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The thing I’ve never understood about UBI is how it wouldn’t immediately be counteracted by inflation. Money is like water or electricity; its only ability to

by zoky 2y ago

The thing I’ve never understood about UBI is how it wouldn’t immediately be counteracted by inflation. Money is like water or electricity; its only ability to do work is when it flows. Just like a water wheel can’t do any work without a river flow, or a motor can’t do any work with a potential difference, money is useless when everyone always just has the same amount. It is only the transfer of money from one entity to another that causes work to be done. The difference between 9V and 12V is 3V. The difference between 12V and 15V is still 3V. The amount of work you can do is the same, but the bar to entry is higher. So somebody explain to me, when everyone gets the same baseline amount of money, how that does anything but raise the baseline?

coreypreston 2y ago
You're cramming an analogy into your point. Systems like economy and people dont fit into an electrical diagram.
- zoky 2y ago
  Am I? I don’t think so. Please describe for me a situation where the simple possession of money, absent any potential for that money to flow, causes work to happen. If you can, you’ve described nothing less than perpetual motion.
  - derdi 2y ago
    The simple possession of money by a hungry person causes that money to flow by encouraging the person to spend the money on food. That causes work to happen at the food producers. Maybe even so much more work that they're willing to hire additional hungry people to do that work.
fgdorais 2y ago
Universal Basic Water would be a great achievement!
al_borland 2y ago
I’ve had the same question. We saw this, to some degree with the stimulus checks during the pandemic. Initially people got all this money and reports were that savings rates had never been higher… but most of the world was also shut down. As things opened up, or people simply got bored at home, what did we see? People spent everything they were given, and more. Personal debt is now at an all time high, and we’ve seen a bunch of inflation (for various reasons). Most people are in a worse place now. Financial literacy is extremely important. Giving more money to people who don’t know how to handle money, allows them to dig bigger holes. That said, everyone’s investments and 401ks are reliant on this reckless spending to keep returns high.
bryanlarsen 2y ago
A fiscally balanced UBI is one which increases taxes on the average taxpayer exactly the same amount as it pays to the average taxpayer. It would not increase the money supply and would have minimal impact on inflation.
- zoky 2y ago
  No, what you’re describing is a “take from the rich and give to the poor” welfare program. The idea behind UBI is that everyone gets the same amount regardless of what they otherwise make. If those who make more are taxed more, and thus ultimately net less, how is that in any way “universal”? And for that matter, how is that any different from what we already have? What you are describing as UBI is nothing more than disguised calls for increased taxes on the rich and greater welfare for the poor. Which, fine, if that’s what you want then why not be honest about it in the first place instead of couching it in misleading terms such as “UBI”?
  - loudmax 2y ago
    This isn't some secret. Of course the wealthy are going to pay more into it than they get out from it. "Take from the rich and give to the poor" is the entire point. This should be understood by anyone with basic economic literacy, or even a modicum of logical reasoning. How else in the world are you to have any welfare program? If you object to the existence of welfare programs on principle, then you should make that argument.
    - zoky 2y ago
      What I object to is the call for such programs under the guise of them being something other than what they are. If UBI is just welfare, why not just call it that?
      - sjsdaiuasgdia 2y ago
        Because it's a different approach than the welfare systems we have today. It's not the same thing. There are similar elements, but the structure is very different. The terminology difference helps reflect that they're different concepts.
sjsdaiuasgdia 2y ago
This is probably also a flawed analogy applying simple ideas to an extremely complex system / set of overlapping systems, but I see UBI as a sort of social and economic lubricant. People at the bottom of the economy are not able to effectively participate in it. At the absolute bottom it's homeless people with no real path to employment or any real ability to improve their situation. You get above that layer and you've got people making constant compromises between competing necessities like housing, nutrition, and clothing. Inconsistent and/or substandard nutrition can be massively impacting to adults and even more so to children. Their immediate and long term mental and physical capability is lessened compared to others. People who aren't able to effectively participate in the economy today have kids who aren't able to effectively participate in the economy tomorrow. This creates a persistent drag on the economy as a whole. It's absolutely possible UBI causes some degree of price increases, but in exchange we get an economy with a larger number of effective participants and less drag at the bottom.
- zoky 2y ago
  Unfortunately, this thinking is predicated on the idea that those at the very lowest tier of society would participate given the opportunity. To be clear, this is not about the working poor. I don’t think this would ultimately help them. This is also not about those currently on welfare; I don’t think it would help them either. The question is, would it help the homeless man living under a bridge or the homeless woman walking around naked at 7-Eleven? Sadly, I don’t think these people can be helped, at least not just by throwing money at them. Even if UBI were implemented, I don’t see them claiming it, and I don’t see them spending it on anything more than drugs and booze. As far as I’m concerned, rather than implementing UBI, if we were to take that money and use it to implement prison reform and mental health care, it would be far better spent.
  - pif 2y ago
    > this is not about the working poor. I don’t think this would ultimately help them. I think you are generally right, but I strongly disagree on this specific point: the working poor would be the most benefitted. They are working, which means they are already taking good decisions and making efforts to improve their lives: money could not be spent in a more productive way than handling it to those gentlemen.
rhelz 2y ago
If it is funded by taxation, it need not be inflationary. If you think about it, the Fed only really has one "knob" they can turn to control inflation: they can either raise or lower the interest rates. However, raising taxes is also anti-inflationary, and in stagflationary environments (like we had at the end of Trump's presidency), it lets the government control inflation without making borrowing more expensive.
- zoky 2y ago
  If it’s funded by a flat tax, then yes, but then what’s the point? Seems like nothing more than a shell game. If it’s funded by a progressive tax, then how is it anything more than a tax increase combined with increased welfare? Either way, seems like nothing but a recipe for inefficiency and increased government bureaucracy.
  - sjsdaiuasgdia 2y ago
    Current welfare frameworks generate massive amounts of extra work for both government and those receiving assistance. In the means-tested approach, the agencies administering welfare have to understand the means of the people receiving assistance. And monitor for changes that might push recipients outside the accepted range or cause a change to benefits. The recipients carry extra load because they need to understand where they themselves are in that accepted range and organize their lives around that. The current system creates perverse incentives where an unemployed person receiving assistance may find themselves worse off if they get a job. When the agency's job is "Send $X to every citizen" it's actually a lot simpler for everyone involved. There's no qualifications to verify, no changes to monitor. The recipients don't need to continually re-prove themselves or contort their lives. There's still some fraud potential but the attack surface is now far smaller. There's still complexity on the tax side because progressive taxation is the way to go to make this work, but we have that already. IMO it'd be a net reduction in complexity and administrative overhead vs the current welfare system.
    - ryandrake 2y ago
      Sometimes, the means-testing apparatus itself costs more than the benefit that it is supposedly "protecting." Occasionally it costs multiples of the benefit.
pif 2y ago
> The thing I’ve never understood about UBI is how it wouldn’t immediately be counteracted by inflation. I think you are not wrong, but not completely right either! It's true that the income difference among people would not change, but the distribution would: homeless people begging on the street could afford something in a stable way, at last; people on minimum wage would double their income; medium class would see their disposable income increase; and rich people would not notice any difference. Sure, the purchasing power of the UBI sum would be reduced the moment the UBI is introduced, but still poor people would see their situation get better: the poorer, the "more better"! Furthermore, most of the money flowing to the poor people would be spent right away, boosting the economy, which is a very nice side effect. In the end, UBI would be a way to force the rich to take some of their money out of the vaults and spend it (1st benefit) for the poor (2nd benefit). The only problem lies in how much money you'd need to take from the rich to implement UBI in a meaningful way.
bookofjoe 2y ago
>Money is like water or electricity; it's only ability to do work is when it flows. Precisely. "Frozen Desire: The Meaning of Money" by James Buchan (1997) is a superb book that expands on your statement.
tempfile 2y ago
This argument seems to imply that if you had a big red button that would uniformly distribute all the world's resources, that we would be stuck in a steady state and unable to produce anything. This conclusion is obviously false, and I think if you work backwards you can probably find where the analogy breaks down.
slowmovintarget 2y ago
One interesting thing about giving money to the poor is that when they have money, they spend it immediately because they have to. I don't think this addresses the inflation question, as there are guaranteed to be check cashing rackets and price gouging where thing costs 1 UBI unit all of a sudden.

by zoky 2y ago

coreypreston 2y ago

You're cramming an analogy into your point. Systems like economy and people dont fit into an electrical diagram.

zoky 2y ago
Am I? I don’t think so. Please describe for me a situation where the simple possession of money, absent any potential for that money to flow, causes work to happen. If you can, you’ve described nothing less than perpetual motion.
- derdi 2y ago
  The simple possession of money by a hungry person causes that money to flow by encouraging the person to spend the money on food. That causes work to happen at the food producers. Maybe even so much more work that they're willing to hire additional hungry people to do that work.

fgdorais 2y ago

Universal Basic Water would be a great achievement!

al_borland 2y ago

I’ve had the same question. We saw this, to some degree with the stimulus checks during the pandemic. Initially people got all this money and reports were that savings rates had never been higher… but most of the world was also shut down. As things opened up, or people simply got bored at home, what did we see? People spent everything they were given, and more. Personal debt is now at an all time high, and we’ve seen a bunch of inflation (for various reasons). Most people are in a worse place now. Financial literacy is extremely important. Giving more money to people who don’t know how to handle money, allows them to dig bigger holes. That said, everyone’s investments and 401ks are reliant on this reckless spending to keep returns high.

bryanlarsen 2y ago

A fiscally balanced UBI is one which increases taxes on the average taxpayer exactly the same amount as it pays to the average taxpayer. It would not increase the money supply and would have minimal impact on inflation.

zoky 2y ago
No, what you’re describing is a “take from the rich and give to the poor” welfare program. The idea behind UBI is that everyone gets the same amount regardless of what they otherwise make. If those who make more are taxed more, and thus ultimately net less, how is that in any way “universal”? And for that matter, how is that any different from what we already have? What you are describing as UBI is nothing more than disguised calls for increased taxes on the rich and greater welfare for the poor. Which, fine, if that’s what you want then why not be honest about it in the first place instead of couching it in misleading terms such as “UBI”?
- loudmax 2y ago
  This isn't some secret. Of course the wealthy are going to pay more into it than they get out from it. "Take from the rich and give to the poor" is the entire point. This should be understood by anyone with basic economic literacy, or even a modicum of logical reasoning. How else in the world are you to have any welfare program? If you object to the existence of welfare programs on principle, then you should make that argument.
  - zoky 2y ago
    What I object to is the call for such programs under the guise of them being something other than what they are. If UBI is just welfare, why not just call it that?
    - sjsdaiuasgdia 2y ago
      Because it's a different approach than the welfare systems we have today. It's not the same thing. There are similar elements, but the structure is very different. The terminology difference helps reflect that they're different concepts.

sjsdaiuasgdia 2y ago

This is probably also a flawed analogy applying simple ideas to an extremely complex system / set of overlapping systems, but I see UBI as a sort of social and economic lubricant. People at the bottom of the economy are not able to effectively participate in it. At the absolute bottom it's homeless people with no real path to employment or any real ability to improve their situation. You get above that layer and you've got people making constant compromises between competing necessities like housing, nutrition, and clothing. Inconsistent and/or substandard nutrition can be massively impacting to adults and even more so to children. Their immediate and long term mental and physical capability is lessened compared to others. People who aren't able to effectively participate in the economy today have kids who aren't able to effectively participate in the economy tomorrow. This creates a persistent drag on the economy as a whole. It's absolutely possible UBI causes some degree of price increases, but in exchange we get an economy with a larger number of effective participants and less drag at the bottom.

zoky 2y ago
Unfortunately, this thinking is predicated on the idea that those at the very lowest tier of society would participate given the opportunity. To be clear, this is not about the working poor. I don’t think this would ultimately help them. This is also not about those currently on welfare; I don’t think it would help them either. The question is, would it help the homeless man living under a bridge or the homeless woman walking around naked at 7-Eleven? Sadly, I don’t think these people can be helped, at least not just by throwing money at them. Even if UBI were implemented, I don’t see them claiming it, and I don’t see them spending it on anything more than drugs and booze. As far as I’m concerned, rather than implementing UBI, if we were to take that money and use it to implement prison reform and mental health care, it would be far better spent.
- pif 2y ago
  > this is not about the working poor. I don’t think this would ultimately help them. I think you are generally right, but I strongly disagree on this specific point: the working poor would be the most benefitted. They are working, which means they are already taking good decisions and making efforts to improve their lives: money could not be spent in a more productive way than handling it to those gentlemen.

rhelz 2y ago

If it is funded by taxation, it need not be inflationary. If you think about it, the Fed only really has one "knob" they can turn to control inflation: they can either raise or lower the interest rates. However, raising taxes is also anti-inflationary, and in stagflationary environments (like we had at the end of Trump's presidency), it lets the government control inflation without making borrowing more expensive.

zoky 2y ago
If it’s funded by a flat tax, then yes, but then what’s the point? Seems like nothing more than a shell game. If it’s funded by a progressive tax, then how is it anything more than a tax increase combined with increased welfare? Either way, seems like nothing but a recipe for inefficiency and increased government bureaucracy.
- sjsdaiuasgdia 2y ago
  Current welfare frameworks generate massive amounts of extra work for both government and those receiving assistance. In the means-tested approach, the agencies administering welfare have to understand the means of the people receiving assistance. And monitor for changes that might push recipients outside the accepted range or cause a change to benefits. The recipients carry extra load because they need to understand where they themselves are in that accepted range and organize their lives around that. The current system creates perverse incentives where an unemployed person receiving assistance may find themselves worse off if they get a job. When the agency's job is "Send $X to every citizen" it's actually a lot simpler for everyone involved. There's no qualifications to verify, no changes to monitor. The recipients don't need to continually re-prove themselves or contort their lives. There's still some fraud potential but the attack surface is now far smaller. There's still complexity on the tax side because progressive taxation is the way to go to make this work, but we have that already. IMO it'd be a net reduction in complexity and administrative overhead vs the current welfare system.
  - ryandrake 2y ago
    Sometimes, the means-testing apparatus itself costs more than the benefit that it is supposedly "protecting." Occasionally it costs multiples of the benefit.

pif 2y ago

> The thing I’ve never understood about UBI is how it wouldn’t immediately be counteracted by inflation. I think you are not wrong, but not completely right either! It's true that the income difference among people would not change, but the distribution would: homeless people begging on the street could afford something in a stable way, at last; people on minimum wage would double their income; medium class would see their disposable income increase; and rich people would not notice any difference. Sure, the purchasing power of the UBI sum would be reduced the moment the UBI is introduced, but still poor people would see their situation get better: the poorer, the "more better"! Furthermore, most of the money flowing to the poor people would be spent right away, boosting the economy, which is a very nice side effect. In the end, UBI would be a way to force the rich to take some of their money out of the vaults and spend it (1st benefit) for the poor (2nd benefit). The only problem lies in how much money you'd need to take from the rich to implement UBI in a meaningful way.

bookofjoe 2y ago

>Money is like water or electricity; it's only ability to do work is when it flows. Precisely. "Frozen Desire: The Meaning of Money" by James Buchan (1997) is a superb book that expands on your statement.

tempfile 2y ago

This argument seems to imply that if you had a big red button that would uniformly distribute all the world's resources, that we would be stuck in a steady state and unable to produce anything. This conclusion is obviously false, and I think if you work backwards you can probably find where the analogy breaks down.

slowmovintarget 2y ago

One interesting thing about giving money to the poor is that when they have money, they spend it immediately because they have to. I don't think this addresses the inflation question, as there are guaranteed to be check cashing rackets and price gouging where thing costs 1 UBI unit all of a sudden.