[senseless]

Good to see steps like this being made!

As a slight aside, there are strong proponents who argue, based on Ricardo's law of rent [0], that any excess income above the basic subsistence level will inevitably be swallowed up by landlords in the form of rents.

I'd be very interested to hear from the folks involved in this study if they have an opinion on such an assertion, and if you have any ideas on addressing that effect when it comes to instituting a basic income. Since, if you agreed with those arguments, it seems that a BI's long-term impact on disposable incomes would trend towards 0.

I am still studying the topic, but find the arguments compelling that say a basic income would need to also be paired with something along the lines of either a land-value tax or a community land contribution [1] (which, as the argument is often used, would have a dual bonus by obviating the need for property and income taxes) in order to have meaningful effect.

[0] https://en.wikipedia.org/wiki/Law_of_rent

[1] https://www.unitism.com/land/en/9-keep-what-you-earn-pay-for...

[paul]

That assumes a fixed supply of housing, which is only true in deeply dysfunctional places like SF. In most of the US, housing cost is close to replacement cost, so if landlords try to raise rents, people can just move someplace cheaper, especially since they are no longer dependent on a job to support themselves.

[psc]

I think the GP is referring more specifically to Henry George Theorem (https://en.wikipedia.org/wiki/Henry_George_theorem). The theorem has pretty solid theoretical backing, so I don't see why it wouldn't apply to basic income. At the very least it's a good question to research.

My understanding is that all owners of would increase the rents/prices of their unimproved land, not just housing landlords. Everywhere you'd move is now more expensive by the same amount, because unimproved land is (mostly) fixed supply.

[paul]

"under certain conditions". There is an enormous amount of unimproved land in the world, and most of it is quite inexpensive.

I do like the idea of a land tax though, and believe that it's a good way to fund BI (along with carbon tax).

[senseless]

Exactly, Henry George is the most prominent theorist who pushed those ideas, and many more have used or expanded on them since.

[senseless]

No, it does not assume a fixed supply of housing. The law of rent revolves around the margin of productivity and already takes into account what you're trying to say.

The wages extractable from the least valuable land would rise by the same amount as anywhere else since basic income would affect everyone's incomes equally. Thus, there would be an excess over the basic level of sustenance and according to this law that excess MUST be swallowed up by rent. The status quo would resume for normal wage-earners, while land-owners would benefit even more than they already do, raising rates of inequality further.

[soared]

There are plenty of 'dysfunctional' places just like SF. Plenty of cities have limited area to expand into. For example, Boulder local gov owns a ring of land around the city, making it impossible to expand outwards (or upwards).

Housing supply isn't fixed if you think people are willing to live in Wyoming - which they pretty much aren't.

[AnthonyMouse]

"Horrible laws that cause everyone's disposable income to be swallowed by landlords" sounds like a problem worth solving, not an inevitable fact of life.

[undersuit]

Why aren't people willing to live in Wyoming?

[MicroBerto]

I've brought this up in the past, and am always met with arguments that just don't seem to dent the problem statement.

My simple question I always pose is this: "If everyone has $X dollars, then wouldn't $X become worthless?"

I fail to see how there won't be some kind of inflationary situation amongst the lower class, especially in the form of rents over the course of a year as leases reset. I also refuse to accept any argument that involves the majority of landlords "doing the right thing".

Thanks for posting the Law of Rent.

[cortesoft]

This would be the case if the X dollars were being printed from scratch every time they were distributed. They aren't, though; they are coming from tax dollars.

Yes, it would most likely cause some inflation of consumer goods, since poor people spend more of their money on consumer goods than rich people (so when you transfer wealth from the rich to the poor, consumer goods will become more expensive)

This increase in consumer good prices, however, will also cause more resources to go into producing goods for poor people (who suddenly aren't so poor anymore). Depending on the limiting factors for these consumer goods, this will most likely cause prices to stabilize at a reasonable place.

[tmnvix]

> "If everyone has $X dollars, then wouldn't $X become worthless?"

No.

You are ignoring the fact that this is in effect a redistribution of wealth.

[dragonwriter]

> This is clearly the worst aspect of our system and shows that it was designed by the mathematically uneducated.

The answer is no.

> I fail to see how there won't be some kind of inflationary situation amongst the lower class

Ignoring any potentially counteracting monetary policy intervention, there absolutely will be some price inflation for goods disproportionately in demand at the low end of the economic distribution. Reasonably, you expect both market clearing price and market clearing quantity of such goods to increase with a transfer of income to that group (and UBI funded by tax is a transfer, in effect). In short, nominal net beneficiaries will get more stuff, but by somewhat less than prices before the UBI would suggest.

Essentially, production will shift from things demanded by the net contributors to things demanded by the net beneficiaries.

[maerF0x0]

My understanding is that money doesnt become worthless (inflation) so long as there is excess capacity. If a bag maker has 10 excess capacity at the $100 price mark, then the first 10 customers will not cause any inflation. Clearly there will be some inflation with BI as previously nonparticipants in a market begin to participate (homeless begin to rent for example).

[CaptSpify]

Wouldn't this give lower-income households the opportunity to move elsewhere?

I do agree that it seems likely to have some kind of inflationary affect, but it will also give more options.

[robbiemitchell]

Not enough discussion to this effect. When everyone has more money, the prices of everything will probably go up.

[MichaelApproved]

Isn't that similar to what's been happening with collage tuition? Government helps you pay tuition and gives you some breathing room, so the collages raise tuition higher until you're back at the limit you can possibly pay, taking away your breathing room again.

[robbiemitchell]

Yes, in part -- though I'd say the better analogy there is home mortgages; in both cases, easy access to low-cost loans leads to risky debt. (Plus, college tuitions have gone up in part because government subsidies have gone down and in part because they have allowed their costs to go up, not necessarily because they have simply jacked up the prices.)

[shostack]

Exactly. What is also missing from the post on this test is any sense of if/how they plan on addressing this piece of the puzzle as it seems a rather large one. When your experiment group is small, it simply won't cause a big enough impact at a macro level to move the inflation needle, but that is what many predict would happen.

How can we measure that or get any sense of how realistic that outcome is before a large scale program goes into effect? Don't get me wrong, you have to start somewhere, so I commend this effort, but I have yet to see a good proposal for how to test and deal with this.

[beatpanda]

That's true, but making the basic income unconditional is going to change the population distribution drastically. There are a lot of nice, beautiful, cheap places in America where people don't live mainly because there's no work. If you have a basic income, that changes the calculus about where you can live. So those price increases will happen, but they're likely to happen in places where prices are already very low.

[naasking]

Good thing everyone will not have more money then. The total money supply remains constant under UBI.

[chimeracoder]

> The total money supply remains constant under UBI.

Well - it doesn't, actually.

A self-sufficient program would have to be self-sustaining via tax revenue, and unless the goal is to defeat the whole purpose of the program, the tax revenue will disproportionately come from the wealthy. However, the wealthy are less likely to spend every extra dollar that they have, which means that they're more likely instead to save (invest) it[0]. In other words, this proposal would transfer money that is currently being used for long-term investments[1] and put it towards consumption.

The velocity of money would increase, but the actual supply of money would almost certainly decrease, holding all else equal.

[0] Money stored in the bank is an investment; it is the source of capital for others who want to procure loans for investment and infrastructure projects.

[1] These deposits create money, thanks to fractional reserve banking

[AnthonyMouse]

What you're suggesting would be true of all redistributive programs. Replacing means-tested welfare with a UBI which is equally redistributive would have no inflationary effect.

It's also not clear that it's true in general. Invested money doesn't stand still. You invest it in a startup and the startup spends it. You deposit it in a bank that loans it out and the borrower spends it.

So it could be that taking from the rich and giving to the poor causes inflation or, if startups and mortgage borrowers spend money faster than checkout clerks and bartenders, the other way around.

[lmm]

Depends what measure of money supply you're using. Under some measures the same "quantity" of money at higher velocity counts as higher money supply (which arguably better reflects the effect on the real economy). Under other measures money created under fractional reserve doesn't count.

[chimeracoder]

> Under other measures money created under fractional reserve doesn't count

M1,M2,MZM,M3,and M4 are all affected by fractional reserve banking.

> Under some measures the same "quantity" of money at higher velocity counts as higher money supply (which arguably better reflects the effect on the real economy)

No, velocity is orthogonal to the money supply under all measures. Whether you use a constant velocity model or a variable velocity model, the velocity is a distinct factor altogether, the same way mass and acceleration are different concepts, even though they can be linked by an equation involving the sum of all forces.

[sampo]

> this proposal would transfer money

In the US, probably. There are some other countries where the amount of money currently being spent on social security is already large enough that it could be reorganized to give basic income to the whole population.

[tmnvix]

But poorer people that receive payments will have a larger share of the overall wealth than they otherwise would have (even while everyone else receives exactly the same payment). BI is essentially about rebalancing wealth distribution.

[aoeusnth1]

Sure, it will increase the value of land, which will increase rents. But part of the rent was also the value of the improvements, which will not cost any more and should have the same ROI as before.

Especially in the US, land is cheap and if rents are too expensive in the cities people will move elsewhere.

Property and land is already taxed, and an increase in the value of property will eventually be converted into an increase in those taxes.

[creadee]

A basic income is supposed to provide enough to live on. So if rents rise, so should the basic income to cover that rise. And the landlords would notice their taxes rising also.

More interesting is what would happen to wages and salaries. If someone's on a wage that's equal to what the BI will be, if it's introduced they could have their wage halved and still have a bigger income. And their boss will have halved their wages' bill.

A basic income would be revolutionary and I doubt anyone has a good idea on how an economy with one will behave.

[bcheung]

I'm in favor of a much higher land tax and getting rid of income and capital gains taxes.

Taxing income and capital gains seems counter productive to me as it creates a penalty for working harder and investing. Those are activities that make individuals and society more prosperous.

Another possibility I think is worth exploring is having the government simply print money each year and use that to provide for services and basic income. That way we can get rid of the tax system entirely.

[adwn]

> Another possibility I think is worth exploring is having the government simply print money each year and use that to provide for services and basic income. That way we can get rid of the tax system entirely.

cough Inflation cough