6 ms·

Handing out free money will most likely just cause inflation and defeat itself. The inflation will make the amount paid out in basic income insufficient to liv

by psadri 8y ago

Handing out free money will most likely just cause inflation and defeat itself. The inflation will make the amount paid out in basic income insufficient to live on. The alternate to basic income for the purpose of housing, health and food, is to provide a basic version of those resources at zero cost.

ThomPete 8y ago
We don't know which is why it's good we start experimenting with it IMO.
DougN7 8y ago
I don’t know why you were downvoted because you’re right. A simple thought experiment can prove it: give everyone $1 million every year starting today. Is everyone suddenly rich? Just for a few days. Eventually milk will cost $500/gallon. The effects of Supply and demand can’t be legislated out of existence.
- zimzam 8y ago
  That’s like saying any inflation is bad because if it were a million percent bad things would happen. It doesn’t tell us anything about reality.
  - DougN7 8y ago
    The inflation would render the money we gave everyone nearly worthless, by approximately the amount given out. It’s similar to adding six zeros to every bank account.
- ball_of_lint 8y ago
  Sure, a massive influx of newly minted money will cause inflation. That's a given. But it's not sustainable and clearly not a sensible way to implement this policy. If we instead took this money from other taxes most likely there'd be some inflation, but not enough to make the money useless. Finally, I know 1m was a hyperbole but basic income doesn't need to guarantee you can live comfortably anywhere without working, only somewhere. Downtown SF? Nope. Most of CA? Still probably too expensive. Midwest? Now we're talking.
  - notahacker 8y ago
    I think the problem is less overall inflation, which can be stabilised, and more distributional impact. Sure, the costs of slum housing won't rise 1 to 1 so people living in it will still feel slightly better off, but slum landlords in many areas with limited housing availability will still capture much/most of those gains (which are difficult to tax away without also affecting productive businesses) in the form of massive price increases of limited-supply budget housing. Meanwhile, someone on the other end is losing out by paying for the UBI, and that probably includes people in middle class incomes facing higher taxes and cost pressures on their own taxes. Of course, any redistribution programme has undesirable distributional impacts as well as desired ones, but they're likely to be worse if your programme is as unsophisticated as "let's just give everybody exactly the same entitlements irrespective of need and put gross taxes up to pay for any difference"
- function_seven 8y ago
  We don't have enough money in the supply to provide $1m to everyone annually. UBI isn't a money-printing operation. It's a redistribution scheme. The money supply is fixed, but some of it is scraped off the top of the mountain and used to fill in the valley below. Yes, there would be inflation as a result. But not as much as the median increase in income. Say that gallon of milk is $5 today. UBI increases all incomes by $10,000 a year. Milk may rise to $5.50/gal (10% inflation), but the median income would have risen something like 25%. UBI might still be a bad idea, or have unintended consequences, but they're going to be more subtle and indirect than hyperinflation.
zanny 8y ago
Because minimum wage increases inflate basic goods so much that raising minimum wage is pointless. For the exact same reasons minimum wage works, UBI works. You raise the floor and things inflate less than the floor is raised. UBI has an added benefit to mitigate inflation in that long-term universal income becomes an exceedingly stable revenue source. There are thousands of retirement homes across the US that cost social security to live in - the business model is that the income is guaranteed, so the customer base and revenue is maximally reliable, so you can operate on razor margins because of hugely reduced uncertainty. In that same capacity there would emerge UBI living accommodations meant to provide the "basics" for the whole value of the UBI. Even when not everyone uses them, their existence will act as a price floor on basic necessities to prevent them from inflating out of control - for the basic necessities with market price competition. That wouldn't include land or medicine, which can inflate in perpetuity because they are noncompetitive markets that should be more stringently regulated and socialized.
AnthonyMouse 8y ago
> Handing out free money will most likely just cause inflation and defeat itself. The inflation will make the amount paid out in basic income insufficient to live on. I may start calling this the "it is impossible to reduce inequality" fallacy. If you gave everyone money, would things cost more? Maybe some things. Not everything, and not by 100.0% of the amount of money provided. Because some of the money gets saved or used to pay down debts, not spent, and only makes people more secure rather than affecting prices. And not everything has the same price elasticity of supply. There are no practical resource limits on how many electronic devices or kitchen tables or wind turbines we can build. If more people can afford them, the price doesn't have to go up because the supply can go up at approximately the same price. And the money comes from somewhere, unless you're outright printing it, so consumption goes down to some degree there when it goes up somewhere else. The fact that you get the same amount of inflation you get by anything else that causes the poor to have more money is not a real problem. Getting $1000 and then paying $100 more for stuff is $900 better than the status quo. Especially since the current problem is not enough inflation -- the Fed keeps wanting to raise interest rates and can't because as low as they are there is still no almost inflation. They keep missing their inflation target on the low side: https://www.marketwatch.com/story/feds-bullard-says-interest-rate-policy-stance-is-now-a-little-bit-restrictive-2019-02-07 https://www.marketwatch.com/story/feds-bullard-says-interest... Meanwhile everyone is saturated with debt, which inflation helps erode, so having a little more would be better.
- mindslight 8y ago
  Saying that inflation is low is referring to a broken metric. Inflation in housing, healthcare, and education have significantly contributed to the current problem in the US. https://news.ycombinator.com/item?id=19106964 https://news.ycombinator.com/item?id=19106964 I would say the root problem is all that debt, specifically the ongoing costs of servicing the debt. Staying alive does intrinsically require ongoing expenses for food, energy, shelter upkeep, personal grooming, etc. But the cost of these is dwarfed by the amount spent on rent (aka debt) for the space on which the shelter resides. Basic income is really just a natural progression of the last several decades's policy of overwhelming monetary inflation. If the BI mostly goes towards just servicing debt then it's only increasing the speed of that debt treadmill and making people's financial position ever-more precarious - they then depend on both continuing to hold down their job, and conforming to whatever conditions will be placed on the BI. The one sensible thing BI would do is allow people to have income in areas with low economic activity, which is great for those willing to "retire" to such areas. It's just not going to alleviate the pain of the average person having to "make rent" as everyone seemingly envisions.
erik_seaberg 8y ago
Housing prices are mostly high due to shortages within specific labor market areas. If displaced workers can leave, that puts a lot more competitive options in their reach.
JAlexoid 8y ago
I'll take empirical evidence, over your hypothesis.

by psadri 8y ago

ThomPete 8y ago

We don't know which is why it's good we start experimenting with it IMO.

DougN7 8y ago

I don’t know why you were downvoted because you’re right. A simple thought experiment can prove it: give everyone $1 million every year starting today. Is everyone suddenly rich? Just for a few days. Eventually milk will cost $500/gallon. The effects of Supply and demand can’t be legislated out of existence.

zimzam 8y ago
That’s like saying any inflation is bad because if it were a million percent bad things would happen. It doesn’t tell us anything about reality.
- DougN7 8y ago
  The inflation would render the money we gave everyone nearly worthless, by approximately the amount given out. It’s similar to adding six zeros to every bank account.
ball_of_lint 8y ago
Sure, a massive influx of newly minted money will cause inflation. That's a given. But it's not sustainable and clearly not a sensible way to implement this policy. If we instead took this money from other taxes most likely there'd be some inflation, but not enough to make the money useless. Finally, I know 1m was a hyperbole but basic income doesn't need to guarantee you can live comfortably anywhere without working, only somewhere. Downtown SF? Nope. Most of CA? Still probably too expensive. Midwest? Now we're talking.
- notahacker 8y ago
  I think the problem is less overall inflation, which can be stabilised, and more distributional impact. Sure, the costs of slum housing won't rise 1 to 1 so people living in it will still feel slightly better off, but slum landlords in many areas with limited housing availability will still capture much/most of those gains (which are difficult to tax away without also affecting productive businesses) in the form of massive price increases of limited-supply budget housing. Meanwhile, someone on the other end is losing out by paying for the UBI, and that probably includes people in middle class incomes facing higher taxes and cost pressures on their own taxes. Of course, any redistribution programme has undesirable distributional impacts as well as desired ones, but they're likely to be worse if your programme is as unsophisticated as "let's just give everybody exactly the same entitlements irrespective of need and put gross taxes up to pay for any difference"
function_seven 8y ago
We don't have enough money in the supply to provide $1m to everyone annually. UBI isn't a money-printing operation. It's a redistribution scheme. The money supply is fixed, but some of it is scraped off the top of the mountain and used to fill in the valley below. Yes, there would be inflation as a result. But not as much as the median increase in income. Say that gallon of milk is $5 today. UBI increases all incomes by $10,000 a year. Milk may rise to $5.50/gal (10% inflation), but the median income would have risen something like 25%. UBI might still be a bad idea, or have unintended consequences, but they're going to be more subtle and indirect than hyperinflation.

zanny 8y ago

Because minimum wage increases inflate basic goods so much that raising minimum wage is pointless. For the exact same reasons minimum wage works, UBI works. You raise the floor and things inflate less than the floor is raised. UBI has an added benefit to mitigate inflation in that long-term universal income becomes an exceedingly stable revenue source. There are thousands of retirement homes across the US that cost social security to live in - the business model is that the income is guaranteed, so the customer base and revenue is maximally reliable, so you can operate on razor margins because of hugely reduced uncertainty. In that same capacity there would emerge UBI living accommodations meant to provide the "basics" for the whole value of the UBI. Even when not everyone uses them, their existence will act as a price floor on basic necessities to prevent them from inflating out of control - for the basic necessities with market price competition. That wouldn't include land or medicine, which can inflate in perpetuity because they are noncompetitive markets that should be more stringently regulated and socialized.

AnthonyMouse 8y ago

> Handing out free money will most likely just cause inflation and defeat itself. The inflation will make the amount paid out in basic income insufficient to live on. I may start calling this the "it is impossible to reduce inequality" fallacy. If you gave everyone money, would things cost more? Maybe some things. Not everything, and not by 100.0% of the amount of money provided. Because some of the money gets saved or used to pay down debts, not spent, and only makes people more secure rather than affecting prices. And not everything has the same price elasticity of supply. There are no practical resource limits on how many electronic devices or kitchen tables or wind turbines we can build. If more people can afford them, the price doesn't have to go up because the supply can go up at approximately the same price. And the money comes from somewhere, unless you're outright printing it, so consumption goes down to some degree there when it goes up somewhere else. The fact that you get the same amount of inflation you get by anything else that causes the poor to have more money is not a real problem. Getting $1000 and then paying $100 more for stuff is $900 better than the status quo. Especially since the current problem is not enough inflation -- the Fed keeps wanting to raise interest rates and can't because as low as they are there is still no almost inflation. They keep missing their inflation target on the low side: https://www.marketwatch.com/story/feds-bullard-says-interest-rate-policy-stance-is-now-a-little-bit-restrictive-2019-02-07 https://www.marketwatch.com/story/feds-bullard-says-interest... Meanwhile everyone is saturated with debt, which inflation helps erode, so having a little more would be better.

mindslight 8y ago
Saying that inflation is low is referring to a broken metric. Inflation in housing, healthcare, and education have significantly contributed to the current problem in the US. https://news.ycombinator.com/item?id=19106964 https://news.ycombinator.com/item?id=19106964 I would say the root problem is all that debt, specifically the ongoing costs of servicing the debt. Staying alive does intrinsically require ongoing expenses for food, energy, shelter upkeep, personal grooming, etc. But the cost of these is dwarfed by the amount spent on rent (aka debt) for the space on which the shelter resides. Basic income is really just a natural progression of the last several decades's policy of overwhelming monetary inflation. If the BI mostly goes towards just servicing debt then it's only increasing the speed of that debt treadmill and making people's financial position ever-more precarious - they then depend on both continuing to hold down their job, and conforming to whatever conditions will be placed on the BI. The one sensible thing BI would do is allow people to have income in areas with low economic activity, which is great for those willing to "retire" to such areas. It's just not going to alleviate the pain of the average person having to "make rent" as everyone seemingly envisions.

erik_seaberg 8y ago

Housing prices are mostly high due to shortages within specific labor market areas. If displaced workers can leave, that puts a lot more competitive options in their reach.

JAlexoid 8y ago

I'll take empirical evidence, over your hypothesis.