money as credits to developers to build more housing, then they might have a chance at accomplishing their goal.
- stale2002 9y ago
  You actually can subsidize the many at the expense of the few. This is because wealth is becoming more and more centralized. So those "few" people are becoming bigger and bigger pots of gold that can be taken from.
- panarky 9y ago
  If you think it through with a simple model, you might challenge your intuition. Let's say the entire economy consists of three people: #1, #10 and #100. #1 earns $1,000 per month, #10 earns $10,000 a month, and #100 earns $100,000 a month. Raising #1's salary to $1,500 a month might have a small effect on prices in the economy at large, but prices certainly wouldn't go up 50%. That's because #1's share of the entire economy is very small. In the US, 14.5% of the population are #1s, and 85.5% are #2s and #3s. And that 14.5% of people represents a minuscule portion of the economy, maybe something like 5% or less, since their incomes are so low.
- strken 9y ago
  I thought the idea was that, firstly, current welfare already does this and UBI just gets rid of most of the harmful distortionary effects, and secondly, that UBI inherently must change the distribution of spending, and therefore while it will result in a long term increase in demand for the items poor people buy, that demand will eventually be followed by some increase in supply as the economy retools to take advantage of the new flow of money. Would anyone be able to explain why this just-so story is wrong? My econ isn't great.
- navigator01 9y ago
  I'm glad this is the top comment, because I don't often see common sense critiques of UBI that acknowledge price adjustment. We can't just print money, that is obviously going to fail as it always does. So... Will we try to implement UBI with wealth transfers? Taxing the rich and giving to the poor? That seems to be the only alternative to printing money, meaning that UBI is not an innovative idea whatsoever. It's just wealth redistribution.
  - erentz 9y ago
    Of course you don’t print money. You tax everyone more. And you give everyone a share of that tax. > UBI is not an innovative idea whatsoever. It’s not claimed to be. The idea is literally hundreds of years old and is pretty well understood. There seem to be a lot who are just coming across it and applying lazy thinking and biases to it and mostly getting it wrong.
    - greedo 9y ago
      Again, the math simply doesn't work out. The tax increases will be huge, and since most of the real tax revenue is in the middle class, you'll have to bump their tax rates up dramatically. Giving UBI of $10K/year to every citizen of the US is $3.25T. That's more than all the Federal revenues in 2017 (0). And $10K isn't enough. So you'll end up needing confiscatory tax rates on everyone, and possible a wealth tax (not just income). The distorting effect of this level of taxation would be incredible, just from an economic viewpoint. From a political view, it would lead to revolution. [0] - http://federal-budget.insidegov.com/l/120/2017-Estimate http://federal-budget.insidegov.com/l/120/2017-Estimate
- omarforgotpwd 9y ago
  Money is transferred from taxed earners to nontaxed people (unemployed, entrepreneur, retired, etc)
drharby 9y ago
>tech boom Loaded language is loaded!
slifin 9y ago
I wish there was less focus on distributing money and more focus on free water, food and shelter for everyone It's crazy to me in the UK that we have free healthcare, where you can get free water food and shelter if you're ill but if you're healthy you can go back on the street with potentially no food water shelter
- dredmorbius 9y ago
  These services have real costs, and at least in the case of food, water, and shelter, risk (and its side effects) is a minor part of consumption, and so doesn't introduce distortions. Ensuring income adequate for access to these necessities is a fundamental and long-established principle of economics. "A man must always live by his work" comes straight from Adam Smith. The problems are multiple. Wages tend to (or below) subsistence. Rents (economic) eat up excess consumer value, not just producer costs. Not all people can (or should) work. And there are cases where risk components and externalities can lead to both over- and under-consumption (famously: healthcare, both ways).
  - pbhjpbhj 9y ago
    >Wages tend to (or below) subsistence. // In a pure capitalist system wages [for jobs where there are a surfeit of capable people] should surely tend to zero until enough proles have died to introduce scarcity and buoy the labour price.
    - Density 9y ago
      Jesus Christ this is a really thought provoking image of capitalism at the limit.
      - pizza 9y ago
        i think it's basically why the black death raised wages for its survivors
        9y ago
dredmorbius 9y ago
Increasingly my thought is that UBI or a minimum living wage (enforced perhaps through an employer of last resort who sets an effective wage floor) must be balanced by a tax on economic rents, else the gains simply flow to rentiers. This is a "land tax", but writ large and applying across all (or most) rent-seeking goods, including especially productive (as distinguished from strictly financial) asset classes. In the case of Stockton, and most other West Coast cities, this would mean land taxes to incentivise further development and housing supply, as well as updating zoning and building codes to allow denser and mixed-use development. The wildfire situation in the already housing-constrained SF North Bay strikes me as a tremendous opportunity to reconsider housing, rents, asset taxes, and zoning.
- djrogers 9y ago
  Such a tax would only increase rent - most landlords don’t run on huge margins, and those that do aren’t going to just give them up.
  - dredmorbius 9y ago
    See my response elsewhere in this thread, or read on the economics of land taxes. That understanding is incorrect. Most particularly, landlords themselves are paying rent in the form of interest. Property values would tend to fall.
  - dredmorbius 9y ago
    Here, FYI: https://news.ycombinator.com/item?id=15513942 https://news.ycombinator.com/item?id=15513942
at-fates-hands 9y ago
As a city who has been on the verge of bankruptcy, I'd say this is a welcome life line to some of its residents.
truxus 9y ago
The problem with UBI is that it doesn't promote social behavior. In fact it promotes anti-social behavior, since a UBI recipient need not provide any value to his community as a condition of this benefit. Charity is not a legitimate role for government.
- whytaka 9y ago
  That's funny. The proponents of UBI would say that it in fact is the key to maximizing productive social behaviour. Of course, it's a matter of worldviews. You might think innate human behaviour is laziness and only forceful contracts can get productivity out of them. I can certainly see evidence of that, but I don't think it's innate for everyone. I think many people would be eager for a sense of belonging and purpose that could only come from contributing to society. Think about all the people that help out in times of crisis without 'reward'. That's also innate. Whether it's the majority, I think that's a matter of culture. If you define the primary relationship people have to each other in society with forceful contracts, then yes, you might engender also a subculture of rebellion and banditry that results in laziness and exploitation. What if we defined it differently?
  - truxus 9y ago
    Having lived around people all my life, I will tell you that if you give someone something free, it is rare that they give more of themselves to their community. I will not remind you that utopian experiments are not new.
    - whytaka 9y ago
      Your experience isn’t a reliable setting to make the call about human nature because a different setting may produce different outcomes. UBI isn’t utopian. No one lives large for free. People simply get the basic support.
- telchar 9y ago
  Making desperate people less desperate can be pro-social. UBI could drive down the crime rate. Also you're assuming all paid jobs are pro-social. Is coal mining? Advertising? SEO for MLM firms? Lobbying for kleptocratic foreign governments? Some of these may have some positive effects but may be net negative in their effect on society. Finally, I disagree that charity isn't a legitimate role for government. Since neither of us is the arbiter of government legitimacy I think we can agree to disagree here.
atomical 9y ago
If everyone is getting $500 why wouldn't the landlords raise rents by $500?
- Uhhrrr 9y ago
  Maybe it will encourage building new apartments?
- whytaka 9y ago
  For most people, $500 would be taxed and $500 is then returned. So what would be the change?
- krapp 9y ago
  Why don't landlords ask you for your salary now and charge that amount for your rent?
  - atomical 9y ago
    They charge what they assume people can pay. So at some point they would know you can pay $500 more.
- dredmorbius 9y ago
  That's why UBI (or other mechanisms for assuring minimum living wages) will almost certainly have to be accompanied by land tax and other taxes on rent-generating assets.
  - djrogers 9y ago
    Wait, so not only does everyone have more money to spend on rent but it now costs more to maintain rental property? You’re just guaranteeing that rents will rise dramatically.
    - dredmorbius 9y ago
      No. Economics rents (not strictly the same as the money paid in rent. It is the return above costs that accrue to the supplier rather than renter of the property. The net problem is the combination of the two phenomena David Ricardo noted: 1. The iron law of wages: wages tend toward subsistence level. https://en.m.wikipedia.org/wiki/Iron_law_of_wages https://en.m.wikipedia.org/wiki/Iron_law_of_wages 2. The law of rent: the rent of a land site is equal to the economic advantage obtained by using the site in its most productive use. https://en.m.wikipedia.org/wiki/Law_of_rent https://en.m.wikipedia.org/wiki/Law_of_rent Given the latter, rent is determined by economic benefit, not by the cost of provision. A land tax, set to the difference between the value of utilisation and the cost of using the land, secures that surplus value to the state. (You'd want to leave "normal economic profits" to the landlord.) The effect of this is to introduce a carrying cost, to the landlord, on the value of the land. The price of the rent itself is bound by the beneficial use (say, 30% of prevailing wages). If someone cannot afford to pay that amount, they will seek alternative accommodations, or move out of the area. Any landlord charging more than that amount will have no takers (rational actors, long term), if the number of units on a property isn't sufficient for the landlord, the alternative is to increase density (build higher, smaller, or occupy more of the land space). Meantime, the tax revenues go to fund urban services. In much the same way, raising wages does not increase prices, but rather secures more of the manufacturing profit to labour rather than owners, as prices are established by the overall market (net of imports from elsewhere). That's the principle of Georgism. https://en.m.wikipedia.org/wiki/Georgism https://en.m.wikipedia.org/wiki/Georgism More generally: if you go back to the classical economists (Smith, Marx, Ricardo, Malthus, Mill), you find a number of distinct classes of goods being transacted. Generally (and adding a few): 1. Commodities. 2. Labour. 3. Capital. 4. Rents (monopolies). 5. Interest (and risk). 6. Investment assets. 8. Natural resources. 8. Public goods. (Subject to possible consolidation / reordering, though that's the gist of it.) Quite significantly, each of these has specific behaviours in terms of pricing, most specifically as to the relationships of the true economic cost of production (cost), the true economic value (value, for which I don't follow Bentham's Utility theory), and exchange price (price). The ideal, as Smith notes, is for price to approach the long-term true economic cost, but in the case of the goods classes listed, that's frequently not the case (also noted by Smith). Marginal analysis describes this in terms of market function, though that misses critical elements, including market failures and distortions.

98 points by weston 9y ago

When residents don't want to move away, they'll call it "Stockton Syndrome" :P

One of the things about UBI is that these pilot programs aren't UBI, because they aren't universal. Giving a segment of the population free money is going to benefit that segment, no question. Welfare and Quantitative Easing are both examples of that. But when you make it universal, my economics intuition says that the effect will be washed out by a commensurate rise in prices. Or put another way, you can subsidize the few at the expense of the many, but you can't subsidize the many at their own expense and have it result in a positive effect.

mcbruiser3 9y ago
net result being an increase in taxes on many (or at least mid-to-high earners) with zero benefits to society, only a built-in voting block for those who enable this edit: if I wanted upvotes I'd jump on the socialism/communism bandwagon. I feel sorry for the future if this is the prevailing thought :(
- uoaei 9y ago
  Being able to eschew shitty soul-sucking jobs in favor of real personal development is "zero benefit"?
  - maxerickson 9y ago
    They are arguing that access to the economy without the exchange of productivity will not create the opportunity for personal development, that the cost of basic goods and housing will rise to absorb any universal payment.
  - imron 9y ago
    How many people will engage in real personal development, and how many people will just spend more time on Netflix and Facebook?
    - mistercow 9y ago
      There will be some of each, but either one results in more jobs for everybody else.
  - mcbruiser3 9y ago
    who lives on $500 a month? and the economy will simply adjust to absorb this increase anyway, so hence my comment about zero benefits. also, for young people at least, "shitty" jobs build character, which seems ever more critical these days. after working a "shitty" job for a little while, a person may be motivated to better themselves, or at least get a better job.
    - freeone3000 9y ago
      9.8% of the USA lives on $6,000 a year or less, according to the IRS. So, about 10% of the population lives on $500 a month. This isn't targeted to young people, though it will benefit them. This is also targeted at displaced workers, low-skill workers, and the upcoming tens of thousands marginalized out of the workforce by increasing automation. There's not really a PATH for people to move from shitty job to non-shitty job anymore. There simply aren't enough good jobs for every adult.
      - greedo 9y ago
        B.S. They may "earn" $6k or less per year, but they're not living on that. There's EITC, welfare, disability, etc etc. When I was a student, I "lived" on $500/month, but that was because I was a damn student working part time waiting tables. Had I been fully employed, my annual income would have been much higher.
ThrustVectoring 9y ago
>you can't subsidize the many at their own expense and have it result in a positive effect. You can if it changes local incentives to cause a better overall outcome. For example, a tragedy-of-the-commons situation can be improved by having each over-user give up their share of use to a monopolist whose subsidies replace the lost income. This is explicitly one of the goals of replacing the current social safety nets with UBI. The social safety net as it stands has some extraordinarily shitty incentives. The effective marginal rate on income can exceed 100% in some situations, where income-based phase-outs of benefits are higher than the extra money you make. When I worked pizza delivery, my boss at one time had to scramble to figure out how to decline a pay raise that made her ineligible for childcare subsidies that cost more than the increase in take-home pay. >But when you make it universal, my economics intuition says that the effect will be washed out by a commensurate rise in prices. This is why a university degree isn't what it used to be, IMO, and why I oppose the college subsidies people are talking about. The net effect is that an undergraduate degree basically becomes what a high school degree is right now.
- aaron-lebo 9y ago
  Sorry to be annoying on this topic, but: This is explicitly one of the goals of replacing the current social safety nets with UBI. UBI can't replace social safety nets. It's impossible. 12k for every adult is 3 trillion dollars, which almost always assumes cutting other programs. What about healthcare? I bet most would rather have comprehensive health coverage instead of 12k every year, but you can't have both. In the US we have neither. You'd have to lose safety nets to make UBI work, financially. If you can show otherwise, do you mind explaining it?
  - lovich 9y ago
    part of our high healthcare costs are from not using a universal system. Other Western countries are achieving same or better outcomes with far less costs. I do agree that UBI will not work if we leave some of the things we consider basics now, such as food, housing, or(in my opinion) basic healthcare to be provided by competitive corporations, then we are essentially just going to be putting the money in their pockets
fenwick67 9y ago
I agree that these studies need to use the area's whole population to be complete. They should give these a try in a more insular area, like a big town the middle of nowhere in Wyoming, for these studies. They would have a more isolated economy.
yellowstuff 9y ago
Sure, if you simply gave everyone $1 for every dollar they already have, all you do is double prices and change nothing of substance. But I think the pro-UBI argument would be that you don't need to increase the money supply to do it. About 60% of Federal spending is on Social Security, Medicare and Medicaid. Reducing the spending on these programs, and other inefficient transfers such as welfare and disability will pay for much of UBI, and the rest is paid for by raising taxes. The net outcome is that rich people will pay a bit more to the government than they do now, poor people get a bit more than they do now, but the major effects are 1) inefficient bureaucracy is eliminated, 2) bad incentives are eliminated (such as disability payments forbidding any gainful employment, and 3) the stigma of welfare payments is removed when everyone gets them. I don't think this will work in the US because 1) there's no political will to reduce existing entitlement programs and 2) there's a lot of resentment in the working class against recipients of entitlements, and 3) racism. However, the argument that UBI will fail because it requires printing money is probably wrong.
- bigtunacan 9y ago
  How is UBI any different from welfare if it is what you describe? From your description, it actually sounds worse. As I read it, it sounds sort of like this. 1) Reduce Social Security (so steal people's retirement money that they paid in...) 2) Reduce Medicare / Medicaid (The group of people that receive these are often the one's least likely to be able to afford medical care (the poor & the eldery) while simultaneously being the one's most likely to need such care (at least the elderly)).
- mechagodzilla 9y ago
  I disagree with your premise that doubling the number of dollars everyone has would simply double prices. If you take someone that has $1 million in the bank, and magically make that $2 million, they almost certainly won't double all of their expenditures (they probably wouldn't change what they spend at all on a wide variety of categories - food or clothing, for instance). Rising inequality means that lack of demand is actually a big issue, since we're transferring income from people that would readily increase consumption, given more income, to people that will largely sit on that money. Globally speaking, our factories could easily produce more goods without raising prices much, if any. I believe a UBI would effectively be a transfer of wealth from people that have lots of money (but don't spend it) to people that don't have lots of money (but would readily spend more if they had it), but it wouldn't be the zero-sum game that people often assume it would, just by virtue of our productive capacity not being nearly maxed out.
nicholas73 9y ago
Are you going to eat more food with UBI? Probably not. Are food prices going to rise if others eat more food? No, we have spare capacity for food production. Also, a bigger topic, but supply and demand is not linear like they teach in school. Food prices are fairly cheap and stable in America because of excess capacity plus the fact that producers face thin margins plus spoilage. It will take a lot before prices move "commensurately". This is just one example.
andrewla 9y ago
The "commensurate rise in prices" is the tricky part. I think what you would see would be a percentage increase in prices corresponding to the average percentage increase in income. Since UBI is a flat amount, not tied to income, that average percentage is going to be so close to 0 as to be completely irrelevant. Even if it's not close to 0, for low-income (or UBI-only income) households especially, the marginal increase in income should be significantly higher than the marginal increase in prices.
dragonwriter 9y ago
UBI is giving a segment an increase in income (unless you are just printing money for it, which no one has proposed), since money comes from increased taxes or decreased existing spending somewhere else; there are, compared to the status quo ante, a segment of net gainers and one of net losers (with, most likely, a smooth continuum between.) So it's not actually different from the limited implementations in the way you paint it (it's different in other important ways, but not that one.)
eru 9y ago
https://medium.com/basic-income/why-land-value-tax-and-universal-basic-income-need-each-other-42ba999f7322 https://medium.com/basic-income/why-land-value-tax-and-unive... is a great article on how to do basic income. The problem is not so much general price rises, as rises in rent.
- sokoloff 9y ago
  Exactly. If I had an idea that countrywide UBI was coming at a meaningful level, I'd buy as much cheap housing stock as I could get my hands on as I believe UBI would result in net household formation and net demand for low-end rental housing.
stult 9y ago
Well, you're not giving UBI to everyone. Just the people who don't earn more than UBI level. For everyone else, UBI becomes like the standard deduction under the current US system.
- erentz 9y ago
  No. You give UBI to everyone. And you also tax everyone’s income, usually with a flat tax.
  - dredmorbius 9y ago
    s/flat/progressive/
  - stult 9y ago
    Ok. So think about what that actually means. You get a payment from the government for $1000 once a month. Then they take $2000 in taxes from your paycheck once a month. Net, you paid $1000 in taxes. For you, it is indistinghuisable from a system where you paid $1000 less in taxes because of lower rates. UBI functions like the standard deduction for your purposes, except insofar as it is refundable if your income and thus taxes owed drops below the UBI level, whereas a traditional refundable tax credit is refundable only after the return is filed, once per year. You can relabel the account balances however you want, but the underlying economic reality is the same for people earning income taxable above the UBI amount. You are paying more to the government than you are receiving. For people near or right on that level, they simply have an accelerated refund schedule.
ChuckMcM 9y ago
If I am understanding your argument, it is a sort of 'thermodynamics' argument against UBI. It argues that there exists a fixed supply of capital and that transfer payments funded by taxes are always counter balanced by an increases in prices to keep capital supplies in balance. If that isn't a correct interpretation of your argument, then the rest of this won't make a lot of sense. The reason this sort of thermodynamics arguments fails for me is that the economy isn't really the amount of cash flowing through it, rather cash is a proxy for GDP not the economy itself. GDP is a function of productivity and effort. In simpler terms we can have our fictional worker 'Bob' who is anxious and fearful so he scrapes along with a minimum wage job that he hates, versus 'Alt-Bob' who is engaged and excited about his career and is building a future retirement nest egg. With the same 'worker population' of '1' we get two very different GDPs. One theory is that UBI will make the anxious Bob less anxious and fearful and able to make better choices about their future. If you look at some of the work on how people who are anxious about the amount of money they have a hard time making good choices I refer you to the book 'Scarcity: Why having so little means so much.' it is a good read in general because it applies to anything, even 'free time' as a resource.
- wtvanhest 9y ago
  I think an easier way to think about the OP's point is that if you offer every person $1,000 a month (UBI), prices to live their exact same life style will increase by $1,000/month. The net change will be zero. There is an argument that while costs go up $1,000, if a true life changing event occurs, let's say sickness or entrepurship happen, maybe the person can scale down their life style from ramen to unflavored ramen and not be as bad off as with no UBI.
- gigs 9y ago
  If the justification for this is rising housing costs, then giving people free money to pay the high rents is just going to cause housing to be even more expensive. We've already tried this experiment. It's called financial aid for college. Tuition prices just keep tracking federal aid increases. http://college.usatoday.com/2015/08/20/report-federal-aid-rising-tuition/ http://college.usatoday.com/2015/08/20/report-federal-aid-ri... If they gave the money as credits to developers to build more housing, then they might have a chance at accomplishing their goal.
stale2002 9y ago
You actually can subsidize the many at the expense of the few. This is because wealth is becoming more and more centralized. So those "few" people are becoming bigger and bigger pots of gold that can be taken from.
panarky 9y ago
If you think it through with a simple model, you might challenge your intuition. Let's say the entire economy consists of three people: #1, #10 and #100. #1 earns $1,000 per month, #10 earns $10,000 a month, and #100 earns $100,000 a month. Raising #1's salary to $1,500 a month might have a small effect on prices in the economy at large, but prices certainly wouldn't go up 50%. That's because #1's share of the entire economy is very small. In the US, 14.5% of the population are #1s, and 85.5% are #2s and #3s. And that 14.5% of people represents a minuscule portion of the economy, maybe something like 5% or less, since their incomes are so low.
strken 9y ago
I thought the idea was that, firstly, current welfare already does this and UBI just gets rid of most of the harmful distortionary effects, and secondly, that UBI inherently must change the distribution of spending, and therefore while it will result in a long term increase in demand for the items poor people buy, that demand will eventually be followed by some increase in supply as the economy retools to take advantage of the new flow of money. Would anyone be able to explain why this just-so story is wrong? My econ isn't great.
navigator01 9y ago
I'm glad this is the top comment, because I don't often see common sense critiques of UBI that acknowledge price adjustment. We can't just print money, that is obviously going to fail as it always does. So... Will we try to implement UBI with wealth transfers? Taxing the rich and giving to the poor? That seems to be the only alternative to printing money, meaning that UBI is not an innovative idea whatsoever. It's just wealth redistribution.
- erentz 9y ago
  Of course you don’t print money. You tax everyone more. And you give everyone a share of that tax. > UBI is not an innovative idea whatsoever. It’s not claimed to be. The idea is literally hundreds of years old and is pretty well understood. There seem to be a lot who are just coming across it and applying lazy thinking and biases to it and mostly getting it wrong.
  - greedo 9y ago
    Again, the math simply doesn't work out. The tax increases will be huge, and since most of the real tax revenue is in the middle class, you'll have to bump their tax rates up dramatically. Giving UBI of $10K/year to every citizen of the US is $3.25T. That's more than all the Federal revenues in 2017 (0). And $10K isn't enough. So you'll end up needing confiscatory tax rates on everyone, and possible a wealth tax (not just income). The distorting effect of this level of taxation would be incredible, just from an economic viewpoint. From a political view, it would lead to revolution. [0] - http://federal-budget.insidegov.com/l/120/2017-Estimate http://federal-budget.insidegov.com/l/120/2017-Estimate
omarforgotpwd 9y ago
Money is transferred from taxed earners to nontaxed people (unemployed, entrepreneur, retired, etc)

drharby 9y ago

>tech boom Loaded language is loaded!

slifin 9y ago

I wish there was less focus on distributing money and more focus on free water, food and shelter for everyone It's crazy to me in the UK that we have free healthcare, where you can get free water food and shelter if you're ill but if you're healthy you can go back on the street with potentially no food water shelter

dredmorbius 9y ago
These services have real costs, and at least in the case of food, water, and shelter, risk (and its side effects) is a minor part of consumption, and so doesn't introduce distortions. Ensuring income adequate for access to these necessities is a fundamental and long-established principle of economics. "A man must always live by his work" comes straight from Adam Smith. The problems are multiple. Wages tend to (or below) subsistence. Rents (economic) eat up excess consumer value, not just producer costs. Not all people can (or should) work. And there are cases where risk components and externalities can lead to both over- and under-consumption (famously: healthcare, both ways).
- pbhjpbhj 9y ago
  >Wages tend to (or below) subsistence. // In a pure capitalist system wages [for jobs where there are a surfeit of capable people] should surely tend to zero until enough proles have died to introduce scarcity and buoy the labour price.
  - Density 9y ago
    Jesus Christ this is a really thought provoking image of capitalism at the limit.
    - pizza 9y ago
      i think it's basically why the black death raised wages for its survivors
      - 9y ago

dredmorbius 9y ago

Increasingly my thought is that UBI or a minimum living wage (enforced perhaps through an employer of last resort who sets an effective wage floor) must be balanced by a tax on economic rents, else the gains simply flow to rentiers. This is a "land tax", but writ large and applying across all (or most) rent-seeking goods, including especially productive (as distinguished from strictly financial) asset classes. In the case of Stockton, and most other West Coast cities, this would mean land taxes to incentivise further development and housing supply, as well as updating zoning and building codes to allow denser and mixed-use development. The wildfire situation in the already housing-constrained SF North Bay strikes me as a tremendous opportunity to reconsider housing, rents, asset taxes, and zoning.

djrogers 9y ago
Such a tax would only increase rent - most landlords don’t run on huge margins, and those that do aren’t going to just give them up.
- dredmorbius 9y ago
  See my response elsewhere in this thread, or read on the economics of land taxes. That understanding is incorrect. Most particularly, landlords themselves are paying rent in the form of interest. Property values would tend to fall.
- dredmorbius 9y ago
  Here, FYI: https://news.ycombinator.com/item?id=15513942 https://news.ycombinator.com/item?id=15513942

at-fates-hands 9y ago

As a city who has been on the verge of bankruptcy, I'd say this is a welcome life line to some of its residents.

truxus 9y ago

The problem with UBI is that it doesn't promote social behavior. In fact it promotes anti-social behavior, since a UBI recipient need not provide any value to his community as a condition of this benefit. Charity is not a legitimate role for government.

whytaka 9y ago
That's funny. The proponents of UBI would say that it in fact is the key to maximizing productive social behaviour. Of course, it's a matter of worldviews. You might think innate human behaviour is laziness and only forceful contracts can get productivity out of them. I can certainly see evidence of that, but I don't think it's innate for everyone. I think many people would be eager for a sense of belonging and purpose that could only come from contributing to society. Think about all the people that help out in times of crisis without 'reward'. That's also innate. Whether it's the majority, I think that's a matter of culture. If you define the primary relationship people have to each other in society with forceful contracts, then yes, you might engender also a subculture of rebellion and banditry that results in laziness and exploitation. What if we defined it differently?
- truxus 9y ago
  Having lived around people all my life, I will tell you that if you give someone something free, it is rare that they give more of themselves to their community. I will not remind you that utopian experiments are not new.
  - whytaka 9y ago
    Your experience isn’t a reliable setting to make the call about human nature because a different setting may produce different outcomes. UBI isn’t utopian. No one lives large for free. People simply get the basic support.
telchar 9y ago
Making desperate people less desperate can be pro-social. UBI could drive down the crime rate. Also you're assuming all paid jobs are pro-social. Is coal mining? Advertising? SEO for MLM firms? Lobbying for kleptocratic foreign governments? Some of these may have some positive effects but may be net negative in their effect on society. Finally, I disagree that charity isn't a legitimate role for government. Since neither of us is the arbiter of government legitimacy I think we can agree to disagree here.

atomical 9y ago

If everyone is getting $500 why wouldn't the landlords raise rents by $500?

Uhhrrr 9y ago
Maybe it will encourage building new apartments?
whytaka 9y ago
For most people, $500 would be taxed and $500 is then returned. So what would be the change?
krapp 9y ago
Why don't landlords ask you for your salary now and charge that amount for your rent?
- atomical 9y ago
  They charge what they assume people can pay. So at some point they would know you can pay $500 more.
dredmorbius 9y ago
That's why UBI (or other mechanisms for assuring minimum living wages) will almost certainly have to be accompanied by land tax and other taxes on rent-generating assets.
- djrogers 9y ago
  Wait, so not only does everyone have more money to spend on rent but it now costs more to maintain rental property? You’re just guaranteeing that rents will rise dramatically.
  - dredmorbius 9y ago
    No. Economics rents (not strictly the same as the money paid in rent. It is the return above costs that accrue to the supplier rather than renter of the property. The net problem is the combination of the two phenomena David Ricardo noted: 1. The iron law of wages: wages tend toward subsistence level. https://en.m.wikipedia.org/wiki/Iron_law_of_wages https://en.m.wikipedia.org/wiki/Iron_law_of_wages 2. The law of rent: the rent of a land site is equal to the economic advantage obtained by using the site in its most productive use. https://en.m.wikipedia.org/wiki/Law_of_rent https://en.m.wikipedia.org/wiki/Law_of_rent Given the latter, rent is determined by economic benefit, not by the cost of provision. A land tax, set to the difference between the value of utilisation and the cost of using the land, secures that surplus value to the state. (You'd want to leave "normal economic profits" to the landlord.) The effect of this is to introduce a carrying cost, to the landlord, on the value of the land. The price of the rent itself is bound by the beneficial use (say, 30% of prevailing wages). If someone cannot afford to pay that amount, they will seek alternative accommodations, or move out of the area. Any landlord charging more than that amount will have no takers (rational actors, long term), if the number of units on a property isn't sufficient for the landlord, the alternative is to increase density (build higher, smaller, or occupy more of the land space). Meantime, the tax revenues go to fund urban services. In much the same way, raising wages does not increase prices, but rather secures more of the manufacturing profit to labour rather than owners, as prices are established by the overall market (net of imports from elsewhere). That's the principle of Georgism. https://en.m.wikipedia.org/wiki/Georgism https://en.m.wikipedia.org/wiki/Georgism More generally: if you go back to the classical economists (Smith, Marx, Ricardo, Malthus, Mill), you find a number of distinct classes of goods being transacted. Generally (and adding a few): 1. Commodities. 2. Labour. 3. Capital. 4. Rents (monopolies). 5. Interest (and risk). 6. Investment assets. 8. Natural resources. 8. Public goods. (Subject to possible consolidation / reordering, though that's the gist of it.) Quite significantly, each of these has specific behaviours in terms of pricing, most specifically as to the relationships of the true economic cost of production (cost), the true economic value (value, for which I don't follow Bentham's Utility theory), and exchange price (price). The ideal, as Smith notes, is for price to approach the long-term true economic cost, but in the case of the goods classes listed, that's frequently not the case (also noted by Smith). Marginal analysis describes this in terms of market function, though that misses critical elements, including market failures and distortions.