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Y Combinator Learns Basic Income Is Not So Basic After All

103 points by rasengan 8y ago

Simulacra 8y ago
IMHO basic income runs up against two problems: 0. People are primarily self serving and will likely not use the money as proponents intent, and 1. If you give everyone a basic monthly income, what’s stopping everyone else who provides services (i.e. housing) from just increasing prices by however much the income is, thus negating the free money in the first place. What would make more sense are price controls to bring down costs, like housing and utilities.
- jstarfish 8y ago
  BMI just hits the tare button on what it means to be broke. You need no further evidence of what happens when you dump funny money into the market beyond looking at the rocketing cost of housing and education. The current result is what you get when everyone has access to a fixed amount of money. It doesn't level the playing field, it just elevates it.
  - someone7x 8y ago
    > BMI just hits the tare button on what it means to be broke > It doesn't level the playing field, it just elevates it. Raising the lower bounds of poverty sounds like a good outcome!
- firic 8y ago
  Price control for a scarce resource (eg. land) will lower the price for people who are better connected (friends of the seller, same religion as the seller, etc) but will make the cost impossible for others. The solution to the housing problem is to build more houses.
  - Retric 8y ago
    Land is available in the US under 10,000$ an acre. It’s the stuff like ocean views and public services that make land valuable not the limited total supply. Basic incomes would cause people to migrate to less expensive areas, but that’s unlikely to change prices much as we have vast amounts of land that’s barely used for anything.
    - firic 8y ago
      "Good" land is scarce. If you were to propose price control only in unwanted land then that law wouldn't do anything because the price there is already low. I was referring to wanted land, ie. land where price control would do something
      - dllthomas 8y ago
        I would note that a basic income directly increases the amount of land "sufficiently close to sufficient income".
      - Retric 8y ago
        I suspect people that are on basic income for longer periods might have a different view of what “good” land is. But, more to the point we already do what your talking about via affordable housing. It’s a large waste of resources, but hardly casusing the kind of inflation spiral your talking about due to how it’s implemented.
  - sbilstein 8y ago
    In my handful of years in the bay area I've seen rent controlled 4 bedroom apartments pass through chains of friends (usually alumni of the same university) several years in a row. Most of these tenants have been well compensated tech workers. I think price control without regulating who can access lower controls can increase inequality. Something I have observed anecdotally to work is fixing a percentage of units to be reserved for low income people. It's a nice way to let us tech workers subsidize the less fortunate and still allow landlords to make money.
  - Maybestring 8y ago
    >The solution to the housing problem is to build more houses. There's way too much latent demand for housing in booming cities to just build your way out. Without rent control, there will be people not benefiting from the boom that are just bled dry by rising costs.
    - travisoneill1 8y ago
      What is "latent demand"? There are empty apartments in SF right now and if you have the money you can rent them.
      - s73v3r_ 8y ago
        But that amount of money is astronomical. People are buying the apartments and leaving them vacant as an investment, rather than using them as intended, as a residence for a person living in the city.
      - Maybestring 8y ago
        The difference between current demand, and the increased demand that would exist at a lower price. I just mean, there are lots of people that would move to SF if they could afford it. This mass of potential immigrants will counter an attempt to just build your way out. Unless you mean a real substantive change to the city e.g. building 30,000 apartments/year.
- nkoren 8y ago
  > 0. People are primarily self serving and will likely not use the money as proponents intent This is an assumption, rooted in the belief that people are poor because they are lazy, and it is wrong. There are numerous studies which disprove this assumption and I have yet to see a study which supports it. > 1. If you give everyone a basic monthly income, what’s stopping everyone else who provides services (i.e. housing) from just increasing prices by however much the income is, thus negating the free money in the first place. While a UBI would raise the median income within an economy, if it was funded out of income tax then it would be neutral with respect to the mean available income, which is more what prices respond to. > What would make more sense are price controls to bring down costs, like housing and utilities. That's a really terrible idea. Free-market competition is better. Public ownership and provision of services is also better. Price controls on private markets, however, is genuinely the the worst of all worlds. It also does nothing whatsoever to help people at the bottom of the economic ladder, who don't have access to money at all.
  - deleted 8y ago
    [deleted]
  - joe_the_user 8y ago
    While a UBI would raise the median income within an economy, if it was funded out of income tax then it would be neutral with respect to the mean available income, which is more what prices respond to. This seems like an argument that breaks when one looks at the details of the markets involved. A landlord who owns low-income units doesn't care about average income. The landlord knows the income of their tenants and knows that they suddenly are able to afford more rent and so that landlord raises the rent to be able to take part in the windfall. IE, your argument would only work is housing units has efficient, elastic supply and demand like candy or something, where rising income taxes for the wealthy would reduce their demand for low-income units in the central cites. But we know the wealthy's demand for such units already near zero and the demand of the poor for such units is going to be constant.
    - dx87 8y ago
      A prime example of what you're talking about is apartments around military bases; landlords know that everyone on the base has to stay in the area for at least a few years, so they did sketchy stuff with what they'd charge for rent because they knew that the person couldn't leave. The pay rate of different ranks is public information, so if landlords found out you got promoted, they would raise your rent by difference between your old pay rate and new pay rate. Eventually the govt had to step in and make it illegal to charge different rent amounts based on what the service members rank was.
- pattyboo 8y ago
  What will prevent businesses from increasing the price? Competition Price control? Is this some sort of a joke?
  - _rpd 8y ago
    > Price control? Is this some sort of a joke? No, UBI only works if you institute price controls, or if there is a mass migration to rural areas, Otherwise, it just sparks an inflationary spiral. The spiral is even quicker if UBI is 'adjusted' for regional cost of living.
    - dragonwriter 8y ago
      > No, UBI only works if you institute price controls, or if there is a mass migration to rural areas, Otherwise, it just sparks an inflationary spiral. There is good reason to think that a tax-supported UBI at any level would, in fact, lead to price inflation for goods disproportionately in demand at the low end of the income scale, such that the net benefit of a UBI to the lowest-income recipients would be less than would be expected by consideration of the nominal benefit and pre-policy price levels, sure. The idea that it would just spark an inflationary spiral, OTOH, something that needs some support.
      - _rpd 8y ago
        > The idea that it would just spark an inflationary spiral, OTOH, something that needs some support. Fair point. My assumption is that any political movement that institutes UBI in the first place would add automatic indexing to CPI either in the initial bill or soon after the first inflationary surge. Even if (miraculously) resisted at the federal level, the pressure to automatically index in urban areas would be overwhelming and even a few major cities with local indexing laws would still spark the inflationary spiral.
        dllthomas 8y ago
        Yeah, the BI level should be pegged to targeted inflation, not observed or expected inflation.
- dragonwriter 8y ago
  > 0. People are primarily self serving and will likely not use the money as proponents intent That's...actually what many proponents specifically intend, though. > If you give everyone a basic monthly income, what’s stopping everyone else who provides services (i.e. housing) from just increasing prices by however much the income is, thus negating the free money in the first place. Competition for market goods, the lack of incentive to do so (or for regulators to allow it) for public services including regulated public utilities.
- briandear 8y ago
  Price controls just create shortages. See Venezuela.
- xvedejas 8y ago
  To address housing prices, UBI would ideally be paired with a Land Value Tax (LVT), to capture the producer surplus. More detailed discussion of the economics can be found here: https://en.wikipedia.org/wiki/Land_value_tax#Economic_properties https://en.wikipedia.org/wiki/Land_value_tax#Economic_proper...
- saudioger 8y ago
  With UBI I'm not necessarily tied to living in an urban population center, and I might be able to make a lower-paying job in a rural area work better for me. Urbanization came along with industrialization.
asimpletune 8y ago
IMHO, the real issue with basic income is centralization. Society as a whole should share in the benefits from the advancements made in automation and productivity. However, operating under the assumption that the government should handle the distribution of this profit sharing is a very brittle and potentially dangerous solution. Imagine mandatory drug tests, ideological compliance checks, etc... in order to receive your pay check. That may be extreme but it also may not. I have no idea. This begs the question of what alternatives could be? Irrespective of whether they’re good or bad, I’m curious what others would have to share.
- s73v3r_ 8y ago
  "Imagine mandatory drug tests, ideological compliance checks, etc... in order to receive your pay check." Lots of non-tech employees have to deal with that on a regular basis from their job.
- taurath 8y ago
  I'd start from the other side - its quite clear that private industry cannot handle the distribution without charging larger and larger fees to administer them, and lobbying governments to create more restrictions and let them keep the savings. > Imagine mandatory drug tests, ideological compliance checks, etc... in order to receive your pay check. That may be extreme but it also may not. I have no idea. Have you ever worked at a retail job? They not only drug test you regularly, they also have you take personality tests to determine your likelihood to be a good or bad employee. For me that was 15 years ago. Now places have automated systems checking your social networks for subversive/non-friendly talk, cameras on you 24/7 in the workplace. > This begs the question of what alternatives could be? The solution to "we don't trust the government to do something the private sector can't do" is to improve the government, which is something that we can actually do.
  - merpnderp 8y ago
    Without a doubt the private sector is far more responsive to negative attention than the bureaucrats congress and most state governments have abdicated their responsibilities to.
s73v3r_ 8y ago
I mean, any one of us could have thought that there would be problems. But without research and experimentation like this, we wouldn't really know what those problems would be, and be able to consider fixes for those problems.
ilaksh 8y ago
The problem is that this is not a test of basic income as they say it is. It's $1000, which is well below the minimum amount required to live. $1000 might be basic income in another country, but not in the US.
- aetherson 8y ago
  "Basic income" does not necessarily mean, "Enough money to live a relatively comfortable if frugal life with." It just means, "An income given to you with few eligibility requirements."
  - Hello71 8y ago
    No, you're thinking of "universal income". That's what the commonly accepted definitions of "basic" and "universal" are. basic: Necessary, essential for life or some process; Elementary, simple, fundamental, merely functional. universal: Common to all members of a group or class; Common to all society; world-wide.
  - simonsarris 8y ago
    The article is about YC's experiment, and the article even quotes Sam Altman directly when explaining what the test is for: > "Giving people enough money to live on with no strings attached" So I think in this context we should be talking about that, and not some other definition.
- defen 8y ago
  Depends where you live. It's certainly possible to live on $1000/month in many areas of the US. It's not going to be a lavish existence, but it also won't be complete penury.
ilyagr 8y ago
I wonder, will this be taxed the same as lottery winnings? Or is this post-tax $1000?
- smpetrey 8y ago
  In the experiment, it's taxable income. There's no shortage of frameworks and differing philosophies on the matter of taxation of the UBI. But generally speaking, no, the $1000 would be considered tax-free as for all intents and purposes, it's a gift from the coffers of government's treasury. Income generated outside of the UBI however, is taxed because well.. it's income and not a gift.
  - _rpd 8y ago
    > But generally speaking, no, the $1000 would be considered tax-free as for all intents and purposes, it's a gift from the coffers of government's treasury. If the income is truly universal (i.e., not means tested), then it will almost certainly be taxed so that higher income individuals pay back a higher percentage of the income.
DoreenMichele 8y ago
I would much rather see people working on solving the affordable housing shortage in the US than on basic income experiments. Because of the high cost of housing across the US, a single childless person cannot live on $1000/month in many places. There are cities where rent on a one bedroom apartment is nearly $1000/month. If you don't solve the affordable housing problem, basic income doesn't have any hope of ending poverty. If you do, many people who are currently living with terrible distress could make their lives work. If you are only going to work on one of the two, affordable housing should be the priority. If you want do both, cool. But I'm not really seeing affordable housing given anywhere near the attention that basic income is getting.
- sli 8y ago
  > There are cities where rent on a one bedroom apartment is nearly $1000/month. And I think the reality of this statement is lost of many folks, because it's not just large cities that have this problem. I live in a moderately sized city (~100k people) and rents here are nearly $1000/mo for an average one bedroom apartment.
  - kerng 8y ago
    In Seattle and SF it's more like $2000 per month.
    - erentz 8y ago
      Minimum in my experience. I haven’t been able to pay under $2000 for a 1 bedroom in the 7 years I’ve lived in Seattle. The cheapest I’ve gotten was $2100 but that was a place where you had to deal with mold, you heard your neighbors every conversation, and the whole building shook when the washing machine downstairs ran.
- ryanmonroe 8y ago
  I think the fear of not being able to find a job is a large part of the reason people don't just move somewhere cheaper when they can't afford housing. There are of course other reasons, e.g. community, for staying in expensive areas, but I think people would be more likely to move to where they can afford housing if they have an guaranteed income stream. Theoretically this would also decrease demand on the low-end of high-price housing areas, lowering prices.
lalos 8y ago
Who funded this study and what are they to gain with this result? Research seems to be used as a bargaining chip always when trying to influence public opinion and regulation (Tobacco industry, dairy, etc).
andromedavision 8y ago
My take on this is not going to be popular but here goes: This is a path to communism and historically there's no moral justification for it. IT IS WRONG, SO STOP IT. Doesn't matter which way you drape it, work MUST be done for compensation/remuneration to be received, otherwise people die en masse. It is known.
- jakobegger 8y ago
  I live in a very capitalist country (Austria) and here parents get around 200€ per kid per month pretty much unconditionally (until the kid has completed their education). We're not on a path to communism, and people don't die en masse here.
  - apocalyptic0n3 8y ago
    This happens in the US too, though not quite the same way. Here, you get substantial tax breaks for each "dependent" (i.e. kid, disabled person, elderly, etc. that you are financially responsible for). This basically translates into the government giving money to families that otherwise they would not have had. The only difference is that it is money simply not taken from the citizen, rather than a monthly stipend given to the citizen, which leads to people treating it differently.
    - monetus 8y ago
      I wouldn't say that is the only difference. The Austrian stipend seems flat, while our tax break seems like it wouldn't affect people who don't earn enough to be taxed. I'm also a bit curious about the difference in the psychological effect of being given money each month, rather than not having money taken away once a year.
- dang 8y ago
  Please don't take HN threads into generic ideological flamewar, which is the last thing we want here. Also, please don't use allcaps for emphasis; it's basically yelling. (That's in the site guidelines too.) https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
philwelch 8y ago
So here's my basic criticism of universal basic income: There are 325 million people in the United States. If we give each of them a "basic income" of $1,000 per month (which is bare bones subsistence basic income), the accumulated cost would be $12,000 per year times 325 million people, or $3.9 trillion per year. The entire US federal budget is already $4.094 trillion. (https://en.wikipedia.org/wiki/2018_United_States_federal_budget https://en.wikipedia.org/wiki/2018_United_States_federal_bud...), and once you account for things like defense, interest on the national debt, and Medicare that we'd still have to pay for, it's still looking like we would have to add maybe $3 trillion to the annual budget. (You can get really deep into the weeds on this: for example, even if you replace some or all of Social Security with UBI, some Social Security recipients receive more than $1000 per month, so you would need to top them up to the same levels they're already receiving because of the time-honored principle of The United States Government Does Not Welch On Its Debts). So here comes the other side of the argument: "you can just raise taxes on rich people to make up for that 3 trillion dollar shortfall!". Yeah, but you can already raise taxes on rich people. The steelman version of that argument is more like, "even if we give away 4 trillion dollars, we can set up the tax brackets so we get some of it back, so the total cost is less than 4 trillion". OK, cool, let's do some napkin math. It looks like $100,000 is around the 75th percentile of income in the US (https://en.wikipedia.org/wiki/Household_income_in_the_United_States#Distribution_of_household_income_in_2014_according_to_US_Census_data https://en.wikipedia.org/wiki/Household_income_in_the_United...), and that's a big round number where people definitely shouldn't be receiving public assistance anymore, so let's make that the break-even point where we tax back all of the UBI we give away in the first place, which means we get to cut our UBI budget by at least 25% (since only 75% of the population gets any), and maybe let's throw in another 12.5% for gradually taxing back some of the UBI for people in the 50th-75th percentiles, too. So our $4 trillion expenditure is now $2.5 trillion, and let's assume we can write off the same trillion dollars as before by canceling out existing welfare and entitlements, so now you're adding a net $1.5 trillion annual expenditure. That actually seems doable. This would also mean that providing a UBI for ten years would cost $15 trillion. So, OK, let's accept for the sake of argument that the federal government is going to spend $15 trillion over the course of the next ten years to make everyone's lives better. Is this really the best way? Or could you do something like: * Repair and replace damaged and worn out US infrastructure: $2 trillion (https://www.csmonitor.com/Business/2018/0118/Why-fixing-US-infrastructure-matters-9-per-household-per-day https://www.csmonitor.com/Business/2018/0118/Why-fixing-US-i...), much of which will create jobs and stimulate enough economic activity to pay itself off in the long run. * A manned mission to Mars: At most, $1 trillion (http://time.com/money/4765718/travel-mars-price-cost-tourism/ http://time.com/money/4765718/travel-mars-price-cost-tourism...), much of which will create jobs. * ITER, the best-funded effort to develop fusion power, costs about $20 billion (http://www.sciencemag.org/news/2016/04/updated-panel-backs-iter-fusion-project-s-new-schedule-balks-cost http://www.sciencemag.org/news/2016/04/updated-panel-backs-i...). Spend $250 billion on a Apollo/Manhattan Project scale effort to develop low cost energy solutions, either from fusion or other projects. (It'll create jobs!) * It would cost $10 billion to build a Lofstrom loop, but since the federal government is doing it and we've never done anything like that before, let's 10x that. That's another $100 billion. (And even more jobs!) And you still have $11.5 trillion left to either spend on even more extravagant government projects or eat a decent chunk out of the $21 trillion national debt (https://www.usgovernmentdebt.us/ https://www.usgovernmentdebt.us/). And in addition to creating more than enough jobs for everyone who needs one, we get to potentially solve some of the most important long-term problems for human civilization, repair all of our infrastructure, land on goddamn Mars, and knock out half of our national debt.
hartator 8y ago
> It also took time to work with California state agencies and the IRS to make sure that no study participants lost existing benefits. So, same family working for the $1,000 will have to pay more overall taxes than the one receiving the $1,000 from the YC program? It doesn't seem really fair.
dahdum 8y ago
The YC experiment will be rather interesting, giving people guaranteed monthly payments of ~$1k for 3-5 years makes them a very attractive population for loan providers. Once they are accepted into the program, you could offer to immediately buy them out, for say, $24k in cash for signing over their rights to the monthly payments. If YC backs out once they've taken the buyout, they're saddled with debt and likely forced into bankruptcy. It would leave them worse off than before. If YC doesn't back out, the loan provider can pocket a hefty profit.
- _rpd 8y ago
  It'll be interesting to see if YC adds language prohibiting such arrangements to the experiment contract. It could be that $25k is all the capital needed to start a small business. Maybe YC itself could offer it as an alternative: larger monthly payment or smaller lump sum?
monetus 8y ago
Does anyone know the details of the UBI within the Cherokee reservation in North Carolina? I don't understand why y-combinator chose the particular methods in the article. I can see how the control groups are losing engagement. Not many articles, but it seems to have been relatively successful. https://www.demos.org/blog/1/19/14/cherokee-tribes-basic-income-success-story https://www.demos.org/blog/1/19/14/cherokee-tribes-basic-inc...
logfromblammo 8y ago
As is usual whenever the basic income thread comes up, I have to reiterate that I don't think just giving cash to people will work. You have to invest that money in the production of basic goods and services, and then distribute those evenly. A better experiment than $X cash per month to N families would be to spend that $X*N on corn that would otherwise be exported, and labor and transport to distribute ration packs to the experimental group. The control group can get some coupons for up to $3 off a 5# bag of corn meal. You can then also see how fast the price of a 5# bag of corn meal goes up to $2.99 . Or spend up to $X per month on the experimental group's metered utilities, in the following order: water, electric, natgas (if available), other municipal-owned utilities, then phone/ISP, with anything remaining distributed as prepaid vehicle fuel cards. The power company can't exactly raise your rates if it finds out you, specifically, got a windfall, and the landlord can't raise your rent if you're getting paid in kWh, Mbps, gallons, and cubic yards. I think it is very important that whatever the basic income is distributed as not be easily convertible to the currency used to pay rents and make general purchases of goods and services. Rent-seeking always happens wherever it is possible.
chriselles 8y ago
Regardless of the outcome of the YC UBI Experiment, I applaud YC’s effort. It’s great to see a private company trying to influence public policy through privately funded, transparent, data driven experimentation. Instead of traditional money driven lobbying(now called non market activity in business school) which I abhor.
RestlessMind 8y ago
I would not trust most of the entities promising basic income. Most of them can go bankrupt (eg. corporate titans like GM or cities like Detroit/Stockton or insurers like AIG). If one relies on basic income for 10-15 years and alter their lifestyle accordingly (little savings, big gap in work experience), what happens when the entity underwriting their basic income declares bankruptcy? Only a handful of entities (like US federal govt) can administer a trustworthy UBI program (and that too, only for a limited set of people).
esaym 8y ago
I have a friend getting out of jail soon, how do I sign him up? (serious question)
RhysU 8y ago
Thoughts on focusing on sliding-scale financing instead of UBI? That is, the disadvantaged can finance businesses and arbitrage at cheaper rates than you and I can? Think of the successes of micro-finance. The point being that sliding financing incentivizes but does not eliminate risk. Because, no risk never reward.
exabrial 8y ago
I have no problem with UBI when it comes from private funding sources! I love what is being done here, especially carefully jumping through the hope with Tax law. I hope this helps some families in need and eventually chances their life situation
RickJWagner 8y ago
I'd like to help. It seems Y-Combinator is waiting until they get the whole sum put together before they start. I'm willing to participate as a recipient for a much smaller pilot program. :)

103 points by rasengan 8y ago

IMHO basic income runs up against two problems: 0. People are primarily self serving and will likely not use the money as proponents intent, and 1. If you give everyone a basic monthly income, what’s stopping everyone else who provides services (i.e. housing) from just increasing prices by however much the income is, thus negating the free money in the first place. What would make more sense are price controls to bring down costs, like housing and utilities.

jstarfish 8y ago
BMI just hits the tare button on what it means to be broke. You need no further evidence of what happens when you dump funny money into the market beyond looking at the rocketing cost of housing and education. The current result is what you get when everyone has access to a fixed amount of money. It doesn't level the playing field, it just elevates it.
- someone7x 8y ago
  > BMI just hits the tare button on what it means to be broke > It doesn't level the playing field, it just elevates it. Raising the lower bounds of poverty sounds like a good outcome!
firic 8y ago
Price control for a scarce resource (eg. land) will lower the price for people who are better connected (friends of the seller, same religion as the seller, etc) but will make the cost impossible for others. The solution to the housing problem is to build more houses.
- Retric 8y ago
  Land is available in the US under 10,000$ an acre. It’s the stuff like ocean views and public services that make land valuable not the limited total supply. Basic incomes would cause people to migrate to less expensive areas, but that’s unlikely to change prices much as we have vast amounts of land that’s barely used for anything.
  - firic 8y ago
    "Good" land is scarce. If you were to propose price control only in unwanted land then that law wouldn't do anything because the price there is already low. I was referring to wanted land, ie. land where price control would do something
    - dllthomas 8y ago
      I would note that a basic income directly increases the amount of land "sufficiently close to sufficient income".
    - Retric 8y ago
      I suspect people that are on basic income for longer periods might have a different view of what “good” land is. But, more to the point we already do what your talking about via affordable housing. It’s a large waste of resources, but hardly casusing the kind of inflation spiral your talking about due to how it’s implemented.
- sbilstein 8y ago
  In my handful of years in the bay area I've seen rent controlled 4 bedroom apartments pass through chains of friends (usually alumni of the same university) several years in a row. Most of these tenants have been well compensated tech workers. I think price control without regulating who can access lower controls can increase inequality. Something I have observed anecdotally to work is fixing a percentage of units to be reserved for low income people. It's a nice way to let us tech workers subsidize the less fortunate and still allow landlords to make money.
- Maybestring 8y ago
  >The solution to the housing problem is to build more houses. There's way too much latent demand for housing in booming cities to just build your way out. Without rent control, there will be people not benefiting from the boom that are just bled dry by rising costs.
  - travisoneill1 8y ago
    What is "latent demand"? There are empty apartments in SF right now and if you have the money you can rent them.
    - s73v3r_ 8y ago
      But that amount of money is astronomical. People are buying the apartments and leaving them vacant as an investment, rather than using them as intended, as a residence for a person living in the city.
    - Maybestring 8y ago
      The difference between current demand, and the increased demand that would exist at a lower price. I just mean, there are lots of people that would move to SF if they could afford it. This mass of potential immigrants will counter an attempt to just build your way out. Unless you mean a real substantive change to the city e.g. building 30,000 apartments/year.
nkoren 8y ago
> 0. People are primarily self serving and will likely not use the money as proponents intent This is an assumption, rooted in the belief that people are poor because they are lazy, and it is wrong. There are numerous studies which disprove this assumption and I have yet to see a study which supports it. > 1. If you give everyone a basic monthly income, what’s stopping everyone else who provides services (i.e. housing) from just increasing prices by however much the income is, thus negating the free money in the first place. While a UBI would raise the median income within an economy, if it was funded out of income tax then it would be neutral with respect to the mean available income, which is more what prices respond to. > What would make more sense are price controls to bring down costs, like housing and utilities. That's a really terrible idea. Free-market competition is better. Public ownership and provision of services is also better. Price controls on private markets, however, is genuinely the the worst of all worlds. It also does nothing whatsoever to help people at the bottom of the economic ladder, who don't have access to money at all.
- deleted 8y ago
  [deleted]
- joe_the_user 8y ago
  While a UBI would raise the median income within an economy, if it was funded out of income tax then it would be neutral with respect to the mean available income, which is more what prices respond to. This seems like an argument that breaks when one looks at the details of the markets involved. A landlord who owns low-income units doesn't care about average income. The landlord knows the income of their tenants and knows that they suddenly are able to afford more rent and so that landlord raises the rent to be able to take part in the windfall. IE, your argument would only work is housing units has efficient, elastic supply and demand like candy or something, where rising income taxes for the wealthy would reduce their demand for low-income units in the central cites. But we know the wealthy's demand for such units already near zero and the demand of the poor for such units is going to be constant.
  - dx87 8y ago
    A prime example of what you're talking about is apartments around military bases; landlords know that everyone on the base has to stay in the area for at least a few years, so they did sketchy stuff with what they'd charge for rent because they knew that the person couldn't leave. The pay rate of different ranks is public information, so if landlords found out you got promoted, they would raise your rent by difference between your old pay rate and new pay rate. Eventually the govt had to step in and make it illegal to charge different rent amounts based on what the service members rank was.
pattyboo 8y ago
What will prevent businesses from increasing the price? Competition Price control? Is this some sort of a joke?
- _rpd 8y ago
  > Price control? Is this some sort of a joke? No, UBI only works if you institute price controls, or if there is a mass migration to rural areas, Otherwise, it just sparks an inflationary spiral. The spiral is even quicker if UBI is 'adjusted' for regional cost of living.
  - dragonwriter 8y ago
    > No, UBI only works if you institute price controls, or if there is a mass migration to rural areas, Otherwise, it just sparks an inflationary spiral. There is good reason to think that a tax-supported UBI at any level would, in fact, lead to price inflation for goods disproportionately in demand at the low end of the income scale, such that the net benefit of a UBI to the lowest-income recipients would be less than would be expected by consideration of the nominal benefit and pre-policy price levels, sure. The idea that it would just spark an inflationary spiral, OTOH, something that needs some support.
    - _rpd 8y ago
      > The idea that it would just spark an inflationary spiral, OTOH, something that needs some support. Fair point. My assumption is that any political movement that institutes UBI in the first place would add automatic indexing to CPI either in the initial bill or soon after the first inflationary surge. Even if (miraculously) resisted at the federal level, the pressure to automatically index in urban areas would be overwhelming and even a few major cities with local indexing laws would still spark the inflationary spiral.
      - dllthomas 8y ago
        Yeah, the BI level should be pegged to targeted inflation, not observed or expected inflation.
dragonwriter 8y ago
> 0. People are primarily self serving and will likely not use the money as proponents intent That's...actually what many proponents specifically intend, though. > If you give everyone a basic monthly income, what’s stopping everyone else who provides services (i.e. housing) from just increasing prices by however much the income is, thus negating the free money in the first place. Competition for market goods, the lack of incentive to do so (or for regulators to allow it) for public services including regulated public utilities.
briandear 8y ago
Price controls just create shortages. See Venezuela.
xvedejas 8y ago
To address housing prices, UBI would ideally be paired with a Land Value Tax (LVT), to capture the producer surplus. More detailed discussion of the economics can be found here: https://en.wikipedia.org/wiki/Land_value_tax#Economic_properties https://en.wikipedia.org/wiki/Land_value_tax#Economic_proper...
saudioger 8y ago
With UBI I'm not necessarily tied to living in an urban population center, and I might be able to make a lower-paying job in a rural area work better for me. Urbanization came along with industrialization.

asimpletune 8y ago

IMHO, the real issue with basic income is centralization. Society as a whole should share in the benefits from the advancements made in automation and productivity. However, operating under the assumption that the government should handle the distribution of this profit sharing is a very brittle and potentially dangerous solution. Imagine mandatory drug tests, ideological compliance checks, etc... in order to receive your pay check. That may be extreme but it also may not. I have no idea. This begs the question of what alternatives could be? Irrespective of whether they’re good or bad, I’m curious what others would have to share.

s73v3r_ 8y ago
"Imagine mandatory drug tests, ideological compliance checks, etc... in order to receive your pay check." Lots of non-tech employees have to deal with that on a regular basis from their job.
taurath 8y ago
I'd start from the other side - its quite clear that private industry cannot handle the distribution without charging larger and larger fees to administer them, and lobbying governments to create more restrictions and let them keep the savings. > Imagine mandatory drug tests, ideological compliance checks, etc... in order to receive your pay check. That may be extreme but it also may not. I have no idea. Have you ever worked at a retail job? They not only drug test you regularly, they also have you take personality tests to determine your likelihood to be a good or bad employee. For me that was 15 years ago. Now places have automated systems checking your social networks for subversive/non-friendly talk, cameras on you 24/7 in the workplace. > This begs the question of what alternatives could be? The solution to "we don't trust the government to do something the private sector can't do" is to improve the government, which is something that we can actually do.
- merpnderp 8y ago
  Without a doubt the private sector is far more responsive to negative attention than the bureaucrats congress and most state governments have abdicated their responsibilities to.

s73v3r_ 8y ago

I mean, any one of us could have thought that there would be problems. But without research and experimentation like this, we wouldn't really know what those problems would be, and be able to consider fixes for those problems.

ilaksh 8y ago

The problem is that this is not a test of basic income as they say it is. It's $1000, which is well below the minimum amount required to live. $1000 might be basic income in another country, but not in the US.

aetherson 8y ago
"Basic income" does not necessarily mean, "Enough money to live a relatively comfortable if frugal life with." It just means, "An income given to you with few eligibility requirements."
- Hello71 8y ago
  No, you're thinking of "universal income". That's what the commonly accepted definitions of "basic" and "universal" are. basic: Necessary, essential for life or some process; Elementary, simple, fundamental, merely functional. universal: Common to all members of a group or class; Common to all society; world-wide.
- simonsarris 8y ago
  The article is about YC's experiment, and the article even quotes Sam Altman directly when explaining what the test is for: > "Giving people enough money to live on with no strings attached" So I think in this context we should be talking about that, and not some other definition.
defen 8y ago
Depends where you live. It's certainly possible to live on $1000/month in many areas of the US. It's not going to be a lavish existence, but it also won't be complete penury.

ilyagr 8y ago

I wonder, will this be taxed the same as lottery winnings? Or is this post-tax $1000?

smpetrey 8y ago
In the experiment, it's taxable income. There's no shortage of frameworks and differing philosophies on the matter of taxation of the UBI. But generally speaking, no, the $1000 would be considered tax-free as for all intents and purposes, it's a gift from the coffers of government's treasury. Income generated outside of the UBI however, is taxed because well.. it's income and not a gift.
- _rpd 8y ago
  > But generally speaking, no, the $1000 would be considered tax-free as for all intents and purposes, it's a gift from the coffers of government's treasury. If the income is truly universal (i.e., not means tested), then it will almost certainly be taxed so that higher income individuals pay back a higher percentage of the income.

DoreenMichele 8y ago

I would much rather see people working on solving the affordable housing shortage in the US than on basic income experiments. Because of the high cost of housing across the US, a single childless person cannot live on $1000/month in many places. There are cities where rent on a one bedroom apartment is nearly $1000/month. If you don't solve the affordable housing problem, basic income doesn't have any hope of ending poverty. If you do, many people who are currently living with terrible distress could make their lives work. If you are only going to work on one of the two, affordable housing should be the priority. If you want do both, cool. But I'm not really seeing affordable housing given anywhere near the attention that basic income is getting.

sli 8y ago
> There are cities where rent on a one bedroom apartment is nearly $1000/month. And I think the reality of this statement is lost of many folks, because it's not just large cities that have this problem. I live in a moderately sized city (~100k people) and rents here are nearly $1000/mo for an average one bedroom apartment.
- kerng 8y ago
  In Seattle and SF it's more like $2000 per month.
  - erentz 8y ago
    Minimum in my experience. I haven’t been able to pay under $2000 for a 1 bedroom in the 7 years I’ve lived in Seattle. The cheapest I’ve gotten was $2100 but that was a place where you had to deal with mold, you heard your neighbors every conversation, and the whole building shook when the washing machine downstairs ran.
ryanmonroe 8y ago
I think the fear of not being able to find a job is a large part of the reason people don't just move somewhere cheaper when they can't afford housing. There are of course other reasons, e.g. community, for staying in expensive areas, but I think people would be more likely to move to where they can afford housing if they have an guaranteed income stream. Theoretically this would also decrease demand on the low-end of high-price housing areas, lowering prices.

lalos 8y ago

Who funded this study and what are they to gain with this result? Research seems to be used as a bargaining chip always when trying to influence public opinion and regulation (Tobacco industry, dairy, etc).

andromedavision 8y ago

My take on this is not going to be popular but here goes: This is a path to communism and historically there's no moral justification for it. IT IS WRONG, SO STOP IT. Doesn't matter which way you drape it, work MUST be done for compensation/remuneration to be received, otherwise people die en masse. It is known.

jakobegger 8y ago
I live in a very capitalist country (Austria) and here parents get around 200€ per kid per month pretty much unconditionally (until the kid has completed their education). We're not on a path to communism, and people don't die en masse here.
- apocalyptic0n3 8y ago
  This happens in the US too, though not quite the same way. Here, you get substantial tax breaks for each "dependent" (i.e. kid, disabled person, elderly, etc. that you are financially responsible for). This basically translates into the government giving money to families that otherwise they would not have had. The only difference is that it is money simply not taken from the citizen, rather than a monthly stipend given to the citizen, which leads to people treating it differently.
  - monetus 8y ago
    I wouldn't say that is the only difference. The Austrian stipend seems flat, while our tax break seems like it wouldn't affect people who don't earn enough to be taxed. I'm also a bit curious about the difference in the psychological effect of being given money each month, rather than not having money taken away once a year.
dang 8y ago
Please don't take HN threads into generic ideological flamewar, which is the last thing we want here. Also, please don't use allcaps for emphasis; it's basically yelling. (That's in the site guidelines too.) https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

philwelch 8y ago

So here's my basic criticism of universal basic income: There are 325 million people in the United States. If we give each of them a "basic income" of $1,000 per month (which is bare bones subsistence basic income), the accumulated cost would be $12,000 per year times 325 million people, or $3.9 trillion per year. The entire US federal budget is already $4.094 trillion. (https://en.wikipedia.org/wiki/2018_United_States_federal_budget https://en.wikipedia.org/wiki/2018_United_States_federal_bud...), and once you account for things like defense, interest on the national debt, and Medicare that we'd still have to pay for, it's still looking like we would have to add maybe $3 trillion to the annual budget. (You can get really deep into the weeds on this: for example, even if you replace some or all of Social Security with UBI, some Social Security recipients receive more than $1000 per month, so you would need to top them up to the same levels they're already receiving because of the time-honored principle of The United States Government Does Not Welch On Its Debts). So here comes the other side of the argument: "you can just raise taxes on rich people to make up for that 3 trillion dollar shortfall!". Yeah, but you can already raise taxes on rich people. The steelman version of that argument is more like, "even if we give away 4 trillion dollars, we can set up the tax brackets so we get some of it back, so the total cost is less than 4 trillion". OK, cool, let's do some napkin math. It looks like $100,000 is around the 75th percentile of income in the US (https://en.wikipedia.org/wiki/Household_income_in_the_United_States#Distribution_of_household_income_in_2014_according_to_US_Census_data https://en.wikipedia.org/wiki/Household_income_in_the_United...), and that's a big round number where people definitely shouldn't be receiving public assistance anymore, so let's make that the break-even point where we tax back all of the UBI we give away in the first place, which means we get to cut our UBI budget by at least 25% (since only 75% of the population gets any), and maybe let's throw in another 12.5% for gradually taxing back some of the UBI for people in the 50th-75th percentiles, too. So our $4 trillion expenditure is now $2.5 trillion, and let's assume we can write off the same trillion dollars as before by canceling out existing welfare and entitlements, so now you're adding a net $1.5 trillion annual expenditure. That actually seems doable. This would also mean that providing a UBI for ten years would cost $15 trillion. So, OK, let's accept for the sake of argument that the federal government is going to spend $15 trillion over the course of the next ten years to make everyone's lives better. Is this really the best way? Or could you do something like: * Repair and replace damaged and worn out US infrastructure: $2 trillion (https://www.csmonitor.com/Business/2018/0118/Why-fixing-US-infrastructure-matters-9-per-household-per-day https://www.csmonitor.com/Business/2018/0118/Why-fixing-US-i...), much of which will create jobs and stimulate enough economic activity to pay itself off in the long run. * A manned mission to Mars: At most, $1 trillion (http://time.com/money/4765718/travel-mars-price-cost-tourism/ http://time.com/money/4765718/travel-mars-price-cost-tourism...), much of which will create jobs. * ITER, the best-funded effort to develop fusion power, costs about $20 billion (http://www.sciencemag.org/news/2016/04/updated-panel-backs-iter-fusion-project-s-new-schedule-balks-cost http://www.sciencemag.org/news/2016/04/updated-panel-backs-i...). Spend $250 billion on a Apollo/Manhattan Project scale effort to develop low cost energy solutions, either from fusion or other projects. (It'll create jobs!) * It would cost $10 billion to build a Lofstrom loop, but since the federal government is doing it and we've never done anything like that before, let's 10x that. That's another $100 billion. (And even more jobs!) And you still have $11.5 trillion left to either spend on even more extravagant government projects or eat a decent chunk out of the $21 trillion national debt (https://www.usgovernmentdebt.us/ https://www.usgovernmentdebt.us/). And in addition to creating more than enough jobs for everyone who needs one, we get to potentially solve some of the most important long-term problems for human civilization, repair all of our infrastructure, land on goddamn Mars, and knock out half of our national debt.

hartator 8y ago

> It also took time to work with California state agencies and the IRS to make sure that no study participants lost existing benefits. So, same family working for the $1,000 will have to pay more overall taxes than the one receiving the $1,000 from the YC program? It doesn't seem really fair.

dahdum 8y ago

The YC experiment will be rather interesting, giving people guaranteed monthly payments of ~$1k for 3-5 years makes them a very attractive population for loan providers. Once they are accepted into the program, you could offer to immediately buy them out, for say, $24k in cash for signing over their rights to the monthly payments. If YC backs out once they've taken the buyout, they're saddled with debt and likely forced into bankruptcy. It would leave them worse off than before. If YC doesn't back out, the loan provider can pocket a hefty profit.

_rpd 8y ago
It'll be interesting to see if YC adds language prohibiting such arrangements to the experiment contract. It could be that $25k is all the capital needed to start a small business. Maybe YC itself could offer it as an alternative: larger monthly payment or smaller lump sum?

monetus 8y ago

Does anyone know the details of the UBI within the Cherokee reservation in North Carolina? I don't understand why y-combinator chose the particular methods in the article. I can see how the control groups are losing engagement. Not many articles, but it seems to have been relatively successful. https://www.demos.org/blog/1/19/14/cherokee-tribes-basic-income-success-story https://www.demos.org/blog/1/19/14/cherokee-tribes-basic-inc...

logfromblammo 8y ago

As is usual whenever the basic income thread comes up, I have to reiterate that I don't think just giving cash to people will work. You have to invest that money in the production of basic goods and services, and then distribute those evenly. A better experiment than $X cash per month to N families would be to spend that $X*N on corn that would otherwise be exported, and labor and transport to distribute ration packs to the experimental group. The control group can get some coupons for up to $3 off a 5# bag of corn meal. You can then also see how fast the price of a 5# bag of corn meal goes up to $2.99 . Or spend up to $X per month on the experimental group's metered utilities, in the following order: water, electric, natgas (if available), other municipal-owned utilities, then phone/ISP, with anything remaining distributed as prepaid vehicle fuel cards. The power company can't exactly raise your rates if it finds out you, specifically, got a windfall, and the landlord can't raise your rent if you're getting paid in kWh, Mbps, gallons, and cubic yards. I think it is very important that whatever the basic income is distributed as not be easily convertible to the currency used to pay rents and make general purchases of goods and services. Rent-seeking always happens wherever it is possible.

chriselles 8y ago

Regardless of the outcome of the YC UBI Experiment, I applaud YC’s effort. It’s great to see a private company trying to influence public policy through privately funded, transparent, data driven experimentation. Instead of traditional money driven lobbying(now called non market activity in business school) which I abhor.

RestlessMind 8y ago

I would not trust most of the entities promising basic income. Most of them can go bankrupt (eg. corporate titans like GM or cities like Detroit/Stockton or insurers like AIG). If one relies on basic income for 10-15 years and alter their lifestyle accordingly (little savings, big gap in work experience), what happens when the entity underwriting their basic income declares bankruptcy? Only a handful of entities (like US federal govt) can administer a trustworthy UBI program (and that too, only for a limited set of people).

esaym 8y ago

I have a friend getting out of jail soon, how do I sign him up? (serious question)

RhysU 8y ago

Thoughts on focusing on sliding-scale financing instead of UBI? That is, the disadvantaged can finance businesses and arbitrage at cheaper rates than you and I can? Think of the successes of micro-finance. The point being that sliding financing incentivizes but does not eliminate risk. Because, no risk never reward.

exabrial 8y ago

I have no problem with UBI when it comes from private funding sources! I love what is being done here, especially carefully jumping through the hope with Tax law. I hope this helps some families in need and eventually chances their life situation

RickJWagner 8y ago

I'd like to help. It seems Y-Combinator is waiting until they get the whole sum put together before they start. I'm willing to participate as a recipient for a much smaller pilot program. :)