4 ms·

Why would giving everyone basic income below a certain income level immediately cause inflation to match it? Inflation doesnt track directly to minimum wage, w

by 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.

by AaronM 3y ago

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.