7 ms·

It seems to me that every basic income ‘experiment’ is flawed because they don’t account for the externalities of higher taxes and the fact that the pool of rec

It seems to me that every basic income ‘experiment’ is flawed because they don’t account for the externalities of higher taxes and the fact that the pool of recipients is limited enough that the market is unaffected. Giving a few thousand people a few thousand a month isn’t going to cause much on an impact on inflation and it’s not going to make rents go up across the market. Additionally, others outside the experiment aren’t getting taxed at a higher rate so they aren’t passing costs on to consumers. My other main criticism is the fact that most of these experiments measure how “happy” or less anxious the recipients become. Which to me is obvious, yes, free money can do that. But again, they’re measuring the impact of limited free money without the downsides of higher taxes and market impact. Would any of these experiments demand that the recipients also lose access to any other government assistance they may be on? To my knowledge none of them do. Edit: To put it more succinctly, they are measuring the impact of a stipend and not a basic income program.

underyx 3y ago
Great, so I guess it’s time to try UBI on a country scale then!
- somedude895 3y ago
  Sure, you go first
AaronM 3y ago
Why would giving everyone basic income below a certain income level immediately cause inflation to match it? Inflation doesnt track directly to minimum wage, which seems to be a very similar principal.
- klipt 3y ago
  Consider that some resources are naturally or artificially constrained (housing, medical care, good schools). If everyone has more money, those things have almost limitless capacity to absorb the extra money in the form of higher rent, higher health costs, higher college fees. UBI can help somewhat to decrease inequality (same as welfare targeted only at the poor) but if the government prints and gives everyone a million dollars, that would obviously cause inflation to the point that a million isn't that much money. Reducing inequality will generally mean that well off people (which most software engineers are) will ultimately have less spending power. On the other hand removing artificial constraints could make those resources cheaper for everyone. Relax zoning to build more housing. Increase residency spots to train more doctors and allow foreign licensed doctors to practice in the US more easily. Etc.
  - jiggawatts 3y ago
    > government prints and gives everyone a million dollars I think you might be conflating unrelated economic boogeymen. UBI is not at all about the government "printing" money. It's a redistribution of taxes, such that the net government taxation income remains the same. The total money supply remains constant.
    - dagw 3y ago
      It's a redistribution of taxes It's also a replacement for other forms of financial aid. Someone currently on unemployment or other benefits won't get UBI on top of his current benefits, but instead of. Most proponents of UBI also argue that this simplification of the benefits system will bring its own savings as you will have less administrative overhead that comes with means testing and dealing with multiple overlapping systems.
- MagicMoonlight 3y ago
  Because inflation doesn’t exist, it’s an invented idea. If nobody told you that inflation was 8%, you’d only increase your prices if you had a reason to. That reason could be increased demand, increased costs. Those could come about from increased money supply but that would be slow and unlikely. When the government announces inflation will be 8%, everyone puts their prices up by 8% + 3%. Inflation is therefore 11%. Even though none of them even had a reason to do it. That 11% price increase then inflates their balance sheet. This surplus lets them give it to the wealthy or splurge on stupid things like buying twitter. The wealthy then have an inflated bank balance. This surplus lets them buy investments or splurge on stupid things. These purchases then cause prices to increase. Which signals the government to announce that prices should increase more…
  - vosper 3y ago
    > When the government announces inflation will be 8% This isn’t how it works. Inflation numbers are announced based on what has already happened, not what will/should happen. I do think there’s something to the idea that it gives companies a license to raise prices, though.
  - bsjaux628 3y ago
    I see you went to the economics school of Venezuela and Zimbabwe
- kmeisthax 3y ago
  Because in the 1970s, Saudi Arabia shut off oil exports to America, triggering waves of supply side inflation. This manifests both as increasing prices as well as economic stagnation, which mainstream economists thought wasn't possible. The prevailing interpretation was that this was caused by a "wage price spiral", i.e. that any wage gains by workers will trigger the inflation necessary to claw those gains back. This is a valid assumption... in a perfectly closed economy where no new energy, material, or labor is available[0]. However, this is not actually the case for most economies - just the one where resource-cursed petrostates are deliberately conspiring to starve out democracy and we decide to let them do that. Energy literally falls on us from the sky[1], we can use it to recover disposed of material, and, if we need more than that, we've got an entire planet full of material to dig up. In fact, states with lots of mineral or energy wealth already use UBI. Saudi Arabia and Wyoming basically have no income tax because oil and coal extraction pay for everything. Alaska goes one step further and gives state residents a dividend out of the state's permanent oil wealth fund. And, as far as I'm aware, none of these states have outsized inflation compared with the rest of the country / world. tl;dr economists have a superstition about workers having money [0] Not to be confused with degrowth, at least I think so? [1] And when it isn't we have this metal called uranium that literally spews out heat from radioactive decay when you enrich it enough.
geysersam 3y ago
I definitely agree the experiments are flawed. But I'd like to raise that there also are positive effects that are not accounted for. You mentioned the impact on market prices, I think the impact on prices would be net positive, because the market would become more inclined to provide products and services for people with lower incomes, where every marginal spent dollar has a much higher impact on overall well being than in higher income brackets. Market economies are more efficient when purchasing power is close to evenly distributed in the population.
- MagicMoonlight 3y ago
  If you’re getting £1000 extra a month and I say your rent is now £1000 extra a month, you can’t and won’t say no. If you say no, I’ll just get someone else in who will give me their free money. As you’re competing with them for the same goods, you’ll have no choice but to pay the same. Meaning it’s made no difference for you as the primary costs in your life are limited by supply. For someone who owns their own house and makes £10,000 a month, it’s meaningless. Their inflexible goods are already covered. So they’re free to spend it in holidays and working less.
  - underlipton 3y ago
    That's unrealistic. If it's purely supply and demand, the premium landlords will be able to command out of that 1000 bucks will be somewhat less than the total - and perhaps significantly less, if prospective tenants are savvy enough to hold out collectively. The only way you see the entire thing co-opted for rent is if landlords were to collude and refuse to break rank on pricing. But there's no way that would happen, since it'd be illegal.
    - RestlessMind 3y ago
      > if prospective tenants are savvy enough to hold out collectively and why would that be the case? Seems like a hard coordination problem to me.
      - 3y ago
jnwatson 3y ago
The central bank wouldn't just sit there and allow the money supply to increase unbounded. They'd turn their knobs so the money supply would remain more per less constant.
- mvdtnz 3y ago
  And by "turn their knobs" you mean "pull the one and only lever they have and cripple the economy with high interest rates". Universal incomes would be disastrous for economies.
  - isitmadeofglass 3y ago
    [dead]
chiefalchemist 3y ago
> To put it more succinctly, they are measuring the impact of a stipend and not a basic income program. Most importantly, they're connected. As you noted, of course people are happy to get "free" money. But what happens when the markets eats up that extra and they are back to normal, or perhaps worse off? Happiness isn't going to stay high. In theory, I like the idea of UBI but I'm also confident the market (at least in the USA) - specifically housing - is going to quickly eat up anything extra.
underlipton 3y ago
You neglect to mention who the higher taxes would be on. I presume that the UBI isn't taxed, so in the near term, at least, such a regime would merely be reversing the upward wealth flow that we've seen since 2008. I'm fine with that, are you?
solardev 3y ago
Wasn't COVID in the US a large scale basic income experiment, with the stimulus checks?
- mitthrowaway2 3y ago
  (Not an American). Did those checks go to everyone? Or just people who were laid off?
  - thewildginger 3y ago
    Everyone
  - solardev 3y ago
    There were many different checks, from both the central (federal) government and several states handed out their own too. Some of them went to everyone, others had various requirements. I was working full time but I still got thousands of dollars for no reason. It actually kinda bugged me how wasteful and thoughtless my government was being (no surprise there). I wish they they sent my share of it to people who really needed it then, the folks who couldn't just take their work remote.
rapind 3y ago
> every basic income ‘experiment’ is flawed because they don’t account for the externalities of higher taxes I think UBI should be combined with a flat tax to achieve the same as a progressive tax but without any loopholes (because it’s so simple).
X6S1x6Okd1st 3y ago
What about Alaska's permanent freedom fund?

underyx 3y ago

Great, so I guess it’s time to try UBI on a country scale then!

somedude895 3y ago
Sure, you go first

AaronM 3y ago

Why would giving everyone basic income below a certain income level immediately cause inflation to match it? Inflation doesnt track directly to minimum wage, which seems to be a very similar principal.

klipt 3y ago
Consider that some resources are naturally or artificially constrained (housing, medical care, good schools). If everyone has more money, those things have almost limitless capacity to absorb the extra money in the form of higher rent, higher health costs, higher college fees. UBI can help somewhat to decrease inequality (same as welfare targeted only at the poor) but if the government prints and gives everyone a million dollars, that would obviously cause inflation to the point that a million isn't that much money. Reducing inequality will generally mean that well off people (which most software engineers are) will ultimately have less spending power. On the other hand removing artificial constraints could make those resources cheaper for everyone. Relax zoning to build more housing. Increase residency spots to train more doctors and allow foreign licensed doctors to practice in the US more easily. Etc.
- jiggawatts 3y ago
  > government prints and gives everyone a million dollars I think you might be conflating unrelated economic boogeymen. UBI is not at all about the government "printing" money. It's a redistribution of taxes, such that the net government taxation income remains the same. The total money supply remains constant.
  - dagw 3y ago
    It's a redistribution of taxes It's also a replacement for other forms of financial aid. Someone currently on unemployment or other benefits won't get UBI on top of his current benefits, but instead of. Most proponents of UBI also argue that this simplification of the benefits system will bring its own savings as you will have less administrative overhead that comes with means testing and dealing with multiple overlapping systems.
MagicMoonlight 3y ago
Because inflation doesn’t exist, it’s an invented idea. If nobody told you that inflation was 8%, you’d only increase your prices if you had a reason to. That reason could be increased demand, increased costs. Those could come about from increased money supply but that would be slow and unlikely. When the government announces inflation will be 8%, everyone puts their prices up by 8% + 3%. Inflation is therefore 11%. Even though none of them even had a reason to do it. That 11% price increase then inflates their balance sheet. This surplus lets them give it to the wealthy or splurge on stupid things like buying twitter. The wealthy then have an inflated bank balance. This surplus lets them buy investments or splurge on stupid things. These purchases then cause prices to increase. Which signals the government to announce that prices should increase more…
- vosper 3y ago
  > When the government announces inflation will be 8% This isn’t how it works. Inflation numbers are announced based on what has already happened, not what will/should happen. I do think there’s something to the idea that it gives companies a license to raise prices, though.
- bsjaux628 3y ago
  I see you went to the economics school of Venezuela and Zimbabwe
kmeisthax 3y ago
Because in the 1970s, Saudi Arabia shut off oil exports to America, triggering waves of supply side inflation. This manifests both as increasing prices as well as economic stagnation, which mainstream economists thought wasn't possible. The prevailing interpretation was that this was caused by a "wage price spiral", i.e. that any wage gains by workers will trigger the inflation necessary to claw those gains back. This is a valid assumption... in a perfectly closed economy where no new energy, material, or labor is available[0]. However, this is not actually the case for most economies - just the one where resource-cursed petrostates are deliberately conspiring to starve out democracy and we decide to let them do that. Energy literally falls on us from the sky[1], we can use it to recover disposed of material, and, if we need more than that, we've got an entire planet full of material to dig up. In fact, states with lots of mineral or energy wealth already use UBI. Saudi Arabia and Wyoming basically have no income tax because oil and coal extraction pay for everything. Alaska goes one step further and gives state residents a dividend out of the state's permanent oil wealth fund. And, as far as I'm aware, none of these states have outsized inflation compared with the rest of the country / world. tl;dr economists have a superstition about workers having money [0] Not to be confused with degrowth, at least I think so? [1] And when it isn't we have this metal called uranium that literally spews out heat from radioactive decay when you enrich it enough.

geysersam 3y ago

I definitely agree the experiments are flawed. But I'd like to raise that there also are positive effects that are not accounted for. You mentioned the impact on market prices, I think the impact on prices would be net positive, because the market would become more inclined to provide products and services for people with lower incomes, where every marginal spent dollar has a much higher impact on overall well being than in higher income brackets. Market economies are more efficient when purchasing power is close to evenly distributed in the population.

MagicMoonlight 3y ago
If you’re getting £1000 extra a month and I say your rent is now £1000 extra a month, you can’t and won’t say no. If you say no, I’ll just get someone else in who will give me their free money. As you’re competing with them for the same goods, you’ll have no choice but to pay the same. Meaning it’s made no difference for you as the primary costs in your life are limited by supply. For someone who owns their own house and makes £10,000 a month, it’s meaningless. Their inflexible goods are already covered. So they’re free to spend it in holidays and working less.
- underlipton 3y ago
  That's unrealistic. If it's purely supply and demand, the premium landlords will be able to command out of that 1000 bucks will be somewhat less than the total - and perhaps significantly less, if prospective tenants are savvy enough to hold out collectively. The only way you see the entire thing co-opted for rent is if landlords were to collude and refuse to break rank on pricing. But there's no way that would happen, since it'd be illegal.
  - RestlessMind 3y ago
    > if prospective tenants are savvy enough to hold out collectively and why would that be the case? Seems like a hard coordination problem to me.
    - 3y ago

jnwatson 3y ago

The central bank wouldn't just sit there and allow the money supply to increase unbounded. They'd turn their knobs so the money supply would remain more per less constant.

mvdtnz 3y ago
And by "turn their knobs" you mean "pull the one and only lever they have and cripple the economy with high interest rates". Universal incomes would be disastrous for economies.
- isitmadeofglass 3y ago
  [dead]

chiefalchemist 3y ago

> To put it more succinctly, they are measuring the impact of a stipend and not a basic income program. Most importantly, they're connected. As you noted, of course people are happy to get "free" money. But what happens when the markets eats up that extra and they are back to normal, or perhaps worse off? Happiness isn't going to stay high. In theory, I like the idea of UBI but I'm also confident the market (at least in the USA) - specifically housing - is going to quickly eat up anything extra.

underlipton 3y ago

You neglect to mention who the higher taxes would be on. I presume that the UBI isn't taxed, so in the near term, at least, such a regime would merely be reversing the upward wealth flow that we've seen since 2008. I'm fine with that, are you?

solardev 3y ago

Wasn't COVID in the US a large scale basic income experiment, with the stimulus checks?

mitthrowaway2 3y ago
(Not an American). Did those checks go to everyone? Or just people who were laid off?
- thewildginger 3y ago
  Everyone
- solardev 3y ago
  There were many different checks, from both the central (federal) government and several states handed out their own too. Some of them went to everyone, others had various requirements. I was working full time but I still got thousands of dollars for no reason. It actually kinda bugged me how wasteful and thoughtless my government was being (no surprise there). I wish they they sent my share of it to people who really needed it then, the folks who couldn't just take their work remote.

rapind 3y ago

> every basic income ‘experiment’ is flawed because they don’t account for the externalities of higher taxes I think UBI should be combined with a flat tax to achieve the same as a progressive tax but without any loopholes (because it’s so simple).

X6S1x6Okd1st 3y ago

What about Alaska's permanent freedom fund?