6 ms·

Of course, giving anyone money in a vacuum can have transformative results. However, when you apply that to the wider system of economics, it is utterly destruc

Of course, giving anyone money in a vacuum can have transformative results. However, when you apply that to the wider system of economics, it is utterly destructive. If a business knows that you are getting extra money from the government, they would be leaving money on the table by not increasing prices to get for that money. The same goes with real estate, iPhones, healthcare, and everything else. They know you have the money. I equate this with telling a car dealer exactly how much money you have to spend.

aurareturn 2y ago
You’re basically implying that if you give everyone in the US $1,000, no matter what, inflation will happen and people are back to where they started.
- underseacables 2y ago
  Absolutely. That is exactly right. That's economics. Love it or hate it, the market will always equalize. The only way to stop that is to put price controls on huge amount of commerce, and barring a complete revolution in the American system of commerce, that is never going to happen.
- toasterlovin 2y ago
  We already ran this experiment several times during the pandemic and inflation did, in fact, happen.
  - jeromegv 2y ago
    Money supply increased but lots of money went into corporations. Not just into individuals pocket.
- avidiax 2y ago
  Giving these people in isolation $1,000/month, probably no. Giving everyone $1,000/mo, you could expect that money to be captured as economic rents, if not literal rents. If you currently spend $2,000/mo on your apartment, which is probably low for many areas (such as the California Bay Area), then people currently living further away to pay only $1,000/mo can now afford your $2,000/mo apartment. So the price has to go up. I say all of this as a somewhat proponent of UBI. In particular, I like the idea that UBI could replace many assistance programs, would be destigmatized, would not have the administrative overhead of those programs, would not be a welfare trap, and would be fundamentally fair. But giving it to everyone would also tend to be inflationary, and would likely be captured by rent-seekers, unless such rents are controlled somehow. But rent controls are also distorting. It's all very theoretically problematic, and a small scale study just can't be predictive of the distortionary effects that full scale UBI would have.
  - ethbr1 2y ago
    The quintessential example is US college tuition. The US government shoveled free / low-cost money into sending people to college, university tuitions increased to capture that additional funding while still keeping their enrollment numbers. Let's not do that with housing?
    - mgh95 2y ago
      This fact is what scares me most about economic populism in the USA. I'm not concerned about higher taxes: I'm concerned people look at the college market and see the problem as lack of subsidy, not about excess capital availability.
      - ethbr1 2y ago
        The problem is that you can only subsidize a for-profit entity (including non-profits that act as such) by simultaneously controlling prices (or scaling supply supra-demand). Anything else, including any personal contribution, and the prices just raise to include the subsidy. Which is exactly what you'd expect a market rate to do! * The sole exception seems to be if the subsidies are targeted and few enough in number so as to not influence the broader market rate, but then you're not helping as many people.
- pton_xd 2y ago
  It's obvious that simply printing money and handing it out won't solve anything. If it did, let's just give every individual $10 million via direct deposit. Cool now we're all rich and can retire, right? But, if that money (which is a claim against future economic output) was diverted from somewhere else, it could have an effect. The total US GDP is $25T and the total population is 330 million, meaning if it were cut and divided equally we'd each get... $75k per year. So I guess in a hand-wavey sense it's true we generate enough economic activity to have everyone capable of living a decent middle-class lifestyle. Of course that level of redistribution would require some extreme form of socialism / communism which just wouldn't work out.
- dredmorbius 2y ago
  The fact that subsidies provided to improve affordability of rents generally increases those rent costs is long-recognised. Winston Churchill in 1906: Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public conscience, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed. All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week, or the amount of the toll which had been remitted! <https://www.landvaluetax.org/history/winston-churchill-said-it-all-better-then-we-can https://www.landvaluetax.org/history/winston-churchill-said-...> Tax those rents.
dredmorbius 2y ago
Which is why UBI/GMI policies must be paired with confiscatory taxation on economic rents. Those price-fungible goods and services you name capture surplus value to the seller. A Georgian tax on such goods captures that surplus value, limits price growth, and could further finance UBI/GBI and other public welfare projects.
- mgh95 2y ago
  > Those price-fungible goods and services you name capture surplus value to the seller. A Georgian tax on such goods captures that surplus value, limits price growth, and could further finance UBI/GBI and other public welfare projects. Big oof. This rapidly turns into market participants leaving the market because the returns associated with the "price-fungible goods and services" (whatever precisely those are) are poorer than those not denominated in the currency. Mass distribution of currency only leads to devaluation of currency. The entire premise of Georgism isn't about fixing wealth inequality: it's about forcing resources that are physically finite with no replacement (namely land) into productive use.
  - scotty79 2y ago
    There's zero downsides from large scale capital leaving housing real estate rental market. That's exactly what is needed for housing to return to acting like housing.
    - mgh95 2y ago
      The downside is that you cannot build units (especially apartments) without large scale capital. To effectively build, you need people (developers) to finance the construction of many units, especially multifamily whether townhomes, apartments, or condos. The issue is heavily constrained supply. Even if it is profitable to build a smaller, lower-cost unit land use restrictions effectively limit the production of housing units from land.
      - dredmorbius 2y ago

aurareturn 2y ago

You’re basically implying that if you give everyone in the US $1,000, no matter what, inflation will happen and people are back to where they started.

underseacables 2y ago
Absolutely. That is exactly right. That's economics. Love it or hate it, the market will always equalize. The only way to stop that is to put price controls on huge amount of commerce, and barring a complete revolution in the American system of commerce, that is never going to happen.
toasterlovin 2y ago
We already ran this experiment several times during the pandemic and inflation did, in fact, happen.
- jeromegv 2y ago
  Money supply increased but lots of money went into corporations. Not just into individuals pocket.
avidiax 2y ago
Giving these people in isolation $1,000/month, probably no. Giving everyone $1,000/mo, you could expect that money to be captured as economic rents, if not literal rents. If you currently spend $2,000/mo on your apartment, which is probably low for many areas (such as the California Bay Area), then people currently living further away to pay only $1,000/mo can now afford your $2,000/mo apartment. So the price has to go up. I say all of this as a somewhat proponent of UBI. In particular, I like the idea that UBI could replace many assistance programs, would be destigmatized, would not have the administrative overhead of those programs, would not be a welfare trap, and would be fundamentally fair. But giving it to everyone would also tend to be inflationary, and would likely be captured by rent-seekers, unless such rents are controlled somehow. But rent controls are also distorting. It's all very theoretically problematic, and a small scale study just can't be predictive of the distortionary effects that full scale UBI would have.
- ethbr1 2y ago
  The quintessential example is US college tuition. The US government shoveled free / low-cost money into sending people to college, university tuitions increased to capture that additional funding while still keeping their enrollment numbers. Let's not do that with housing?
  - mgh95 2y ago
    This fact is what scares me most about economic populism in the USA. I'm not concerned about higher taxes: I'm concerned people look at the college market and see the problem as lack of subsidy, not about excess capital availability.
    - ethbr1 2y ago
      The problem is that you can only subsidize a for-profit entity (including non-profits that act as such) by simultaneously controlling prices (or scaling supply supra-demand). Anything else, including any personal contribution, and the prices just raise to include the subsidy. Which is exactly what you'd expect a market rate to do! * The sole exception seems to be if the subsidies are targeted and few enough in number so as to not influence the broader market rate, but then you're not helping as many people.
pton_xd 2y ago
It's obvious that simply printing money and handing it out won't solve anything. If it did, let's just give every individual $10 million via direct deposit. Cool now we're all rich and can retire, right? But, if that money (which is a claim against future economic output) was diverted from somewhere else, it could have an effect. The total US GDP is $25T and the total population is 330 million, meaning if it were cut and divided equally we'd each get... $75k per year. So I guess in a hand-wavey sense it's true we generate enough economic activity to have everyone capable of living a decent middle-class lifestyle. Of course that level of redistribution would require some extreme form of socialism / communism which just wouldn't work out.
dredmorbius 2y ago
The fact that subsidies provided to improve affordability of rents generally increases those rent costs is long-recognised. Winston Churchill in 1906: Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public conscience, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed. All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week, or the amount of the toll which had been remitted! <https://www.landvaluetax.org/history/winston-churchill-said-it-all-better-then-we-can https://www.landvaluetax.org/history/winston-churchill-said-...> Tax those rents.

dredmorbius 2y ago

Which is why UBI/GMI policies must be paired with confiscatory taxation on economic rents. Those price-fungible goods and services you name capture surplus value to the seller. A Georgian tax on such goods captures that surplus value, limits price growth, and could further finance UBI/GBI and other public welfare projects.

mgh95 2y ago
> Those price-fungible goods and services you name capture surplus value to the seller. A Georgian tax on such goods captures that surplus value, limits price growth, and could further finance UBI/GBI and other public welfare projects. Big oof. This rapidly turns into market participants leaving the market because the returns associated with the "price-fungible goods and services" (whatever precisely those are) are poorer than those not denominated in the currency. Mass distribution of currency only leads to devaluation of currency. The entire premise of Georgism isn't about fixing wealth inequality: it's about forcing resources that are physically finite with no replacement (namely land) into productive use.
- scotty79 2y ago
  There's zero downsides from large scale capital leaving housing real estate rental market. That's exactly what is needed for housing to return to acting like housing.
  - mgh95 2y ago
    The downside is that you cannot build units (especially apartments) without large scale capital. To effectively build, you need people (developers) to finance the construction of many units, especially multifamily whether townhomes, apartments, or condos. The issue is heavily constrained supply. Even if it is profitable to build a smaller, lower-cost unit land use restrictions effectively limit the production of housing units from land.
    - dredmorbius 2y ago