5 ms·

If everyone gets an equal raise (whatever the UBI is), wouldn’t the entire market simply adjust to price that in, leaving everyone in the same relative position

If everyone gets an equal raise (whatever the UBI is), wouldn’t the entire market simply adjust to price that in, leaving everyone in the same relative position?

bodge5000 1y ago
Price/income increases don't happen in a vacuum, it takes a while for it to become normal. If you got a £50 bonus and decide to get yourself to a McDonalds, only to find they've raised the price of their burgers to £50, would you still buy the burger? Your situation would be the same as before so logically you would, but of course you wouldn't. That price increase has overall lost Mcdonalds money, since now you're not buying anything (assuming everything else they sell also went up a proportional amount). Obviously there are essentials that can effectively be at any price and you have to pay them if you can afford them, but everything else is fair game.
Hasnep 1y ago
I don't know about the long term economic effects, but there are people who currently earn less than the subsistence amount who will be better off with UBI than without it.
- tossandthrow 1y ago
  I don't hope that this is a latent argument pro corporate slavery? Are you seriously proposing that we need people who are paid below subsistence? Or was this more an argument for ubi?
  - Hasnep 1y ago
    No, I'm saying that if everyone gets given $2000 each month and as a result everyone's wages are reduced by $2000 a month, most people will be unaffected. However, anyone who made less than $2000 a month before will get to quit their job and make more money than before UBI, so UBI wouldn't be useless in this scenario.
Eisenstein 1y ago
No, because the money isn't being printed, it is being reallocated from whatever it would have been spent on either by the people we tax to get it, or by the government who would have spent it on other things. Proponents contend that the economy is better off when people have a baseline income so that they can invest their time in productive things which may be beneficial, like going to school, having more time to raise their children, or starting a business, or volunteering, whatever, without worrying about how they are going to feed themselves. This would be opposed to whatever tax breaks we would be giving that would end up in a trust, foundation, or a VC fund, or whatever the government would have spent it on. Note, I have no position on whether or not it would work in this way, but that is my understanding of the position of the those in favor of it.
tossandthrow 1y ago
Only of positional goods. Ie. Houses in attractive quarters etc. On the contrary, we would likely see non positional goods become cheaper as the market is alive and companies can continue to produce at scale.
lmm 1y ago
Even at first order, it makes the people at the bottom relatively better off. If we go from Alice having 600, Bob having 0, and Carol having 0, to Alice having 700, Bob having 100, and Carol having 100, then Bob and Carol are still more able to buy things than they were before even if prices now increase by 50%.
- ziggure 1y ago
  Yes, being shortsighted ignores the rubber band effect that then disproportionately hurts those people down the road.
  - const_cast 1y ago
    The arguments against UBI are pretty much the same against rising minimum wages. That being, the baseline just moves, so everything gets more expensive, so the situation doesn't improve at all. It intuitively makes sense, and like most economic reasoning it's horribly simple. But economics is comprised to two parts: theory, and practice. Practice always trumps theory. If practice defies your theory, it doesn't mean that the market is broken, or that there's over-regulation, or that your theory will eventually come true. It means your theory is just wrong. All economic theory are predicated on thousands or millions of underlying assumptions. If even just a few of those are not true, or aren't true in the way you think they are, then the theory can be wrong while simultaneously being logically perfect. When it comes to the arguments against minimum wage, the theory is just wrong. Rising minimum wages do help people making minimum wage. If it does raise the COL, it's slowly, and not in the same degree as the minimum wage shift. In addition, a flat minimum wage still results in a rising COL. You can't simply pin the COL like that. So knowing what we know about minimum wage, I think it's arrogant to claim the UBI would just result in a rising COL to eat up all the UBI.
    - tossandthrow 1y ago
      A descriminator between minimum wage and ubi is location. UBI (if people trust that it will continue) will encourage people moving out of the cities as they don't need to be close to jobs. I would hypotheses that this would 1) create new more local economies (where people can earn money) and 2) reduce pressure on the hyper metropols. I would even hypothesize that because of this, it would have an adverse effect on the cost of living. Butnthese a theories.
hardwaresofton 1y ago
Yes, IMO that's exactly what will happen, except companies that can best compete for their share of this $1000 will get a government funded revenue stream (think Amazon, Netflix, rent seeking enterprises, etc). I have not heard a convincing argument the other way, would really appreciate a link to one if you find one.
- tossandthrow 1y ago
  A class of people would have a larger spending power. Naturally, implementing UBI would require the entire financial sector to adjust. We would likely need to significantly raise interest rates (Which, IMHO would be great) and have a period to manage inflation. But beside the initial recalibration phase, I have not seen any convincing arguments for why prices on non-positional goods would increase. Even with the increase interest rates, we would likely see that prices on positional goods / assets would stabilize as dead-cheap capital is not available.
  - hardwaresofton 1y ago
    > A class of people would have a larger spending power. Spending power with no real alternatives (i.e. in monopoly/oligopoly conditions) isn't actually very useful IMO. It's mostly just more guaranteed money for the current monopoly/oligopoly -- you're just guaranteeing revenue streams. In a pre-UBI world, you can at least assume that companies can't completely shaft employees because then no one can buy anything. If the government steps in to make sure people can still buy stuff, that has almost the opposite effect. I think walmart & it's treatment of employees (with employees reportedly needing to ALSO depend on food stamps) as a perfect example of the system kind of working against itself. The fix for that problem is within our reach right now, but it's just unpopular for the usual reasons with the people with the ability to make the fix. > Naturally, implementing UBI would require the entire financial sector to adjust. We would likely need to significantly raise interest rates (Which, IMHO would be great) and have a period to manage inflation. > > But beside the initial recalibration phase, I have not seen any convincing arguments for why prices on non-positional goods would increase. Even with the increase interest rates, we would likely see that prices on positional goods / assets would stabilize as dead-cheap capital is not available. OK, so then how about we do this without the UBI bit and just raise interest rates? I'm not seeing where UBI actually has a material benefit here, and there are other real problems with raising interest rates, because losing access to cheap credit also hurts those at the bottom of the economy (arguably even more) -- the solution there is political, likely (i.e. lower income borrowers could somehow be advantaged, but then we have shades of 2008 all over again if excessive greed/moral hazard sets in).
deleted 1y ago
[deleted]
Rebelgecko 1y ago
My intuition is that it wouldn't change the ranking of people's wealths, but it would make a big difference in the ratio between a top 10 percentile income and a bottom 10 percentile income Edit- although even that is an oversimplification because I think in some cases it might encourage people to make more money. I know a handful of people who intentionally limit their income because of gaps in means testing. eg there's a window where you start making too much to take advantage of some govt social services, but not enough to pay for those services yourself (healthcare is a big one)
komali2 1y ago
People that admit "yes" to this (or similar ones: subsidization causing increasing rent to match, etc) are acknowledging that prices aren't really set by supply and demand, nor were they ever, nor will they ever be. Prices are as high as companies can get away with charging, and they can collude to get these prices higher if need be, or lie about a product, or spend decades as an industry convincing you that you need something you don't. If the market worked as economists always scold us that it does when they want less socialism, it wouldn't matter a lick what someone's salary is. That doesn't affect supply and demand, after all.

If everyone gets an equal raise (whatever the UBI is), wouldn’t the entire market simply adjust to price that in, leaving everyone in the same relative position?

bodge5000 1y ago

Price/income increases don't happen in a vacuum, it takes a while for it to become normal. If you got a £50 bonus and decide to get yourself to a McDonalds, only to find they've raised the price of their burgers to £50, would you still buy the burger? Your situation would be the same as before so logically you would, but of course you wouldn't. That price increase has overall lost Mcdonalds money, since now you're not buying anything (assuming everything else they sell also went up a proportional amount). Obviously there are essentials that can effectively be at any price and you have to pay them if you can afford them, but everything else is fair game.

Hasnep 1y ago

I don't know about the long term economic effects, but there are people who currently earn less than the subsistence amount who will be better off with UBI than without it.

tossandthrow 1y ago
I don't hope that this is a latent argument pro corporate slavery? Are you seriously proposing that we need people who are paid below subsistence? Or was this more an argument for ubi?
- Hasnep 1y ago
  No, I'm saying that if everyone gets given $2000 each month and as a result everyone's wages are reduced by $2000 a month, most people will be unaffected. However, anyone who made less than $2000 a month before will get to quit their job and make more money than before UBI, so UBI wouldn't be useless in this scenario.

Eisenstein 1y ago

No, because the money isn't being printed, it is being reallocated from whatever it would have been spent on either by the people we tax to get it, or by the government who would have spent it on other things. Proponents contend that the economy is better off when people have a baseline income so that they can invest their time in productive things which may be beneficial, like going to school, having more time to raise their children, or starting a business, or volunteering, whatever, without worrying about how they are going to feed themselves. This would be opposed to whatever tax breaks we would be giving that would end up in a trust, foundation, or a VC fund, or whatever the government would have spent it on. Note, I have no position on whether or not it would work in this way, but that is my understanding of the position of the those in favor of it.

tossandthrow 1y ago

Only of positional goods. Ie. Houses in attractive quarters etc. On the contrary, we would likely see non positional goods become cheaper as the market is alive and companies can continue to produce at scale.

lmm 1y ago

Even at first order, it makes the people at the bottom relatively better off. If we go from Alice having 600, Bob having 0, and Carol having 0, to Alice having 700, Bob having 100, and Carol having 100, then Bob and Carol are still more able to buy things than they were before even if prices now increase by 50%.

ziggure 1y ago
Yes, being shortsighted ignores the rubber band effect that then disproportionately hurts those people down the road.
- const_cast 1y ago
  The arguments against UBI are pretty much the same against rising minimum wages. That being, the baseline just moves, so everything gets more expensive, so the situation doesn't improve at all. It intuitively makes sense, and like most economic reasoning it's horribly simple. But economics is comprised to two parts: theory, and practice. Practice always trumps theory. If practice defies your theory, it doesn't mean that the market is broken, or that there's over-regulation, or that your theory will eventually come true. It means your theory is just wrong. All economic theory are predicated on thousands or millions of underlying assumptions. If even just a few of those are not true, or aren't true in the way you think they are, then the theory can be wrong while simultaneously being logically perfect. When it comes to the arguments against minimum wage, the theory is just wrong. Rising minimum wages do help people making minimum wage. If it does raise the COL, it's slowly, and not in the same degree as the minimum wage shift. In addition, a flat minimum wage still results in a rising COL. You can't simply pin the COL like that. So knowing what we know about minimum wage, I think it's arrogant to claim the UBI would just result in a rising COL to eat up all the UBI.
  - tossandthrow 1y ago
    A descriminator between minimum wage and ubi is location. UBI (if people trust that it will continue) will encourage people moving out of the cities as they don't need to be close to jobs. I would hypotheses that this would 1) create new more local economies (where people can earn money) and 2) reduce pressure on the hyper metropols. I would even hypothesize that because of this, it would have an adverse effect on the cost of living. Butnthese a theories.

hardwaresofton 1y ago

Yes, IMO that's exactly what will happen, except companies that can best compete for their share of this $1000 will get a government funded revenue stream (think Amazon, Netflix, rent seeking enterprises, etc). I have not heard a convincing argument the other way, would really appreciate a link to one if you find one.

tossandthrow 1y ago
A class of people would have a larger spending power. Naturally, implementing UBI would require the entire financial sector to adjust. We would likely need to significantly raise interest rates (Which, IMHO would be great) and have a period to manage inflation. But beside the initial recalibration phase, I have not seen any convincing arguments for why prices on non-positional goods would increase. Even with the increase interest rates, we would likely see that prices on positional goods / assets would stabilize as dead-cheap capital is not available.
- hardwaresofton 1y ago
  > A class of people would have a larger spending power. Spending power with no real alternatives (i.e. in monopoly/oligopoly conditions) isn't actually very useful IMO. It's mostly just more guaranteed money for the current monopoly/oligopoly -- you're just guaranteeing revenue streams. In a pre-UBI world, you can at least assume that companies can't completely shaft employees because then no one can buy anything. If the government steps in to make sure people can still buy stuff, that has almost the opposite effect. I think walmart & it's treatment of employees (with employees reportedly needing to ALSO depend on food stamps) as a perfect example of the system kind of working against itself. The fix for that problem is within our reach right now, but it's just unpopular for the usual reasons with the people with the ability to make the fix. > Naturally, implementing UBI would require the entire financial sector to adjust. We would likely need to significantly raise interest rates (Which, IMHO would be great) and have a period to manage inflation. > > But beside the initial recalibration phase, I have not seen any convincing arguments for why prices on non-positional goods would increase. Even with the increase interest rates, we would likely see that prices on positional goods / assets would stabilize as dead-cheap capital is not available. OK, so then how about we do this without the UBI bit and just raise interest rates? I'm not seeing where UBI actually has a material benefit here, and there are other real problems with raising interest rates, because losing access to cheap credit also hurts those at the bottom of the economy (arguably even more) -- the solution there is political, likely (i.e. lower income borrowers could somehow be advantaged, but then we have shades of 2008 all over again if excessive greed/moral hazard sets in).

deleted 1y ago

[deleted]

Rebelgecko 1y ago

My intuition is that it wouldn't change the ranking of people's wealths, but it would make a big difference in the ratio between a top 10 percentile income and a bottom 10 percentile income Edit- although even that is an oversimplification because I think in some cases it might encourage people to make more money. I know a handful of people who intentionally limit their income because of gaps in means testing. eg there's a window where you start making too much to take advantage of some govt social services, but not enough to pay for those services yourself (healthcare is a big one)

komali2 1y ago

People that admit "yes" to this (or similar ones: subsidization causing increasing rent to match, etc) are acknowledging that prices aren't really set by supply and demand, nor were they ever, nor will they ever be. Prices are as high as companies can get away with charging, and they can collude to get these prices higher if need be, or lie about a product, or spend decades as an industry convincing you that you need something you don't. If the market worked as economists always scold us that it does when they want less socialism, it wouldn't matter a lick what someone's salary is. That doesn't affect supply and demand, after all.