[jerelunruh]

Let's say that currently rent is $1,000 per month, food is $500, and Alice is earning $2,500.

Now UBI is implemented and Alice and all fellow citizens receive $1,000 per month. What will keep the market from easing the entry level rent up to $1,500 and food to $1,000 since the money is available? At first glance it seems like we'd just be choosing a different number representing "broke".

[noonespecial]

Draw it out into the absurd to watch it work:

Consider a society with 2 members, Mr Rich (net worth $10M) and Mr. Poor (net worth $100). Mr. Rich is 100,000 X richer than Mr. Poor right now.

Institute a ridiculous UBI of $1M/year for everyone. At the end of the year, Mr. Poor has $1,000,100 and Mr Rich has $11M but Mr Rich is now only ~ 11 X richer than Mr Poor.

Now sure cheeseburgers at Micky-D's are now $700 but the fact has changed that before, Mr Rich could buy a hundred thousand burgers for every one Mr Poor could buy. Now he can only buy 11.

UBI works like gravity. Continually pulling the unequal towards a center. The rich will still stay rich, but unlike today where rich automatically makes richer, the force will be reversed. It will take "energy" to stay rich.

[bryanlarsen]

Mr Rich will have $9M because his taxes would have gone up by $2M/year to pay for the program.

And the cheeseburgers are still the same price. Mr. Poor was buying cheeseburgers before he got BI and he's still buying cheeseburgers; neither supply nor demand has changed. Mr. Rich bought caviar before and after.

If McDonald's gets greedy and raises its prices because it thinks it can, Burger King is still making money selling at $5.

[psadauskas]

Except McDonald's can't find any workers that are willing to work for $8.15/hr any more. I think prices of most things will go up, not because of inflation, but because you have to pay more for the people to serve them. On the other hand, customer service will probably go up, because nobody is there any more because they have to.

[CWuestefeld]

> unlike today where rich automatically makes richer

This aspect of Piketty has been pretty well refuted. To begin with, he failed to properly account for depreciation. That server software system that you built and is making you money today, isn't going to be worth squat in 10 years.

[qudat]

except mr. rich is now making more for producing micky-d burgers

[drabiega]

Because markets still exist. The change in the distribution of income will necessarily incur a change in the distribution of production of goods and services. You would probably expect the price of some necessities to increase a little, especially in the short term, but it's not like we're anywhere near our capacity to produce food and housing.

[logfromblammo]

You would have to restructure taxation, such that incomes from rent-seeking behaviors and business activities are taxed at a higher (possibly punitive) rate than incomes from voluntary, equivalent-value trades between economic equals.

Otherwise, as has been seen countless times before, the value of the government benefit will be mostly captured by those best positioned to monetize it.

The alternative is to provide the housing and food benefit directly, rather than distributing dollars and employing a middleman. If UBI provided 3000 kcal of food per person per day directly, as pantry staples, rather than with a $500 check, it is much more difficult to skim rents out of that. Even restricted use food stamps fuel scams that convert them into cash. There may be people who rent out their government-provided housing as storage units, storefronts, or offices as they live in a non-gratis premium residence, but assigned tenement space is not quite as liquid as cash in the wallet, and therefore less able to be sucked out of the local economy.

Twice as much of the same apartment you already have is simply less valuable to you than twice what one apartment is worth to you, so anyone trying to rent it out cannot demand the same price as it might otherwise cost for the first apartment you live in. Imagine where you live now. Now make an exact copy of it. Would you pay twice as much as you currently pay to live in both places at once? Would you cook twice as much or twice as often if you had two identical kitchens? Would you sleep twice as long or twice as restfully if you had two identical bedrooms? If housing is a benefit guaranteed by UBI, rental prices for the non-gratis residences crash, because the only people willing to pay are now only those looking for a better place to live, rather than those looking for any place to live.

Whereas if the benefit is up to $500 in cash to the person who rents you an apartment, that's just fueling an economic bidding war where everyone in the auction has another $500 to spend.

[twoodfin]

BI shouldn't be more inflationary in the aggregate than any other government scheme that redistributes income in a comparable way. The only difference would be which goods have more money chasing them. That choice would be made by the market (of net BI recipients after any tax clawback) instead of by politicians & bureaucrats, which has a certain appeal.

Currently, if you want access to much redistributed income, you can only use it to eat what USDA allows you to, or live where HUD tells you to. I find that a rather degrading way to treat our fellow citizens.

[mindslight]

> The only difference would be which goods have more money chasing them. That choice would be made by the market

... for what people must spend on, and where it's hard to create new competition. So, rent - exactly where most middle-class surplus is going today (and I think a large part of what makes people yearn for BI).

[karmacondon]

The obvious answer here is that basic income won't be evenly distributed to all citizens. A household earning the average national income will get $1,000/month from the government, and see their taxes go up by about $1,000/month. So it's difficult to raise rent on everyone when only a fraction of your customers have true extra income.

Imagine you're a landlord who runs a property for those of normal income. How much do you raise rent because people who currently earn below the poverty line suddenly have $1,000 extra per month? You can raise rent on everyone, but then most of your middle class tenants will move out to seek better prices. The same is true for the price of groceries and other staples.

A smart business will maintain their prices and benefit from a larger customer base. Since everyone doesn't experience an increase in income, raising rents of all forms will only open those businesses up to price competition.

[CWuestefeld]

You ignore marginal utility. As you amass more of something, the value you place on each individual unit of it decreases. So $1 is worth more to me than to Bill Gates.

In any mutually-agreed upon transaction, both parties to the transaction will gain some amount of value ("utility" in economics jargon) relative to the amount they're giving up. Because $X is now worth (slightly) less (say, by $Y) to each BI recipient, the seller (or landlord in this case) can demand $X+$Y in exchange for his product. That is, he's demanding that the buyer continue to sacrifice the same amount of value, because the value of his own asset hasn't decreased. So you'll see prices increase.

There are other forces in play, too. One of them is price elasticity of demand. This tells us that things that people are less willing to go without (housing, fuel...) put more bargaining power in the hands of the seller than those that we're more willing to flex on (say, going out to movies). In this context, goods like housing and fuel will have a larger degree of price rise than will those where the consumer has greater bargaining power.

[AnimalMuppet]

Let's assume a free market, run by supply and demand. Will BI change the supply of food? No. Will it change the demand? Well, there are some people who can't get enough food, but they are the exception. Demand might rise, but it won't double.

What will change is an increasing demand for quality. If I've got more money, I might want healthier food, or tastier food, or food that I perceive as being more "upper class" than I have been eating so far. I might move to wine from beer, or to steak from hamburger, or to organic from factory food.

[drcode]

Easy, once that starts happening, we'll just raise Alice's earnings to $3,500.

(kidding)

[qudat]

you've essentially described minimum wage

[Spooky23]

That already happens now. Tenement apartments in the hood rent at rates similar to suburban developments -- using vouchers.

The only actual "benefit" I can see from UBI is laying off a half million welfare workers.

[alistairSH]

The argument is that BI is non-inflationary because the total money supply is not being increased. BI simply re-allocates money from one person to another.

While that addresses inflation on an economy-wide scale, there are also arguments that apply to specific items. Take milk for example. Currently, if you are poor, you buy milk using SNAP vouchers or some other form of welfare. Under a BI system, the demand for milk doesn't change - we simply replace SNAP vouchers with cash from the BI.

[manyoso]

We tie the UBI to the cost of living index.

[notahacker]

That makes any potential generalised inflation worse, not better...

[danharaj]

That would be the Marxian claim: wages trend for most workers towards subsistence. Caveat: subsistence is a relative term.

I think it's a reasonable question because UBI doesn't change much about the structure of capitalism. And also just like every other welfare program, it will be rolled back inch by inch every time there's a systemic shock and the poors are held to blame.

[VLM]

"since the money is available?"

Sure about that? Some fraction of the population will buy a new iphone, some will experience the rare luxury of health insurance, some will repair the car they use to get to work or buy a better car to get to work, some will spend money on higher education, some can finally afford dental work, some will pay up whatever had garnished their wages (child support,taxes?), catch up on bills. Most of that money is not going to be available for basic food or rent.

The experience will vary greatly depending on the socioeconomic class and the size of the UBI. It'll also vary based on institutionalization status. College students will likely be expected to pay 100% of it toward tuition. Prisoners will likely either not get it or the state will keep it for restitution and court fees. On the other extreme the average slumlord likely will not see an additional penny.