4 ms·

One part of UBI I still don't understand and have a hard time finding an answer for: If everyone gets a basic level of income no matter what, won't the base le

by botto 8y ago

One part of UBI I still don't understand and have a hard time finding an answer for: If everyone gets a basic level of income no matter what, won't the base level just be pushed up higher? So instead of a flat costing for instance $500 a month, it will cost $1000 month because everyone can afford the $500 flat. I can't see a scenario where a government doesn't have to increase the UBI every year.

marcosdumay 8y ago
Are there no other flats on the world that people can sell for $900 and undercut the competition? Why what you described doesn't happen right now?
- oosjc9a5 8y ago
  There's a shortage of flats, so there's no need to undercut the competition.
deleted 8y ago
[deleted]
krapp 8y ago
>So instead of a flat costing for instance $500 a month, it will cost $1000 month because everyone can afford the $500 flat. In this scenario, presumably all businesses raise their prices to the total UBI amount. But now people on UBI who could previously afford multiple goods and services no longer can, because each business demands the entirety of their UBI, participation in the economy is infeasible. Therefore, most of those businesses go under, being unable to actually sell anything and make a profit (bear in mind that this inflation also applies to business owners, and any costs of doing business as well.) This won't happen for the reason renters don't ask for your income and simply demand 100% of your income as rent nowadays - economics isn't that simple. No one is going to buy a flat if they can't also afford utilities and food while living there.
- misja111 8y ago
  OP did not write that rents would go up until l00% of people's income. IMO what he meant was that certain flats that used to be priced at the level that everyone could afford them, would go up in price when everyone's income would increase because of basic income: and they would keep going up until they reached the same equilibrium that they used to be in beforehand. Of course this would not just apply to rents but to all scarce commodities. I think OP has a valid point; similar things happened after the influx of high income tech workers in SF, or for instance in some European countries after governments gave tax advantages to house owners.
  - meruru 8y ago
    Wouldn't UBI lead to a population decrease as the people living in poverty (for whatever reason) are the ones that reproduce the most? It sounds to me like housing costs should decrease in the long term as the supply becomes greater than the demand.
roenxi 8y ago
It would probably push prices up, but the impact on individuals would depend on their non-basic income. Say I earn nothing, then a UBI of $100/month comes in; I have increased my income by an infinite percentage. Say I earn $10,000 and the same UBI comes in, I have increased my income by 1%. This results in a general flattening of the income v. population percentile curve, effectively flatting out income differentials and promoting equality. Things do go haywire if the governing thought is "everyone should get enough money to buy an X" in some scenario where there are Y people and (Y-1) Xs floating around. It doesn't matter how much money people have if there are not enough goods.
- antpls 8y ago
  One might ask in a first place : who needs $10,000/month to live (including water, food, private place to sleep, and some entertainment) ? If some people can live with $1,500/month, how come other receive so much and for what? I guess it's related to "capitalism", "liberatism" or whatever. But please can someone explain to me like I'm five ?
  - dan1234 8y ago
    What a single person can live on may be quite different to what a family would need, especially with school age children. Some people might be happy living a simple life, some may want the fancy house and car, or want to travel whenever they can.
  - PeterFBell 8y ago
    Adding value. Lets say there is something in your life that you care about and costs you $100 a month. If I find a way to provide you with the same value for $20 a month and manage to do it at a cost of $10 a month, if I can persuade you to do business with me, you get the same value for $80 a month less and I get $10 a month in profits. If I manage to convince 100,000 people to also save $80 a month, I get $10 * $100,000 or $1m a month - not by taking away from others, but by saving them money. Of course, plenty of people get money in ways that doesn't align with this ideal, but as an entrepreneur, that's the way I think about things and I have no problem with receiving $1m a month if I do so by saving others money and/or providing them with goods or services that they choose to purchase and that makes them happy.
deleted 8y ago
[deleted]
WheelsAtLarge 8y ago
The law of supply and demand will always force the cost of goods to go up if there is not enough supply vs demand. You're right there is no scenario, without technological improvement, in the long term, where items get affordable just because people have more money. But there are some items that are in oversupply that would always be affordable so giving someone money to buy it will probably help. I can only think of virtual goods as goods that are always in oversupply. A place to live is not one of those items.
- tonyedgecombe 8y ago
  I think you could argue the developed world has an oversupply of food. The biggest problem I can see is housing, if housing supply is constrained then I suspect any UBI will just end up in the pockets of landlords. Perhaps universal housing would be a better idea.
  - WheelsAtLarge 8y ago
    You're right in a sense. But the only reason is that the governments subsidize the production. People bitch about farmer subsidies but without them, farming would be a much more volatile business and farmers would be much more unlikely to be in the business. Thus cutting supply and making food much more expensive. I wouldn't classify it as being naturally oversupplied. It's a result of the way governments manage the food production.
- cf498 8y ago
  A place to live is one of those examples i think, just not in the regions which are in demand. With a declining population and a push to live in more urban environments, there is quite a lot of living space in regions where its not attractive to live. You can witness the trend in Germany where alot of villages are dying out, as there are no jobs in the region and they are to far off for people to drive every day to work. I see, that the trend to increased rent prices balancing out UBI would apply to in demand regions, but not at all in areas that would otherwise go unused. Most countries do have an extreme oversupply of living space, even before a population decline.
daenz 8y ago
I have a somewhat sinister view of this. In my opinion, it would play out exactly how you described, and when it did, proponents of UBI would demand control over private sector pricing in order to stabilize. And since you can't just "undo" large scale UBI, government control over private sectors would have to be given, or the ratcheting up of costs and UBI would continue indefinitely. UBI is a foot in the door of more government control over life and business.
rbritton 8y ago
I came here to say the same thing. We’ve already seen it play out in the US with college tuition costs where loans are effectively guaranteed so college tuition has risen to a new equilibrium point to reflect that.
- zanny 8y ago
  In large part I feel like that phenomenon emerges from how significant a good degree can be on your future income. For many people its the best investment they make - $200k with interest and four years now for several million of extra income over their working years. So if you raise loan allotments and grants more people are now eligible to go to a very restricted and finite pool of schools, especially "top" ones, the first response will be a price rise because the supply of admissions into desired schools doesn't go up at all. What should happen in a naive sense is that with more money available for quality education top schools would expand their enrollment and more top schools would emerge, but respectively for the former there is a strong NIMBYism in making a school less "exclusive" and for the later go ahead and try to found a new Ivy League University in 2019. With UBI the market for most of the goods a UBI is meant for, in particular food, power, and amenities are all much more responsive markets. Prices go up for a moment but higher prices means more profits per unit which attracts competition and scaling up production to meet increased demand. The exception of course is housing because the housing market is anything but a free one, especially in the US. But in the same way addressing the university "gatekeeping" epidemic of prestige and exclusivity cannot be solved by jamming money into those without access you similarly cannot just dump money on the poor and expect housing to arise without fixing why the economy is jammed when it comes to meeting demand for housing. UBI isn't a panacea to decoupled problems in the economy. It only works for goods actually operating in a free market where the increased demand can attract investment and growth to meet it. A lot of things, including medicine, housing, infrastructure, and education do not operate in a free market and thus adding or subtracting money from any given group to try to get it for them isn't going to work. But it can work for things like furniture, clothing, etc.
jeffdavis 8y ago
I theory (feel free to e skeptical), it works like this: Higher taxes mean that it's harder for rich people to consume a lot. So they would no longer be able to afford a mansion, and the building manager would convert it into 10 apartments and one luxury apartment. The rich person would still be able to afford the luxury apartment, but there would also be 10 more "normal" units available to people relying on basic income. The problem is that rich people don't consume in proportion to their wealth... most is usually invested. So high taxes don't necessarily free up consumable resources very effectively, and could have consequences for future tax revenue.
- boomboomsubban 8y ago
  >The problem is that rich people don't consume in proportion to their wealth... most is usually invested Money that is invested doesn't vanish, the companies they invest in use that money to produce more goods. Assuming the cost of labor goes up with UBI, less of the profit will go to the investors and more will go to the employees, effectively taxing their investments.
  - jeffdavis 8y ago
    I think we are in agreement. My point was that it's nor clear that rich people would consume less, so the money would come from them divesting assets to pay the taxes.

by botto 8y ago

marcosdumay 8y ago

Are there no other flats on the world that people can sell for $900 and undercut the competition? Why what you described doesn't happen right now?

oosjc9a5 8y ago
There's a shortage of flats, so there's no need to undercut the competition.

deleted 8y ago

[deleted]

krapp 8y ago

>So instead of a flat costing for instance $500 a month, it will cost $1000 month because everyone can afford the $500 flat. In this scenario, presumably all businesses raise their prices to the total UBI amount. But now people on UBI who could previously afford multiple goods and services no longer can, because each business demands the entirety of their UBI, participation in the economy is infeasible. Therefore, most of those businesses go under, being unable to actually sell anything and make a profit (bear in mind that this inflation also applies to business owners, and any costs of doing business as well.) This won't happen for the reason renters don't ask for your income and simply demand 100% of your income as rent nowadays - economics isn't that simple. No one is going to buy a flat if they can't also afford utilities and food while living there.

misja111 8y ago
OP did not write that rents would go up until l00% of people's income. IMO what he meant was that certain flats that used to be priced at the level that everyone could afford them, would go up in price when everyone's income would increase because of basic income: and they would keep going up until they reached the same equilibrium that they used to be in beforehand. Of course this would not just apply to rents but to all scarce commodities. I think OP has a valid point; similar things happened after the influx of high income tech workers in SF, or for instance in some European countries after governments gave tax advantages to house owners.
- meruru 8y ago
  Wouldn't UBI lead to a population decrease as the people living in poverty (for whatever reason) are the ones that reproduce the most? It sounds to me like housing costs should decrease in the long term as the supply becomes greater than the demand.

roenxi 8y ago

It would probably push prices up, but the impact on individuals would depend on their non-basic income. Say I earn nothing, then a UBI of $100/month comes in; I have increased my income by an infinite percentage. Say I earn $10,000 and the same UBI comes in, I have increased my income by 1%. This results in a general flattening of the income v. population percentile curve, effectively flatting out income differentials and promoting equality. Things do go haywire if the governing thought is "everyone should get enough money to buy an X" in some scenario where there are Y people and (Y-1) Xs floating around. It doesn't matter how much money people have if there are not enough goods.

antpls 8y ago
One might ask in a first place : who needs $10,000/month to live (including water, food, private place to sleep, and some entertainment) ? If some people can live with $1,500/month, how come other receive so much and for what? I guess it's related to "capitalism", "liberatism" or whatever. But please can someone explain to me like I'm five ?
- dan1234 8y ago
  What a single person can live on may be quite different to what a family would need, especially with school age children. Some people might be happy living a simple life, some may want the fancy house and car, or want to travel whenever they can.
- PeterFBell 8y ago
  Adding value. Lets say there is something in your life that you care about and costs you $100 a month. If I find a way to provide you with the same value for $20 a month and manage to do it at a cost of $10 a month, if I can persuade you to do business with me, you get the same value for $80 a month less and I get $10 a month in profits. If I manage to convince 100,000 people to also save $80 a month, I get $10 * $100,000 or $1m a month - not by taking away from others, but by saving them money. Of course, plenty of people get money in ways that doesn't align with this ideal, but as an entrepreneur, that's the way I think about things and I have no problem with receiving $1m a month if I do so by saving others money and/or providing them with goods or services that they choose to purchase and that makes them happy.

deleted 8y ago

[deleted]

WheelsAtLarge 8y ago

The law of supply and demand will always force the cost of goods to go up if there is not enough supply vs demand. You're right there is no scenario, without technological improvement, in the long term, where items get affordable just because people have more money. But there are some items that are in oversupply that would always be affordable so giving someone money to buy it will probably help. I can only think of virtual goods as goods that are always in oversupply. A place to live is not one of those items.

tonyedgecombe 8y ago
I think you could argue the developed world has an oversupply of food. The biggest problem I can see is housing, if housing supply is constrained then I suspect any UBI will just end up in the pockets of landlords. Perhaps universal housing would be a better idea.
- WheelsAtLarge 8y ago
  You're right in a sense. But the only reason is that the governments subsidize the production. People bitch about farmer subsidies but without them, farming would be a much more volatile business and farmers would be much more unlikely to be in the business. Thus cutting supply and making food much more expensive. I wouldn't classify it as being naturally oversupplied. It's a result of the way governments manage the food production.
cf498 8y ago
A place to live is one of those examples i think, just not in the regions which are in demand. With a declining population and a push to live in more urban environments, there is quite a lot of living space in regions where its not attractive to live. You can witness the trend in Germany where alot of villages are dying out, as there are no jobs in the region and they are to far off for people to drive every day to work. I see, that the trend to increased rent prices balancing out UBI would apply to in demand regions, but not at all in areas that would otherwise go unused. Most countries do have an extreme oversupply of living space, even before a population decline.

daenz 8y ago

I have a somewhat sinister view of this. In my opinion, it would play out exactly how you described, and when it did, proponents of UBI would demand control over private sector pricing in order to stabilize. And since you can't just "undo" large scale UBI, government control over private sectors would have to be given, or the ratcheting up of costs and UBI would continue indefinitely. UBI is a foot in the door of more government control over life and business.

rbritton 8y ago

I came here to say the same thing. We’ve already seen it play out in the US with college tuition costs where loans are effectively guaranteed so college tuition has risen to a new equilibrium point to reflect that.

zanny 8y ago
In large part I feel like that phenomenon emerges from how significant a good degree can be on your future income. For many people its the best investment they make - $200k with interest and four years now for several million of extra income over their working years. So if you raise loan allotments and grants more people are now eligible to go to a very restricted and finite pool of schools, especially "top" ones, the first response will be a price rise because the supply of admissions into desired schools doesn't go up at all. What should happen in a naive sense is that with more money available for quality education top schools would expand their enrollment and more top schools would emerge, but respectively for the former there is a strong NIMBYism in making a school less "exclusive" and for the later go ahead and try to found a new Ivy League University in 2019. With UBI the market for most of the goods a UBI is meant for, in particular food, power, and amenities are all much more responsive markets. Prices go up for a moment but higher prices means more profits per unit which attracts competition and scaling up production to meet increased demand. The exception of course is housing because the housing market is anything but a free one, especially in the US. But in the same way addressing the university "gatekeeping" epidemic of prestige and exclusivity cannot be solved by jamming money into those without access you similarly cannot just dump money on the poor and expect housing to arise without fixing why the economy is jammed when it comes to meeting demand for housing. UBI isn't a panacea to decoupled problems in the economy. It only works for goods actually operating in a free market where the increased demand can attract investment and growth to meet it. A lot of things, including medicine, housing, infrastructure, and education do not operate in a free market and thus adding or subtracting money from any given group to try to get it for them isn't going to work. But it can work for things like furniture, clothing, etc.

jeffdavis 8y ago

I theory (feel free to e skeptical), it works like this: Higher taxes mean that it's harder for rich people to consume a lot. So they would no longer be able to afford a mansion, and the building manager would convert it into 10 apartments and one luxury apartment. The rich person would still be able to afford the luxury apartment, but there would also be 10 more "normal" units available to people relying on basic income. The problem is that rich people don't consume in proportion to their wealth... most is usually invested. So high taxes don't necessarily free up consumable resources very effectively, and could have consequences for future tax revenue.

boomboomsubban 8y ago
>The problem is that rich people don't consume in proportion to their wealth... most is usually invested Money that is invested doesn't vanish, the companies they invest in use that money to produce more goods. Assuming the cost of labor goes up with UBI, less of the profit will go to the investors and more will go to the employees, effectively taxing their investments.
- jeffdavis 8y ago
  I think we are in agreement. My point was that it's nor clear that rich people would consume less, so the money would come from them divesting assets to pay the taxes.