7 ms·

The key point to basic income, in my opinion, is that it seems like it would increase social welfare while minimally distorting prices and being cheap to admini

The key point to basic income, in my opinion, is that it seems like it would increase social welfare while minimally distorting prices and being cheap to administer. So let's take this to its logical conclusion, that lots of people don't work/do "useless" jobs, but still want to buy high-demand goods. Demand gets higher, and prices for those goods go up. Does this break the economic signalling mechanism? I'd argue that it doesn't, price signals are still firmly in place. Producers of high-demand goods can afford to raise salaries and attract more workers. There is still an incentive to work. On top of that, necessary goods with a satiation point (e.g. food and shelter) would be more resistant to these effects. You don't need more food than you can eat or more houses than you can live in. If you aren't working, you still have to mind your money and budget accordingly; it's not like everything is free.

nickff 13y ago
You are missing one important factor in your analysis (which took me a long time to figure out). People with lower income spend more on consumption goods, than the higher income individuals, who spend more on investments. This is important, because the rich are investing much of their wealth in growth, whereas the poor are spending on necessities and happiness. Transferring money from the rich to the poor also transfers money from investment to consumption, which has important effects on long term economic growth. One must remember that the US grew only 0.5% faster than the UK through the 20th century, and this led to a large difference in outcome.
- makomk 13y ago
  There's one important question you've forgotten to ask: what exactly are the wealthy investing in the growth of? The answer, of course, is the production and sale of consumption goods, either directly or indirectly - all of their investment returns have to come from there eventually. Take that away and you'd just be left with a bunch of investors trying to make money from selling other investors ways to make money from yet more investors, in a mass of ponzis and swindles producing no real economic output.
msandford 13y ago
"while minimally distorting prices" SNIP! I think there's a serious misunderstanding here. Any basic income that is high enough to be useful will also be high enough to be distortive. Any basic income which is low enough not to distort will also be low enough not to be useful. Consider a few thought experiments. Set a basic income to $100 per month. Time 300 million americans that's only $3b per month or $36 billion per year. That's a small enough portion of the economy that it's totally doable, but not useful. Now instead let's set it to $10k per month. That's definitely enough to pay a mortgage, cars, etc. Times 300 million folks we end up at $3 trillion a month or $36 trillion a year. GDP in 2013 was about 17 trillion so we've definitely distorted prices by a huge margin. The price of everything probably triples. OK, you say, let's dial it back just a tad and calibrate it to the size of the economy. Let's set our target at 30% of total GDP which we would argue we can totally do since the government historically gets about 19% of GDP so growing that by 50% should be doable. Of course this means that the federal government provides no services or does nothing except for basic income; no military, no NSF, no dept of education, none of that stuff. Ignore it for now. 17 trillion time 0.3 = 5.1 trillion a year, or 425 billion a month. Divide that by 300 million people and you get $1416 per month. That's not a TERRIBLE number, if you live in a rural area you could pay a mortgage, car payment and even buy some food for that. If you lived in a big city that might cover your rent, but probably not. But wait, you say, there aren't 300 million adults in the US? OK let's assume it's only 200 million. That number goes up to $2125 per month and you don't get a check until you turn 18. Yeah that's better, for sure, you might even make rent in a big city. In a rural area you're doing fairly nicely. But how do we raise this money? There's a difference between income and wealth, if you took every penny from all the Forbes 400 list you'd have $2 trillion. But actually you wouldn't because you're assuming that you can sell their assets for cash at exactly the price they're valued at right now. If you did that you might recoup 80% because it'd be a giant sell-off. But let's ignore that for a minute. Let's also say that you by the time you get down to every person whose net worth is over a million (remember, only the rich) that you've raised another 2 trillion (pie in the sky, the distribution of wealth isn't anywhere near equal remember?). http://en.wikipedia.org/wiki/List_of_members_of_the_Forbes_400 http://en.wikipedia.org/wiki/List_of_members_of_the_Forbes_4... At that point you've got enough cash to make this whole thing run for about 10 months. The total US income for all people in 2013 was $13 trillion. https://bber.unm.edu/econ/us-tpi.htm https://bber.unm.edu/econ/us-tpi.htm Take all that money and divide it up between 200 million adults and you've got $65k per person per year once you turn 18. BUT that's it. Janitor? $65k. Doctor? $65k. Lawyer? $65k. Startup founder? $65k. CEO? $65k. VC? $65k. Nobody, anywhere, ever could make more than $65k or else you don't have somewhere to take the money from. And at that point I think it might be hard to convince people to work harder, take more risks with their personal wealth, study longer, etc if NO MATTER WHAT they can't make more than $65k. If you want to allow people to make more, that's OK. But for every person that makes $75k under this scheme you've got to find someone to only give $55k and to convince them that it's right, or dial the basic income back to $55k and start giving only select bonuses. Of course, remember that all this ignores the idea that we still have to provide all those federal functions that we're currently providing.
Canada 13y ago
> Demand gets higher, and prices for those goods go up. Then everyone will complain that they aren't getting their basic income anymore and demand the basic income be raised. > On top of that, necessary goods with a satiation point (e.g. food and shelter) would be more resistant to these effects. The opposite seems to occur in practice. The price of whatever is subsidized goes up. Example: Cost of education. The only way to prevent this is to impose price controls. Single payer medical schemes are a great example.

nickff 13y ago

You are missing one important factor in your analysis (which took me a long time to figure out). People with lower income spend more on consumption goods, than the higher income individuals, who spend more on investments. This is important, because the rich are investing much of their wealth in growth, whereas the poor are spending on necessities and happiness. Transferring money from the rich to the poor also transfers money from investment to consumption, which has important effects on long term economic growth. One must remember that the US grew only 0.5% faster than the UK through the 20th century, and this led to a large difference in outcome.

makomk 13y ago
There's one important question you've forgotten to ask: what exactly are the wealthy investing in the growth of? The answer, of course, is the production and sale of consumption goods, either directly or indirectly - all of their investment returns have to come from there eventually. Take that away and you'd just be left with a bunch of investors trying to make money from selling other investors ways to make money from yet more investors, in a mass of ponzis and swindles producing no real economic output.

msandford 13y ago

"while minimally distorting prices" SNIP! I think there's a serious misunderstanding here. Any basic income that is high enough to be useful will also be high enough to be distortive. Any basic income which is low enough not to distort will also be low enough not to be useful. Consider a few thought experiments. Set a basic income to $100 per month. Time 300 million americans that's only $3b per month or $36 billion per year. That's a small enough portion of the economy that it's totally doable, but not useful. Now instead let's set it to $10k per month. That's definitely enough to pay a mortgage, cars, etc. Times 300 million folks we end up at $3 trillion a month or $36 trillion a year. GDP in 2013 was about 17 trillion so we've definitely distorted prices by a huge margin. The price of everything probably triples. OK, you say, let's dial it back just a tad and calibrate it to the size of the economy. Let's set our target at 30% of total GDP which we would argue we can totally do since the government historically gets about 19% of GDP so growing that by 50% should be doable. Of course this means that the federal government provides no services or does nothing except for basic income; no military, no NSF, no dept of education, none of that stuff. Ignore it for now. 17 trillion time 0.3 = 5.1 trillion a year, or 425 billion a month. Divide that by 300 million people and you get $1416 per month. That's not a TERRIBLE number, if you live in a rural area you could pay a mortgage, car payment and even buy some food for that. If you lived in a big city that might cover your rent, but probably not. But wait, you say, there aren't 300 million adults in the US? OK let's assume it's only 200 million. That number goes up to $2125 per month and you don't get a check until you turn 18. Yeah that's better, for sure, you might even make rent in a big city. In a rural area you're doing fairly nicely. But how do we raise this money? There's a difference between income and wealth, if you took every penny from all the Forbes 400 list you'd have $2 trillion. But actually you wouldn't because you're assuming that you can sell their assets for cash at exactly the price they're valued at right now. If you did that you might recoup 80% because it'd be a giant sell-off. But let's ignore that for a minute. Let's also say that you by the time you get down to every person whose net worth is over a million (remember, only the rich) that you've raised another 2 trillion (pie in the sky, the distribution of wealth isn't anywhere near equal remember?). http://en.wikipedia.org/wiki/List_of_members_of_the_Forbes_400 http://en.wikipedia.org/wiki/List_of_members_of_the_Forbes_4... At that point you've got enough cash to make this whole thing run for about 10 months. The total US income for all people in 2013 was $13 trillion. https://bber.unm.edu/econ/us-tpi.htm https://bber.unm.edu/econ/us-tpi.htm Take all that money and divide it up between 200 million adults and you've got $65k per person per year once you turn 18. BUT that's it. Janitor? $65k. Doctor? $65k. Lawyer? $65k. Startup founder? $65k. CEO? $65k. VC? $65k. Nobody, anywhere, ever could make more than $65k or else you don't have somewhere to take the money from. And at that point I think it might be hard to convince people to work harder, take more risks with their personal wealth, study longer, etc if NO MATTER WHAT they can't make more than $65k. If you want to allow people to make more, that's OK. But for every person that makes $75k under this scheme you've got to find someone to only give $55k and to convince them that it's right, or dial the basic income back to $55k and start giving only select bonuses. Of course, remember that all this ignores the idea that we still have to provide all those federal functions that we're currently providing.

Canada 13y ago

> Demand gets higher, and prices for those goods go up. Then everyone will complain that they aren't getting their basic income anymore and demand the basic income be raised. > On top of that, necessary goods with a satiation point (e.g. food and shelter) would be more resistant to these effects. The opposite seems to occur in practice. The price of whatever is subsidized goes up. Example: Cost of education. The only way to prevent this is to impose price controls. Single payer medical schemes are a great example.