12 ms·

One aspect of Basic Income that seems to be forgotten quite often is the absence of guilt. The poor no longer need to feel guilt or shame about welfare, it's a

by thret 12y ago

One aspect of Basic Income that seems to be forgotten quite often is the absence of guilt. The poor no longer need to feel guilt or shame about welfare, it's a right they share with everyone else. Those who don't need it can spend it on luxuries without the guilt associated with 'wasting' money.

themartorana 12y ago
Genuinely curious about the macroeconomics of this - how is the "basic income" not quickly pushed down to the lower-bound where it quickly stops being a livable wage? That is, if say, $500/week was the basic income level, wouldn't the price of everything rise quickly to subsume that $500 almost immediately, as it moves the lower-bound from $0 to $500? If not, that's wonderful, and I'd like to learn more about the idea of a society where you can still get rich but will never be in poverty.
- username223 12y ago
  > That is, if say, $500/week was the basic income level, wouldn't the price of everything rise quickly to subsume that $500 almost immediately, as it moves the lower-bound from $0 to $500? How would that happen? Alice's and Bob's grocery stores still have to compete for customers.
  - sliverstorm 12y ago
    Sure, but Alice's and Bob's grocery stores expenses have risen, right? Because taxes have risen to support BI.
    - vidarh 12y ago
      But their demand has risen, which may help them secure better deals with suppliers. It is not automatically a given that their overall costs would increase. Also, even if they do raise prices, the price rise will be averaged over all their customers, most of whom will be spending far more than whatever the added spend from basic income would be, so will alter the degree of redistribution and the cost, not in any way eviscerate the benefit to those it is meant to help.
    - mikepurvis 12y ago
      It's far from clear exactly how much of a tax rise would be necessary. Present social assistance programs are astoundingly wasteful and could be by and large replaced with a simple BI scheme. Of course, there might be a bunch of social workers, bureaucrats, administrators, and other folks living on BI as their primary income for a while, but part of the point of the system is to take away the stigma of that.
  - vidarh 12y ago
    The assumption for that kind of scenario is that supply is static, which is clearly not the case for a lot of things. If supply is entirely static, then injecting $500 extra demand might drive the combined price of the supply up $500.. Of course it misses the elasticity of the supply, but also that the supply is not exclusively paid by people for whom $500 makes up all that large part of their demand, so even if there is a price rise, the primary effect of that price rise will "just" be to alter the degree of redistribution (making the $500 worth a bit less to the recipient, and make providing it cost a bit more to the people eventually footing the bill).
- waterlesscloud 12y ago
  People used the money as capital to create new economic activity- bakery, chickens, concrete blocks, etc. A lot of money seems to have gone to education, which had excess capacity it could use to fill new demand at current prices. It's not stated, but it sounds like most of the villagers aren't paying any kind of rent. I've always suspected that rent would be the place basic income might vanish into rising costs. Would be interesting to see how that turned out. Anyway, it sounds in this case like most of the money was used as capital, which is a win for everyone.
- gizmo686 12y ago
  Warning, highly simplified economics. The basic income is a form of wealth distribution. The poorer people get a larger share of the economy at the cost of the richer people getting a smaller share. Assuming that we have the capacity to produce enough stuff for everyone to live off of, then we could give everyone a livable wage by putting 100% of the money into the basic income. The downside to this is that (for the most part) a basic income mucks with the incentive structure, so it results in us having a lower production capacity [0]. The hope is that our production capacity is sufficiently large that we can have a much smaller percent of money go into basic income where it is still a livable wage, but small enough that it does not shrink our total capacity significantly. Additionally, you also have to look at how elastic the supply of basic necessities are (that is to say, how much prices increase with demand). In the USA (and probably other countries), food is highly elastic, so prices would not raise significantly. Housing is weird (because politics and zoning), but we would expect to see more low cost housing to be built to match the demand, however this would take a while to occur. [0] At a macro level, it can be argued that a basic income could actually increase production capacity, but that is not relevant to your question.
  - waterlesscloud 12y ago
    As I mentioned below, in this small-scale case BI looks like it increased production capacity. But it was really an injection of capital into a community that had almost literally no capital whatsoever. At and sometimes below mere subsistence. Would be interesting to see it play out in a community with a higher baseline.
    - gizmo686 12y ago
      Isn't that the proposed mechanism for how BI increases capacity? By injecting capital into low capital communities, you increase their ability to produce. Of course, to see if this is an actual increase in production, we would also need to look at the opportunity cost associated with taking that money in the first place.
      - msandford 12y ago
- ChuckMcM 12y ago
  Generally the macroeconomics are somewhat in uncharted territory here, which is what makes it interesting. While the transfer of payments insures everyone has _some_ ability to function in the economy, it does not change ordinary capitalist incentives (if you work you get more money, if you work well you can get a lot more money). But proponents suggest that it moderates missapplication of economic output because you aren't spending tax money on welfare offices and rules and hearings etc. You have a valid citizenship card and every month, regardless of who you are, you can walk into the BI office and pick up your stipend check. The first useful question is, what does this do to the quantity demanded of goods in the economy? One answer is that it does nothing, people wanted food before, they want it now, except that now they have a bit of money to allocate to food. If you raise the price of your soup because anyone can buy it now, you still lose out in your soup sales to a competitor who will sell for the old price. Unlike establishing price floors as things like the farm subsidies do and which encourage over production of unneeded goods, you continue to have market forces which dictate the goods that come to market. The second question that people toy with is the question of productivity. If everyone is getting a check every couple of weeks for doing nothing, won't they just stay home and sleep all day? Why would they even take minimum wage jobs? The challenge there is endemic to the current welfare system that is popular in the US which reduces welfare payments in proportion to earned income. This creates an inversion layer where the first 20 - 30 hours per week of work do nothing to change their monthly take home pay. With a BI system every hour worked is additional money in your pocket at the end of the month. Working 20 hours a week in a minimum wage job not converts living at the resident hotel into living in a small studio apartment. Which is to say it has a direct impact on the quality of life experienced by the individual. And the software engineer making six figures? She might take here bi-weekly BI check and help others, or go out to dinner at a fancy restaurant, or save it for a durable goods purchase. For her, its like "free money" so its easy to spend (which also helps the economy). Screw the Military budget, The FED has pumped trillions into the economy with its quantitative easing strategy. Which was characterized as "dropping money out of helicopters". Had they in fact dropped money out of helicopters, the experience of the cash for clunkers program suggests the economy would grow much more quickly than it has, and more effectively because it would grow by new workers entering the workforce, transfer payments which would land directly into the 'cilia' or outer layers of the domestic economy like rents, food, clothes, and durable goods. This idea sounds stupid when you first hear it. I certainly thought it was, but I've been researching the questions above and looking at things (like cash for clunkers) which might provide some insights into the possible effects, and it is definitely not Marxism or pure socialism. It's something different than that, and it is made possible by the fact that individuals in the US economy generate more output than in any previous time.
berns 12y ago
Maybe the poor don't feel guilt, but the argument is deceptive. For the rich BI works just like a small tax deduction. Lets say a rich person pays taxes for $1000 and receives $10 as basic income. It just amounts to paying $990 in taxes. And the poor receive $10 BI and pays no taxes. As others mentioned it's just a redistribution of wealth. Make it look otherwise to not feel guilty is to deceive oneself.

by thret 12y ago

themartorana 12y ago

Genuinely curious about the macroeconomics of this - how is the "basic income" not quickly pushed down to the lower-bound where it quickly stops being a livable wage? That is, if say, $500/week was the basic income level, wouldn't the price of everything rise quickly to subsume that $500 almost immediately, as it moves the lower-bound from $0 to $500? If not, that's wonderful, and I'd like to learn more about the idea of a society where you can still get rich but will never be in poverty.

username223 12y ago
> That is, if say, $500/week was the basic income level, wouldn't the price of everything rise quickly to subsume that $500 almost immediately, as it moves the lower-bound from $0 to $500? How would that happen? Alice's and Bob's grocery stores still have to compete for customers.
- sliverstorm 12y ago
  Sure, but Alice's and Bob's grocery stores expenses have risen, right? Because taxes have risen to support BI.
  - vidarh 12y ago
    But their demand has risen, which may help them secure better deals with suppliers. It is not automatically a given that their overall costs would increase. Also, even if they do raise prices, the price rise will be averaged over all their customers, most of whom will be spending far more than whatever the added spend from basic income would be, so will alter the degree of redistribution and the cost, not in any way eviscerate the benefit to those it is meant to help.
  - mikepurvis 12y ago
    It's far from clear exactly how much of a tax rise would be necessary. Present social assistance programs are astoundingly wasteful and could be by and large replaced with a simple BI scheme. Of course, there might be a bunch of social workers, bureaucrats, administrators, and other folks living on BI as their primary income for a while, but part of the point of the system is to take away the stigma of that.
- vidarh 12y ago
  The assumption for that kind of scenario is that supply is static, which is clearly not the case for a lot of things. If supply is entirely static, then injecting $500 extra demand might drive the combined price of the supply up $500.. Of course it misses the elasticity of the supply, but also that the supply is not exclusively paid by people for whom $500 makes up all that large part of their demand, so even if there is a price rise, the primary effect of that price rise will "just" be to alter the degree of redistribution (making the $500 worth a bit less to the recipient, and make providing it cost a bit more to the people eventually footing the bill).
waterlesscloud 12y ago
People used the money as capital to create new economic activity- bakery, chickens, concrete blocks, etc. A lot of money seems to have gone to education, which had excess capacity it could use to fill new demand at current prices. It's not stated, but it sounds like most of the villagers aren't paying any kind of rent. I've always suspected that rent would be the place basic income might vanish into rising costs. Would be interesting to see how that turned out. Anyway, it sounds in this case like most of the money was used as capital, which is a win for everyone.
gizmo686 12y ago
Warning, highly simplified economics. The basic income is a form of wealth distribution. The poorer people get a larger share of the economy at the cost of the richer people getting a smaller share. Assuming that we have the capacity to produce enough stuff for everyone to live off of, then we could give everyone a livable wage by putting 100% of the money into the basic income. The downside to this is that (for the most part) a basic income mucks with the incentive structure, so it results in us having a lower production capacity [0]. The hope is that our production capacity is sufficiently large that we can have a much smaller percent of money go into basic income where it is still a livable wage, but small enough that it does not shrink our total capacity significantly. Additionally, you also have to look at how elastic the supply of basic necessities are (that is to say, how much prices increase with demand). In the USA (and probably other countries), food is highly elastic, so prices would not raise significantly. Housing is weird (because politics and zoning), but we would expect to see more low cost housing to be built to match the demand, however this would take a while to occur. [0] At a macro level, it can be argued that a basic income could actually increase production capacity, but that is not relevant to your question.
- waterlesscloud 12y ago
  As I mentioned below, in this small-scale case BI looks like it increased production capacity. But it was really an injection of capital into a community that had almost literally no capital whatsoever. At and sometimes below mere subsistence. Would be interesting to see it play out in a community with a higher baseline.
  - gizmo686 12y ago
    Isn't that the proposed mechanism for how BI increases capacity? By injecting capital into low capital communities, you increase their ability to produce. Of course, to see if this is an actual increase in production, we would also need to look at the opportunity cost associated with taking that money in the first place.
    - msandford 12y ago
ChuckMcM 12y ago
Generally the macroeconomics are somewhat in uncharted territory here, which is what makes it interesting. While the transfer of payments insures everyone has _some_ ability to function in the economy, it does not change ordinary capitalist incentives (if you work you get more money, if you work well you can get a lot more money). But proponents suggest that it moderates missapplication of economic output because you aren't spending tax money on welfare offices and rules and hearings etc. You have a valid citizenship card and every month, regardless of who you are, you can walk into the BI office and pick up your stipend check. The first useful question is, what does this do to the quantity demanded of goods in the economy? One answer is that it does nothing, people wanted food before, they want it now, except that now they have a bit of money to allocate to food. If you raise the price of your soup because anyone can buy it now, you still lose out in your soup sales to a competitor who will sell for the old price. Unlike establishing price floors as things like the farm subsidies do and which encourage over production of unneeded goods, you continue to have market forces which dictate the goods that come to market. The second question that people toy with is the question of productivity. If everyone is getting a check every couple of weeks for doing nothing, won't they just stay home and sleep all day? Why would they even take minimum wage jobs? The challenge there is endemic to the current welfare system that is popular in the US which reduces welfare payments in proportion to earned income. This creates an inversion layer where the first 20 - 30 hours per week of work do nothing to change their monthly take home pay. With a BI system every hour worked is additional money in your pocket at the end of the month. Working 20 hours a week in a minimum wage job not converts living at the resident hotel into living in a small studio apartment. Which is to say it has a direct impact on the quality of life experienced by the individual. And the software engineer making six figures? She might take here bi-weekly BI check and help others, or go out to dinner at a fancy restaurant, or save it for a durable goods purchase. For her, its like "free money" so its easy to spend (which also helps the economy). Screw the Military budget, The FED has pumped trillions into the economy with its quantitative easing strategy. Which was characterized as "dropping money out of helicopters". Had they in fact dropped money out of helicopters, the experience of the cash for clunkers program suggests the economy would grow much more quickly than it has, and more effectively because it would grow by new workers entering the workforce, transfer payments which would land directly into the 'cilia' or outer layers of the domestic economy like rents, food, clothes, and durable goods. This idea sounds stupid when you first hear it. I certainly thought it was, but I've been researching the questions above and looking at things (like cash for clunkers) which might provide some insights into the possible effects, and it is definitely not Marxism or pure socialism. It's something different than that, and it is made possible by the fact that individuals in the US economy generate more output than in any previous time.

berns 12y ago

Maybe the poor don't feel guilt, but the argument is deceptive. For the rich BI works just like a small tax deduction. Lets say a rich person pays taxes for $1000 and receives $10 as basic income. It just amounts to paying $990 in taxes. And the poor receive $10 BI and pays no taxes. As others mentioned it's just a redistribution of wealth. Make it look otherwise to not feel guilty is to deceive oneself.