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I think this is the classical error of false dichotomy. Useful for rhetorical purposes, but it is more just a statement of two possibilities and an assertion th

by scarmig 13y ago

I think this is the classical error of false dichotomy. Useful for rhetorical purposes, but it is more just a statement of two possibilities and an assertion that they're the only two, with no backup. I reject completely the idea that either printing money or borrowing money is a viable solution for most economies in the medium or long term. According to you, that must mean I support a Stalinist regime[1]. This is false, to say the least. Other (relative) proponents of a basic income, including such luminaries as Hayek and Milton Friedman, would likely also look at your claim with great skepticism. A basic income is just the redistributionism practiced by current mixed market economies but implemented much more efficiently (in both the Pareto and administrative senses) than what exists now. Price levels would be affected by a basic income, but you've got to specify what and how much. Considering supply effects, the likely first order result of a basic income is an increase in the cost of basic goods and also an overall increase in the consumption of them. Goods that are typically bought with, say, the marginal dollar at twice the basic income level will decrease in price but also be consumed less. The market would reallocate capital to more efficiently produce basic goods (defined as the goods that are typically bought with marginal dollars beneath the basic income level). You might dislike this kind of very limited redistribution. Fair enough, and that is a great debate to have! But you've also got to be thoughtful about the full package. It's not whether you prefer no redistribution to a basic income. It's whether you prefer a basic income to a costly and heavily-administrated redistribution driven by special interest groups. [1]Also, "Marxist communism"? I'd be curious to ask if you've got even a passing acquaintance with the structure of the Soviet economy. It's fine to criticize a basic income on inflationary grounds, but saying it's communism is so off that it qualifies as not even wrong.

scarmig 13y ago
I should point out that the structure of the taxes to fund a basic income are a very, very important implementation detail. As a pragmatic matter, I'd want to phase out existing programs like Medicare, Medicaid, Social Security, SSDI, food stamps, educational grants, etc. and simply redirect their funding streams to a basic income--best to pick one battle at a time. But my ideal taxation scheme includes an abolition of corporate, income, and sales taxes, and a replacement of them with aggressive taxation on goods that are highly inelastic and cheaply taxable. Think land taxes, except updated for contemporary times. Yeah, wish me luck with that.
- sstrudeau 13y ago
  Why except land taxes? Replacing property taxes with land taxes makes a lot of sense to me...
cheald 13y ago
> According to you, that must mean I support a Stalinist regime[1]. This is false, to say the least. Agreed, and I apologize for the rhetorical device. I'm not sitting here twirling my mustache trying to get people to say "BI == Stalin!!" - it seems to to me to lead in that direction, though, and I'm genuinely wanting to understand why it doesn't (or if it does, why that's okay). > Considering supply effects, the likely first order result of a basic income is an increase in the cost of basic goods and also an overall increase in the consumption of them The increase in cost seems obvious (as the necessary contraction of available capital would invariably cause), but I guess I'm hung up on the idea that there would be an overall increase in consumption (or at least, enough of an increase to offset the costs). People are already buying basic goods, be it on government welfare or not; would BI substantially increase purchases of those goods? As I understand BI, the general idea is to provide enough money for everyone to be able to purchase a minimum level of food, clothing, and shelter, so as to attain some particular quality of life. So, my first question would be "how many people do we currently have who are not able to attain this minimum quality of life?", which seems like would be the only market for whom consumption absolutely would increase under a BI plan. As I understand BI, for those currently on welfare, it's approximately analogous - there wouldn't necessarily be much of a change in income. I feel like this is a piece I'm missing - why would consumption of basic goods significantly increase? Basic goods by definition have a price elasticity of less than 1; you don't get linear returns in demand by increasing income. Re: [1] Woefully unfamiliar, and making an effort to fix that by reading basically all the economic philosophy I can get my hands on. I'm aware that the USSR wasn't a great implementation of Marx's ideals, but I also believe that even the best system gets screwed up by people - if we could actually implement ideal communism, it'd probably be awesome. I guess I more meant "Marx's ideal of the elimination of social classes as we've seen it (mis)implemented".
- scarmig 13y ago
  It's true that most people do manage to consume a basket of goods costing at least as much as reasonable basic income levels. Even the homeless end up consuming many tens of thousands of dollars every year, in costs of health care and social services. (More, in fact, than the simply impoverished do.) But that suggests a key point: the basket of goods and time that people consume while below the poverty line is not necessarily what they would choose to consume if they simply received some amount of money equivalent to what one could reasonably expect to survive on. For instance, a huge chunk of the money we ostensibly give to people goes to Medicaid, which effectively redirects aid to an expensive program that doesn't even seem to improve health outcomes. What the money would flow into instead would cause inflation in those goods, but at the same time capital would flow to the production and provision of those same goods as more people were buying more of them. The net result is increased consumption of the replacement goods coupled with an increase in price somewhere between 0% and the percentage increase of the demand going for them. The exact value depends on elasticities and how many new ways capital can find to supply those goods. There are welfare programs that do pass out real money, but they force a different kind of consumption: of time. Instead of consuming hours as an individual knows best, we ask them to send out dozens of ineffective applications. I don't know if they even have good choices: maybe these people are just screwed. But I do know that they probably know a lot better about how to get out of their situation--within the constraints of their particular levels of knowledge and self-control--than I do. There are also psychological aspects that are pretty important. Living in a constant state of staving off being kicked onto the street forces a focus on short-term thinking, at the expense of medium- and long-term thinking. This is more behavioral than micro economics, but it's as real a factor as any other, and definitely changes what and how people choose to consume. It's worth noting that I've left off all discussion of people above the basic income level (which, to be clear, I'm imagining as being around $10k), who constitute a significant majority of Americans. Two points I'd like to mention: 1) A lot of people fall into a benefits trap, where if they work they'll be punished. Literally they face a greater than 100% tax rate. For people on disability, this can actually be from 1,000% to 10,000%. This is horrific from an economic point of view, and horrific from the perspective of human dignity and autonomy. A basic income is one way of totally removing those obstacles to participating in the labor force. 2) People at $40k and above theoretically shouldn't be affected much by my suggested basic income, aside from a real but manageable tax hike. In practice, though, I suspect the behavioral aspect would be significant, if they know that they can quit their jobs without having to worry about bare minimum needs (though this is clearly just a strong suspicion on my part--I have difficulty imagining a good test for it). Instead of worrying about destroying their savings, they can go out and try new, risky ideas. I think we live in an era where there's a great need for individual entrepreneurship in both monetizable and non-monetizable goods, so that's something I embrace.

by scarmig 13y ago

scarmig 13y ago

I should point out that the structure of the taxes to fund a basic income are a very, very important implementation detail. As a pragmatic matter, I'd want to phase out existing programs like Medicare, Medicaid, Social Security, SSDI, food stamps, educational grants, etc. and simply redirect their funding streams to a basic income--best to pick one battle at a time. But my ideal taxation scheme includes an abolition of corporate, income, and sales taxes, and a replacement of them with aggressive taxation on goods that are highly inelastic and cheaply taxable. Think land taxes, except updated for contemporary times. Yeah, wish me luck with that.

sstrudeau 13y ago
Why except land taxes? Replacing property taxes with land taxes makes a lot of sense to me...

cheald 13y ago

> According to you, that must mean I support a Stalinist regime[1]. This is false, to say the least. Agreed, and I apologize for the rhetorical device. I'm not sitting here twirling my mustache trying to get people to say "BI == Stalin!!" - it seems to to me to lead in that direction, though, and I'm genuinely wanting to understand why it doesn't (or if it does, why that's okay). > Considering supply effects, the likely first order result of a basic income is an increase in the cost of basic goods and also an overall increase in the consumption of them The increase in cost seems obvious (as the necessary contraction of available capital would invariably cause), but I guess I'm hung up on the idea that there would be an overall increase in consumption (or at least, enough of an increase to offset the costs). People are already buying basic goods, be it on government welfare or not; would BI substantially increase purchases of those goods? As I understand BI, the general idea is to provide enough money for everyone to be able to purchase a minimum level of food, clothing, and shelter, so as to attain some particular quality of life. So, my first question would be "how many people do we currently have who are not able to attain this minimum quality of life?", which seems like would be the only market for whom consumption absolutely would increase under a BI plan. As I understand BI, for those currently on welfare, it's approximately analogous - there wouldn't necessarily be much of a change in income. I feel like this is a piece I'm missing - why would consumption of basic goods significantly increase? Basic goods by definition have a price elasticity of less than 1; you don't get linear returns in demand by increasing income. Re: [1] Woefully unfamiliar, and making an effort to fix that by reading basically all the economic philosophy I can get my hands on. I'm aware that the USSR wasn't a great implementation of Marx's ideals, but I also believe that even the best system gets screwed up by people - if we could actually implement ideal communism, it'd probably be awesome. I guess I more meant "Marx's ideal of the elimination of social classes as we've seen it (mis)implemented".

scarmig 13y ago
It's true that most people do manage to consume a basket of goods costing at least as much as reasonable basic income levels. Even the homeless end up consuming many tens of thousands of dollars every year, in costs of health care and social services. (More, in fact, than the simply impoverished do.) But that suggests a key point: the basket of goods and time that people consume while below the poverty line is not necessarily what they would choose to consume if they simply received some amount of money equivalent to what one could reasonably expect to survive on. For instance, a huge chunk of the money we ostensibly give to people goes to Medicaid, which effectively redirects aid to an expensive program that doesn't even seem to improve health outcomes. What the money would flow into instead would cause inflation in those goods, but at the same time capital would flow to the production and provision of those same goods as more people were buying more of them. The net result is increased consumption of the replacement goods coupled with an increase in price somewhere between 0% and the percentage increase of the demand going for them. The exact value depends on elasticities and how many new ways capital can find to supply those goods. There are welfare programs that do pass out real money, but they force a different kind of consumption: of time. Instead of consuming hours as an individual knows best, we ask them to send out dozens of ineffective applications. I don't know if they even have good choices: maybe these people are just screwed. But I do know that they probably know a lot better about how to get out of their situation--within the constraints of their particular levels of knowledge and self-control--than I do. There are also psychological aspects that are pretty important. Living in a constant state of staving off being kicked onto the street forces a focus on short-term thinking, at the expense of medium- and long-term thinking. This is more behavioral than micro economics, but it's as real a factor as any other, and definitely changes what and how people choose to consume. It's worth noting that I've left off all discussion of people above the basic income level (which, to be clear, I'm imagining as being around $10k), who constitute a significant majority of Americans. Two points I'd like to mention: 1) A lot of people fall into a benefits trap, where if they work they'll be punished. Literally they face a greater than 100% tax rate. For people on disability, this can actually be from 1,000% to 10,000%. This is horrific from an economic point of view, and horrific from the perspective of human dignity and autonomy. A basic income is one way of totally removing those obstacles to participating in the labor force. 2) People at $40k and above theoretically shouldn't be affected much by my suggested basic income, aside from a real but manageable tax hike. In practice, though, I suspect the behavioral aspect would be significant, if they know that they can quit their jobs without having to worry about bare minimum needs (though this is clearly just a strong suspicion on my part--I have difficulty imagining a good test for it). Instead of worrying about destroying their savings, they can go out and try new, risky ideas. I think we live in an era where there's a great need for individual entrepreneurship in both monetizable and non-monetizable goods, so that's something I embrace.