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If everyone gets a universal basic income, what is to stop the market from raising prices to account for that extra income? For example, if my landlord knows I'

If everyone gets a universal basic income, what is to stop the market from raising prices to account for that extra income? For example, if my landlord knows I'm getting an extra $500 a month, what's to stop him from raising the price of my rent $500? Or an iPhone or the price of groceries? It would seem the only way to prevent that is for massive price controls on everything, Otherwise, that extra income means nothing.

GoToRO 3y ago
I guess it depends from where those money are coming: if they print the money then sure, if they take the money from all kinds of government programs, then the prices should stay the same.
- User23 3y ago
  That’s not how pricing works. The source of new buying power injected into the demand side of the rental market is irrelevant to the effect it will have on marginal prices. And yes, with some hysteresis, suppliers of inelastic goods like housing will capture nearly the entirety of the increased spending.
  - Simulacra 3y ago
    Rather than a UBI, why not eliminate income tax ?
    - gattilorenz 3y ago
      How would it help those without income?
    - User23 3y ago
      I think the original MMT folks’s jobs guarantee is the best option. Everyone that is willing to work is guaranteed a job that pays some reasonable wage. That sets a floor on compensation. Employers who want to attract people away from the government job will either have to pay better or offer otherwise more appealing work. The jobs program incomes in turn create a floor on demand. Note that this doesn’t have the UBI problem because it’s not a bonus additional income, but rather an income floor. Ideally the guaranteed jobs are something more productive than paying people to dig ditches and fill them back in again. But frankly printing money to pay people to exercise 8 hours a day would probably save billions in healthcare costs. Anyhow it’s not particularly difficult to work out a greatly more eucivic and eusocial regime than what we currently have. In fact it’s sufficiently easy that a reasonable person can only conclude that the enshittification of our societies is the intentional policy of rulers who don’t particularly care for our welfare.
ZeroGravitas 3y ago
In a free market it's impossible to raise prices because a competitor will undercut you to increase their sales and profits. Oh, wait, so you're claiming it's not a free market in reality? Suddenly those price controls don't seems like such a bad idea then.
- tw04 3y ago
  >Oh, wait, so you're claiming it's not a free market in reality? Suddenly those price controls don't seems like such a bad idea then. it depends - real-estate, in general, is still very much a free market. So to your point the thing to prevent rent from just being raised is someone else undercutting you. That requires there to be adequate housing to fulfill market need which there is in many places but not everywhere. That being said... the current trend of PE firms starting to buy up real-estate for the sole purpose of renting it back to people is pretty concerning, and quite frankly shouldn't be allowed IMO. What next? Privatize the water supply and then pretend the "market will make it more efficient"?
simonh 3y ago
UBI doesn't have to mean everyone gets a higher income. It could be revenue/income neutral over the population as a whole if properly funded by tax adjustments.
deleted 3y ago
[deleted]
crazygringo 3y ago
That's an excellent and important question. And the answer is that prices will probably be expected to go up to some degree as a one-time thing, in a way that would be approximately a wash for those already with plenty of income, but where it still makes a huge difference for those with little/no income, which is precisely the point. For example if it's a one-time inflation bump of 10% and UBI of $10K/yr., then: Person A with income $100,000/yr, now makes $110,000/yr., worth $100,000 in previous dollars Person B with income $10,000/yr, now makes $20,000/yr., worth $18,182 in previous dollars Person C with income $0/yr, now makes $10,000/yr., worth $9,091 in previous dollars Again, this is precisely the goal: the extra income isn't supposed to mean anything for those who already have plenty of income. It's supposed to help those who don't, or those who lose their jobs, etc. Without a big government bureaucracy trying to determine who qualifies or not. And it's important to realize that the inflation is a one-time event. Prices will rise but then they'll stop rising. And if it were 10% inflation over a year, that's the same as the usual targeted 2% inflation rate but compressed from 5 years. (And the central bank might very well target 0% inflation over the following 4 years to compensate.)
- hnfong 3y ago
  > And it's important to realize that the inflation is a one-time event What's the basis of that? The UBI is on-going, and inflation has a tendency to "stick".
  - crazygringo 3y ago
    Yes, the UBI is on-going, but it's a one-time shift in income levels, which is what generates the one-time inflation. The extra money keeps on getting spent each year -- it doesn't affect the economy in a cumulative way. The person who used to have $0, and now has $10K to spend this year, still only has $10K next year, and still only has $10K the year after. Inflation would only continue if that person received $10K in year one, $20K in year two, $30K in year three, etc. And inflation is a complicated thing, but it doesn't tend to stick when its causes are known, and known to be temporary. Inflation is governed by expectations, and those expectations are often unknown. In the case of UBI, it's extremely known. (Also remember that the UBI is not new money injected into the economy -- it's generally proposed as redistribution in the form of taxation. Which according to the simplest theory wouldn't generate any inflation at all, but because of the resulting shifts in consumption patterns, that's what generates the one-time inflation among basic consumer goods, housing, etc.)

GoToRO 3y ago

I guess it depends from where those money are coming: if they print the money then sure, if they take the money from all kinds of government programs, then the prices should stay the same.

User23 3y ago
That’s not how pricing works. The source of new buying power injected into the demand side of the rental market is irrelevant to the effect it will have on marginal prices. And yes, with some hysteresis, suppliers of inelastic goods like housing will capture nearly the entirety of the increased spending.
- Simulacra 3y ago
  Rather than a UBI, why not eliminate income tax ?
  - gattilorenz 3y ago
    How would it help those without income?
  - User23 3y ago
    I think the original MMT folks’s jobs guarantee is the best option. Everyone that is willing to work is guaranteed a job that pays some reasonable wage. That sets a floor on compensation. Employers who want to attract people away from the government job will either have to pay better or offer otherwise more appealing work. The jobs program incomes in turn create a floor on demand. Note that this doesn’t have the UBI problem because it’s not a bonus additional income, but rather an income floor. Ideally the guaranteed jobs are something more productive than paying people to dig ditches and fill them back in again. But frankly printing money to pay people to exercise 8 hours a day would probably save billions in healthcare costs. Anyhow it’s not particularly difficult to work out a greatly more eucivic and eusocial regime than what we currently have. In fact it’s sufficiently easy that a reasonable person can only conclude that the enshittification of our societies is the intentional policy of rulers who don’t particularly care for our welfare.

ZeroGravitas 3y ago

In a free market it's impossible to raise prices because a competitor will undercut you to increase their sales and profits. Oh, wait, so you're claiming it's not a free market in reality? Suddenly those price controls don't seems like such a bad idea then.

tw04 3y ago
>Oh, wait, so you're claiming it's not a free market in reality? Suddenly those price controls don't seems like such a bad idea then. it depends - real-estate, in general, is still very much a free market. So to your point the thing to prevent rent from just being raised is someone else undercutting you. That requires there to be adequate housing to fulfill market need which there is in many places but not everywhere. That being said... the current trend of PE firms starting to buy up real-estate for the sole purpose of renting it back to people is pretty concerning, and quite frankly shouldn't be allowed IMO. What next? Privatize the water supply and then pretend the "market will make it more efficient"?

simonh 3y ago

UBI doesn't have to mean everyone gets a higher income. It could be revenue/income neutral over the population as a whole if properly funded by tax adjustments.

deleted 3y ago

[deleted]

crazygringo 3y ago

That's an excellent and important question. And the answer is that prices will probably be expected to go up to some degree as a one-time thing, in a way that would be approximately a wash for those already with plenty of income, but where it still makes a huge difference for those with little/no income, which is precisely the point. For example if it's a one-time inflation bump of 10% and UBI of $10K/yr., then: Person A with income $100,000/yr, now makes $110,000/yr., worth $100,000 in previous dollars Person B with income $10,000/yr, now makes $20,000/yr., worth $18,182 in previous dollars Person C with income $0/yr, now makes $10,000/yr., worth $9,091 in previous dollars Again, this is precisely the goal: the extra income isn't supposed to mean anything for those who already have plenty of income. It's supposed to help those who don't, or those who lose their jobs, etc. Without a big government bureaucracy trying to determine who qualifies or not. And it's important to realize that the inflation is a one-time event. Prices will rise but then they'll stop rising. And if it were 10% inflation over a year, that's the same as the usual targeted 2% inflation rate but compressed from 5 years. (And the central bank might very well target 0% inflation over the following 4 years to compensate.)

hnfong 3y ago
> And it's important to realize that the inflation is a one-time event What's the basis of that? The UBI is on-going, and inflation has a tendency to "stick".
- crazygringo 3y ago
  Yes, the UBI is on-going, but it's a one-time shift in income levels, which is what generates the one-time inflation. The extra money keeps on getting spent each year -- it doesn't affect the economy in a cumulative way. The person who used to have $0, and now has $10K to spend this year, still only has $10K next year, and still only has $10K the year after. Inflation would only continue if that person received $10K in year one, $20K in year two, $30K in year three, etc. And inflation is a complicated thing, but it doesn't tend to stick when its causes are known, and known to be temporary. Inflation is governed by expectations, and those expectations are often unknown. In the case of UBI, it's extremely known. (Also remember that the UBI is not new money injected into the economy -- it's generally proposed as redistribution in the form of taxation. Which according to the simplest theory wouldn't generate any inflation at all, but because of the resulting shifts in consumption patterns, that's what generates the one-time inflation among basic consumer goods, housing, etc.)