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My understanding is that if it's known that every American adult collects $1000 in addition to their regular income, prices will rise in an attempt to capture s

by v64 7y ago

My understanding is that if it's known that every American adult collects $1000 in addition to their regular income, prices will rise in an attempt to capture some of that known financial excess, so that the net result isn't that everyone gets an extra $1000 in discretionary income, but that everyone ends up paying that extra $1000 back in inflated prices. Similar logic to how raising tariffs doesn't hurt companies as much as they hurt customers because the cost is passed on (speaking from an American perspective, not considering tax systems like VAT).

mrfusion 7y ago
Surely McDonald’s already knows everyone has an extra two dollars but they don’t raise their prices because of it. The thing is people would still shop around for the lowest price. The vendor with the lowest price gets the business. Even opec can’t raise their prices in unison without someone cheating.
- v64 7y ago
  > The thing is people would still shop around for the lowest price. The vendor with the lowest price gets the business. But we know economically this isn't necessarily true. Some industries are more monopolized than others. Some people aren't in areas where they have good alternative shopping choices. Goods like toilet paper have many different price points and it hasn't been a race to the bottom among the brands to become the cheapest toilet paper. "You get what you pay for" is still a common rule of thumb. Veblen goods would also rise in price. It's my opinion that UBI would give businesses an opportunity to raise prices in certain sectors, but I concede it wouldn't be universal inflation across the board.
  - aeternum 7y ago
    If there are sectors where UBI gives businesses an opportunity to raise prices, then it follows that there is room for competitors to enter. Competition will eventually drive prices down and lead to more consumer choice.
- listenallyall 7y ago
  You could not be more wrong. When everyone gets $1000 for sitting on their ass, wages have nowhere to go but up. Why go to work for minimum/low wage, if basic needs are met? Wages go up + inputs go up --> end prices go up --> even the "vendor with the lowest price" is charging much more than before.
godelski 7y ago
> prices will rise in an attempt to capture some of that known financial excess The assumes financial excess. The reason for UBI is that there isn't excess. If 78% of Americans are living paycheck to paycheck, then that's not excess. If 63% of Americans can't afford an unexpected $500 bill, that's not excess. You're right that inflation happens when there is excess, but given these stats, I don't buy that part of the argument. Even if these stats could be explained away from being financially irresponsible (I don't believe this is the common case), it still wouldn't be excess because people are still spending. If we don't assume excess then this argument becomes as silly as saying that giving people jobs with an income will cause inflation. So where could this money be captured? A person that couldn't afford a car can now. I person with a $1k beater car can now buy a $5k car. Someone that was living paycheck to paycheck can now take a breath, buy a TV and a Netflix subscription. Someone that was unable to invest before could use that money to invest. The money affects everyone in different ways, but supporters of UBI think it is clear that there are already avenues to "capture" this money without inflation and that different income groups will spend the money differently. Studies have also shown that when there isn't full market capture cash injection doesn't cause meaningful rises in inflation.
- v64 7y ago
  > A person that couldn't afford a car can now. I person with a $1k beater car can now buy a $5k car. Wouldn't car dealers raise their prices some value up to $1k because they know anyone coming in that month to buy a car also just received a $1k check from the government? > Someone that was living paycheck to paycheck can now take a breath, buy a TV and a Netflix subscription. Netflix may raise their prices knowing everyone has a little extra cash to spend, and that people would rather pay a dollar or two more than cancel. If your streaming subscriptions, phone bill, and everything else goes up incrementally because companies begin to factor UBI income into their pricing, then without making any lifestyle changes, you'll see that overtime you're spending an extra $1k a month due to higher prices (of course it won't work out exactly like that, but the point is that some portion of your $1k UBI will go toward paying for things you were already buying, but that are now more expensive as a result of UBI-aware pricing.) If you believe that companies won't act that way or that other market forces (such as increased competition) will renormalize prices, I can see the argument, but I don't buy it personally.
jpster 7y ago
Has this happened with the oil dividend in Alaska? https://www.aoga.org/facts-and-figures/permanent-fund-dividend https://www.aoga.org/facts-and-figures/permanent-fund-divide...
AnIdiotOnTheNet 7y ago
> prices will rise in an attempt to capture some of that known financial excess Why is there no incentive to undercut one's competition in this model?
- SllX 7y ago
  Because the most likely destination of excess cash flow is into the hands of landlords, not salt miners and bakers.
sybarita 7y ago
This assumes they aren't already squeezing every cent they can out of people...

by v64 7y ago

mrfusion 7y ago

Surely McDonald’s already knows everyone has an extra two dollars but they don’t raise their prices because of it. The thing is people would still shop around for the lowest price. The vendor with the lowest price gets the business. Even opec can’t raise their prices in unison without someone cheating.

v64 7y ago
> The thing is people would still shop around for the lowest price. The vendor with the lowest price gets the business. But we know economically this isn't necessarily true. Some industries are more monopolized than others. Some people aren't in areas where they have good alternative shopping choices. Goods like toilet paper have many different price points and it hasn't been a race to the bottom among the brands to become the cheapest toilet paper. "You get what you pay for" is still a common rule of thumb. Veblen goods would also rise in price. It's my opinion that UBI would give businesses an opportunity to raise prices in certain sectors, but I concede it wouldn't be universal inflation across the board.
- aeternum 7y ago
  If there are sectors where UBI gives businesses an opportunity to raise prices, then it follows that there is room for competitors to enter. Competition will eventually drive prices down and lead to more consumer choice.
listenallyall 7y ago
You could not be more wrong. When everyone gets $1000 for sitting on their ass, wages have nowhere to go but up. Why go to work for minimum/low wage, if basic needs are met? Wages go up + inputs go up --> end prices go up --> even the "vendor with the lowest price" is charging much more than before.

godelski 7y ago

> prices will rise in an attempt to capture some of that known financial excess The assumes financial excess. The reason for UBI is that there isn't excess. If 78% of Americans are living paycheck to paycheck, then that's not excess. If 63% of Americans can't afford an unexpected $500 bill, that's not excess. You're right that inflation happens when there is excess, but given these stats, I don't buy that part of the argument. Even if these stats could be explained away from being financially irresponsible (I don't believe this is the common case), it still wouldn't be excess because people are still spending. If we don't assume excess then this argument becomes as silly as saying that giving people jobs with an income will cause inflation. So where could this money be captured? A person that couldn't afford a car can now. I person with a $1k beater car can now buy a $5k car. Someone that was living paycheck to paycheck can now take a breath, buy a TV and a Netflix subscription. Someone that was unable to invest before could use that money to invest. The money affects everyone in different ways, but supporters of UBI think it is clear that there are already avenues to "capture" this money without inflation and that different income groups will spend the money differently. Studies have also shown that when there isn't full market capture cash injection doesn't cause meaningful rises in inflation.

v64 7y ago
> A person that couldn't afford a car can now. I person with a $1k beater car can now buy a $5k car. Wouldn't car dealers raise their prices some value up to $1k because they know anyone coming in that month to buy a car also just received a $1k check from the government? > Someone that was living paycheck to paycheck can now take a breath, buy a TV and a Netflix subscription. Netflix may raise their prices knowing everyone has a little extra cash to spend, and that people would rather pay a dollar or two more than cancel. If your streaming subscriptions, phone bill, and everything else goes up incrementally because companies begin to factor UBI income into their pricing, then without making any lifestyle changes, you'll see that overtime you're spending an extra $1k a month due to higher prices (of course it won't work out exactly like that, but the point is that some portion of your $1k UBI will go toward paying for things you were already buying, but that are now more expensive as a result of UBI-aware pricing.) If you believe that companies won't act that way or that other market forces (such as increased competition) will renormalize prices, I can see the argument, but I don't buy it personally.

jpster 7y ago

Has this happened with the oil dividend in Alaska? https://www.aoga.org/facts-and-figures/permanent-fund-dividend https://www.aoga.org/facts-and-figures/permanent-fund-divide...

AnIdiotOnTheNet 7y ago

> prices will rise in an attempt to capture some of that known financial excess Why is there no incentive to undercut one's competition in this model?

SllX 7y ago
Because the most likely destination of excess cash flow is into the hands of landlords, not salt miners and bakers.

sybarita 7y ago

This assumes they aren't already squeezing every cent they can out of people...