Only if the world were zero-sum, which it's not. Remember how only rich people used to have cell phones, and now billions of people have them? The price of most goods is close to the marginal cost of production, which means that giving more people money may actually lower the cost of many goods (by increasing volume). Artificially scarce goods, such as an apartment in SF, may get more expensive however since their price is set by the marginal ability to pay. The good news is, you don't have to live in SF.
I guess apartments in San Fransisco already cost more than what someone living off basic income could afford, so the prices should not be driven up at all. Indeed, people living there would presumably get a net reduction in income (from tax increases to pay for the BI), so the prices should go down.
If you read the article, the BI being proposed would drop off after you began earning more than $30k and the drop would stop at $60k in earned income. I imagine a rather high percentage of people living in San Francisco already earn well above $60k annually.
I've never understood why subsidies like this almost always come with income phaseouts. What's wrong with giving everyone a basic income? People who make a lot of money would more than repay it in taxes, and taxes would have to go up on higher earners, but that's not a real problem.
The difference is you have to make more money first.
"Phase out" means middle income people receive lower benefits in exchange for higher income people paying lower taxes. It's just a code word for screwing over the middle class.
I didn't write the article and I am not for the so called UBI. I am very much against it. I am willing to be convinced otherwise, and the start of this article sounded not crazy to me, but I stopped at reading at some point because later remarks reflected enormous cognitive dissonance in the writer, suggesting they really haven't thought it through and full of baloney.
It's all the same. Otherwise, you're going to increase taxes even more for people making more than the UBI to compensate. This is simply pushing numbers around on the page - either you're getting the UBI and paying it all back in taxes, or you're not getting the UBI and not paying it back in taxes.
No, it's not the same, because the big benefit of UBI is you don't have to pay a huge gaggle of bureaucrats to verify this person gets benefits and that person doesn't.
The article proposes that we replace welfare programs, social security, etc, with this UBI. Then, at some point, it says this:
Government agencies are the worst of all mechanisms for dealing with human needs. They are necessarily bound by rules applied uniformly to people who have the same problems on paper but who will respond differently to different forms of help. Whether religious or secular, nongovernmental organization are inherently better able to tailor their services to local conditions and individual cases.
I find it ironic that this individual is for the so called UBI.
> I find it ironic that this individual is for the so called UBI.
Why do you find it ironic? UBI gives people money without telling them what to do with it. It lets the market (i.e. the people) decide what they need instead of the government.
For example, you can imagine a shelter that will provide food, housing and services for the disabled in exchange for their UBI, which doesn't cover the entire cost but covers most of it and the rest is covered by donations.
Except that the marginal cost of production will go up because of the increased competition for scarce goods, of which every single produced item has some component, not the least of which is land and labor.
So yes, there is likely an inflationary effect, but it is impossible to accurately predict.
It also depends on the net change in people's overall income as most basic income proposals include scrapping piecemeal and overlapping welfare systems.
Personally I think I could be convinced if it was essentially a replacement and thus simple to administer, but would have to be coupled with strict immigration control for the first country to try it.
The price of everything would rise proportionally to the amount of consumption added to the economy - for example, if you funded this entirely by printing money, you'd get a combination of inflation and an equal amount of money going to everyone, causing a redistribution effect on its own. e.g. if you gave everyone $10,000 of newly-printed money, inflation would be very high, but unless it's 100% or more (doubtful) a poor person making $10,000 or less before the change would still have a higher standard of living - it's a redistributionary effect.
If you actually fund this by taxes, like most proposals say, you'd probably still have an inflationary effect (since the lower your income is, the likelier you are to spend each marginal dollar), but likely not enough to outweigh the extra money.
If UBI was carried out as a series of one-time cash injections (such as QE), then yes it would simply lead to inflation as a large proportion of UBI recipients would have the propensity to spend that money immediately on rent, food, debt, releasing the cash into circulation and ramping up inflation. Spending would probably remain unchanged for middle/upper class folk who would view UBI income as negligible.
If UBI was carried out as an exercise in wealth redistribution through higher taxes on the upper/middle class, then the inflationary effects would not be quite as high, although I would still expect to see some inflationary effects as middle/upper class folk drew down spending on some durable/luxury goods, while lower class folk would increase spending on staple goods. I think the overall effect would be slightly positive inflation.
I'm upper middle class, and I can already barely afford to live in this country. What we need isn't more taxes but a more judicious use of taxes that are already being levied. An effective and workable UBI scheme would replace all other forms of means-tested social support payments, foreign aid, and expenditures on meaningless warfare overseas. In such a perfect-world version of the United States UBI suddenly becomes feasible. One may only dream.
I'm going to guess you either bought a house you can't afford or have more than 2 kids or have a lot of student loan debt. (Not judging at all) Correct?
I can barely afford to live in the US because I live in a pretty expensive part of it. I'll blindly guess that my zip code is the second most expensive one in NYC. My thesis is that you (and I, and my family, and everyone else who has ever lived) live only once. I refuse to live a gazillion miles away from work while wasting countless hours of my life commuting. This costs me, as the most desirable areas of Manhattan are also the most expensive.
To be able to afford such a lifestyle, I have to make a considerable amount of money. This leads to my family being ineligible for any kind of freebies from the government. We're forced to look on while other families receive handouts in the form of food stamps, free school lunches, free healthcare and subsidized housing. Many of those families cheat the system by finding loopholes in eligibility criteria. They sneak through and enjoy significant free comforts on my dime... and that of every other taxpayer in the country.
So yes, I can barely afford to live here because I'm being taxed to the gills while freebies are flying to countless others who don't deserve it. I'd much rather cancel the whole rigmarole and just flat out pay everyone the same basic income every year. At least my family will get its fair share of it.
That's interesting. My employer is also based in Manhattan. I live in Minnesota. I live in a 4-br home that costs me $800/mo including taxes in downtown Minneapolis. I go and work in Manhattan once every 3-6 months for a week or so. I could never live there though; I would be throwing my money away. I like certain aspects of NYC, but not enough to take such a paycut. There have been a lot of studies that show that what kind of home or city has almost no bearing on your happiness. You might reconsider.
Also, seriously, if someone is on food stamps or their kids are in the free lunch program, they are not advantaged, they are not comforted: they are living on the edge. Trust me.
On the other hand, I live in subsidized housing. The mortgage interest deduction is the largest (in terms of $) subsidized housing program on earth.
Price of goods with limited supply will rise, where the price floor is mostly determined by how much people are willing to pay.
Price of goods with unlimited supply, where the price floor is determined by cost, will not rise.
Although everything kind of fall somewhere in between the two extremes -- rent will probably go up, whereas food not so much. And many things will not be affected because poor people will not buy them with or without BI.
The whole concept of countries creating way too much currency to pay their bills is a good reflection of this -- Zimbabwe and Venezuela being two recent and current examples. The irony is that all of that "extra" money actually means the recipients become substantially poorer as the supply chains get fucked up.
If it is just a little extra injection, the outcome would not be as extreme. In the most general cases, my guess is somewhere with a tight housing market would see a lot of the money just flow to landlords, in a renter's market the money might flow to consumable goods like drugs and alcohol.
If social & welfare programs are removed in exchange for BI, it is possible all the money would just have to be spent on medical and education. I don't really know the math behind everything but it could just be a restructuring of things that are already occurring. Do extra marketing and "profit" costs exceed government waste? Who knows. Certainly the ability for the government to influence social behavior would be reduced by a lot.
If UBI seems possible to pass within 5 years, that will be signal to ramp up investments in low-end rental properties. You have to do it before it's certain to pass (else the purchase price runs up), but I can't see anything happening to rents other than a sharp move up.
I still don't understand this argument. The vast majority of people who would receive the UBI are not homeless. They live somewhere now. Why would the same number of people suddenly demand substantially more housing?
Have you ever counted the number of families that live in a single low-end housing unit? It's not uncommon for it to be 2 or 3 in more expensive areas. If those families each get $20k/yr in UBI, many of them would be looking to move out on their own.
The families who live two and three to a housing unit are the ones who qualify for as much existing welfare as the UBI would provide. It would be trading food stamps for cash but you have to expect most people are still going to buy food.
Replacing housing assistance with the equivalent cash might even reduce rents because then people can decide they would rather live in cheaper housing and use that money to go to college.
The whole thing with a UBI is that unless you make it more progressive than the existing system, all you're really doing is replacing vouchers with cash. If you do make it more progressive (i.e. provide more cash than you would have provided vouchers) then you get the same economic consequences as providing more vouchers (i.e. possible price inflation), but it's still more economically efficient than providing more vouchers, because then people can choose between college or better housing or better medical coverage etc., instead of having the government decide for you.
If everyone is given money for a specific product and suppliers are universally aware of exactly how much people can spend on that product then, yes, that can happen.
However, under UBI, I think suppliers of goods and services would still be faced with the basic issue of not knowing exactly how much consumers value any given product and competition would still exist so prices would likely still be set by supply vs demand.
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.
But what if Mr. Rich was rich because he owned a McDs? Now he's selling burgers for $700, and rolling around in his money like Scrooge McDuck.
Prices go up for two reasons, when they can and when they must. Which one do you think would be the factor here?
* Note, this is specifically in response to the parent's scenario - I actually doubt that a UBI like the one in the article would lead to appreciable inflation, as the current entitlement plans already spread around more money than this would.
I think the most popular opinion around here is that once Mr. Poor is liberated by the UBI from the impossible treadmill of minimum wage working-poor jobs and a legal system that is outright hostile to those of lesser means, he might make a few burgers of his own and compete with Mr. Rich's defacto monopoly instead of being his near-servant at his former Mcjob.
Well that's the question, isn't it. What are the (un)intended consequences of forced leveling of inequality? Especially automatic and predictable forced leveling.
Right now, it seems that Mr. Rich eats as many burgers as he wants (which isn't many really) while all of the Mr. Poors who would be happy to eat them if they could afford them, and happy to make them if someone would buy them (and then could afford to eat them themselves) sit around hungry because there's a recession donchaknow.
Its almost as if the mass of Mr. Rich's on-paper money is blocking the natural signalling between the makers and the eaters so the cycle jams up. It seems like something that needs fixing. So how?
I didn't really see any weighing of the proposition here, just motivated reasoning. Such a one-sided view is especially scary because, at least to me, the cons for this are pretty apparent and serious.
What's one big negative of funneling even more money into the government? Further centralizing power in the government, which definitely cools my own fever to implement UBI, and definitely warrants some careful consideration. Since trust in government seems to be at an all time low, this point probably deserves some addressing [1].
For one, theories of economy were created in order to better serve the people's needs and wants using scarce resources - if they can be demonstrated (as in western Europe) to represent very large increases in the hedonic calculus, they are objectively superior. For two, a liberal democracy's functioning is premised on a degree of middle class participation: a large group of people with sufficient assets that they have a stake in the future (beyond entertainment value), but insufficient assets and numbers too great to corrupt the system towards their own ends.
> if they can be demonstrated (as in western Europe) to represent very large increases in the hedonic calculus, they are objectively superior.
The only way this could be true is the extraordinarily unlikely case where every individual provably had better experienced utility in one system than another, otherwise, the fact that there is no one objectively correct method of aggregating utilities across individuals to get a single measure of societal good means that there is no objectively correct ordering.
Only if the government added money to the system without removing it elsewhere.
Any sane policy doesn't involve just printing money and giving it to people. It involves taking that money from someone else, through taxes, and THEN giving it to people.
The current government deficit is more than 500 billion. We can't currently pay for current government spending - not sure why you think the government would try and pay for a huge new entitlement when the political firestorm from that would probably kill it.
Take a food stuff. In theory the current price is the cross section of supply and demand (price equilibrium), your idea is that with BI we have just increased demand while supply remains unchanged naturally price equilibrium changes resulting in a price increase. However, with a growth in demand, the market should respond and supply should increase to meet the increased demand, thus readjusting price equalibrium. Obviously this is for a food stuff not something more finite like housing.
Still food stuffs or housing, we don't really live in a free capitalist market as much as we would like to believe. There are many government subsidies artificially impacting current supply/demand/price. One example, farm subsidies where farmers are paid to not grow crops/farm their land (~$1.3B/year). I think its ridiculous, but economists more knowledgeable than me (even if on the farmer's dime) argue its necessary to keep supply artificially low to keep prices artificially high otherwise the entire industry would fail and we would all be starving.
Assuming BI did have such an overall impact on the prices of everything or even just the basics (food stuffs, housing, gas, etc...) there are all types of mechanisms the government currently employees to artificially raise and lower prices and special interests won't be going away with BI.
The Murray UBI plan is paid for in part by eliminating agricultural subsidies. So any stabilizing effect of these subsidies would go away. Would food producers keep their prices high, since each consumer has an extra 10k to spend? Or would prices collapse as growers, with no incentive to leave fields fallow, flood the market with cheaper food?
Not sure why this person is being downvoted. It seems like a perfectly logical question. If there's a good answer for it, people should be posting that here instead of downvoting.