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Ask HN: Would a universal basic income lead to inflation?

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Re: Ask HN: Would a universal basic income lead to inflation?

#71

Post by mnkmnk »

globular-toast wrote: post #38
dagss wrote: post #26

Earlier quoted context omitted.

There is no argument here -- why would everything cost $1000 extra? You just said "then". Where is the argument? So if I earn $500 now, and buy 500 lollipops at $1 each. If everyone gets $1000 as UBI, then those 500 lollipops will cost ... $1001 each and $501000 in total? Isn't that absurd? That is what the sentence "everything will cost $1000 extra" means, and the only way "raising the value of zero" makes mathemati…

> There is no argument here -- why would everything cost $1000 extra? Because you can't print food, houses, energy etc. Give everyone $1000 and you won't magically create any more food or any more houses or any more energy out of thin air. So the market will adjust the price to account for the increased demand. It's basic supply and demand. > If everyone gets $1000 as UBI, then those 500 lollipops will cost ... $1001…

The only way that this will work is if companies reduce their margins making companies less profitable, reducing wealth inequality. That is never going to happen.

Re: Ask HN: Would a universal basic income lead to inflation?

#72

Post by [deleted] »

em500 wrote: post #57

PhD in econometrics speaking, here's my handy guide to macro-economics: - The main variables of interest are (aggregate) real production / income (GDP/GDI), unemployment and inflation (arguably in that order) - Nobody knows much wrt the causes, effects and future trajectories of any of these. Not professional Ivy League economists who publish in journals like AER, QJE, JPE or Econometrica, nor traders getting paid mi…

[deleted]

Re: Ask HN: Would a universal basic income lead to inflation?

#73

Post by onion2k »

chii wrote: post #12
onion2k wrote: post #5

Whenever someone suggests a central bank creating money will lead to inflation I suggest they read this report - https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... tl;dr Private banks create far more money than central banks. If you're worried about inflation from UBI, stimulus checks, bailouts, etc then your brain will explode when you learn about how much money banks put into the economy in the name of…

It's not money creation that causes inflation, it's _excess_ money creation. Banks only loan money to people who have good credit, and can pay it back. Those people with good credit will work to pay it back. This work is often worth more than the loan + interest, and thus, wealth is created by this process. E.g., you borrow money to build a business. And for consumer loans, the consumer would have to work harder to p…

Banks only loan money to people who have good credit, and can pay it back.

2008 called. Not sure what it was saying because it was laughing too much.

Re: Ask HN: Would a universal basic income lead to inflation?

#74

Post by dagss »

globular-toast wrote: post #38
dagss wrote: post #26

Earlier quoted context omitted.

There is no argument here -- why would everything cost $1000 extra? You just said "then". Where is the argument? So if I earn $500 now, and buy 500 lollipops at $1 each. If everyone gets $1000 as UBI, then those 500 lollipops will cost ... $1001 each and $501000 in total? Isn't that absurd? That is what the sentence "everything will cost $1000 extra" means, and the only way "raising the value of zero" makes mathemati…

> There is no argument here -- why would everything cost $1000 extra? Because you can't print food, houses, energy etc. Give everyone $1000 and you won't magically create any more food or any more houses or any more energy out of thin air. So the market will adjust the price to account for the increased demand. It's basic supply and demand. > If everyone gets $1000 as UBI, then those 500 lollipops will cost ... $1001…

"..you misunderstand..."

Hey, I even quoted the interpretation you explain to me here further down in the post I wrote.

What I was arguing about was whether the specific phrase "change the value of zero" makes sense to describe inflation.

Re: Ask HN: Would a universal basic income lead to inflation?

#75

Post by dbingham »

pharke wrote: post #36
dbingham wrote: post #4

It's an important question. A lot of the discussion around basic income takes place in the context of Modern Monetary Theory. I mean, it kind of has too, because otherwise basic income is pretty unaffordable. I've done the math, it is possible but really hard. To significantly oversimplify one stream of thought in Modern Monetary Theory, the idea is that you grow the money supply through government programs and shrin…

Where would new money even go in a system with both fiat currency and wealth caps? Do you have to constantly increase the wealth caps with inflation? How do you perfectly manage that rate? As we can see governments are not capable of doing that now. Do you cap the profits of businesses as well and if so why do they continue to innovate or expand once they've reached the same level as all of their competitors? You're…

All of those questions have pretty straight forward answers. But your first question has really just floored me. Really? If money can't go into the pockets of the very wealthy it has nowhere else to go?

The money would spread out through out the rest of the economy. We don't have a scarcity problem right now, we have a distribution problem. We have plenty of resources to go around, but we have a problem where a very few people are hoarding the vast majority of those resources. So a wealth and income cap is designed to stop that hoarding and force a wider distribution of those resources.

As for the rest of your questions.

> Do you have to constantly increase the wealth caps with inflation?

Yep. Just as we really should be (but aren't) linking minimum wage to inflation currently. And linking our progressive income tax brackets to inflation. And linking our property taxes to inflation.

> How do you perfectly manage that rate?

You don't have to. We don't manage it it now in all of our existing taxation systems (both wealth based and income based). We only have to do good enough to keep inflation broadly in check.

> Do you cap the profits of businesses as well and if so why do they continue to innovate or expand once they've reached the same level as all of their competitors?

No. These are individual income and wealth caps. Business profits are business profits. The idea is that if individuals are limited in how much they can take out of the business, the businesses profits will be more widely distributed among those who contributed to the business. And the business will have less incentive to price gouge.

> You're really just proposing a centrally planned economy where all wages and prices will be set by the government

No I am not. I'm not proposing anything much different than we have now. We have a minimum wage, we're adding a UBI to put a floor under people. We already have a wealth tax for the 90% of people who's wealth is entirely in their real property (their houses), we just leave the 10% of people who's wealth is primarily stocks, commodities or other assets out of it. We already have a progressive income tax, and we've had a progressive income tax that got very close to 100% above a certain level in the past (in the 50s in the US it was ~90% above ~$4 million).

The only thing new I'm proposing is putting a hard cap on overall wealth.

Re: Ask HN: Would a universal basic income lead to inflation?

#76

Post by khaki54 »

em500 wrote: post #57

PhD in econometrics speaking, here's my handy guide to macro-economics: - The main variables of interest are (aggregate) real production / income (GDP/GDI), unemployment and inflation (arguably in that order) - Nobody knows much wrt the causes, effects and future trajectories of any of these. Not professional Ivy League economists who publish in journals like AER, QJE, JPE or Econometrica, nor traders getting paid mi…

From my perspective, the truism of

> we can't make everybody rich by sending everyone a $10M check

isn't so self-evident. A lot of policy and draft legislation is just a watered-down version of this with more steps.

What if we...

- just send unemployed $23.4K check (CARES act $600/wk unemployment kicker)

- just send most people a $3.2K check (stimulus)

- just send everyone an average of $42K check (overall covid relief)

- just send those with unpaid student loans a $20K - $400K check (college debt cancellation idea)

- just send those with distressed mortgages an average of a $150K check (2008 mortgage crisis)

There are many more of these that seems to have no strategic value or incentivize the opposite behavior that we need at the time.

It's also probably a safe assumption that the money generally finds its way to the wrong people considering the $5T in billionaire wealth growth during the pandemic, or record executive bonuses during the mortgage crisis.

Re: Ask HN: Would a universal basic income lead to inflation?

#77

Post by ItsMonkk »

RHSeeger wrote: post #44
forgotmyolduser wrote: post #17

If we print money to fund it, yes. If we fund with taxes without printing money, then no.

This answer seems to treat inflation as "the cost of everything". If, rather, we focus only on the items that are needed to survive (food, shelter, etc), I think the answer changes. The taxes to pay for the UBI will generally come from the middle and higher income households; who are already spending the money they need to on those items. Losing some of their money to taxes won't do much to reduce the amount they spe…

This is exactly why a UBI funded through a Land Value Tax is such a good idea. A land value tax taxes the land such that the market cost of the home is equal to the cost to build the housing on top of the unit.

The land tax will put the land to best use, and that will drive up the supply of housing units, which means the cost to rent will go down. All of this while the average person sees lower tax rates and the person who sits on an empty lot sees much higher tax rates. The money available to collect from NYC and SF land taxes alone could fund a nation-wide UBI.

Re: Ask HN: Would a universal basic income lead to inflation?

#78

Post by sparkie »

jusssi wrote: post #33

Would everyone getting a paying job lead to inflation? And if it would, would that mean that we should rig the system in a way that it can never happen?

Good question. It would depend on whether the newly employed are broadly working "bullshit" (unproductive) jobs, or whether they are adding to productivity.

Inflation occurs when there is an increase in available money (or transiently, in the velocity of money) in excess of any increase in productivity.

Increased productivity (absent of manipulation of the money supply) would suggest that goods get cheaper to produce and are produced in more abundance, leading to decreasing prices.

If the newly employed are not broadly productive, employers would have increased expenditures (wages), without decreasing other expenses. Since the employer doesn't want their own earnings to decrease, the only way they can maintain the standard of living they are used to is to either increase their revenues by increasing prices, or fire the unproductive.

An exception of course, is government, which can simply increase revenues by increasing taxes, which allows them to continually employ unproductive people at the cost of taxpayers.

If you extend this logic to UBI, then every employer now has additional expenses (taxes) to cover the costs of UBI. To maintain the standard of living they are used to, and if they wish to avoid raising prices, they would need to reduce expenses, which would typically mean either: reducing wages, or reducing the number of employees they have.

So the result of UBI would suggest one or more of the following outcomes: 1. Fewer people are employed. 2. Employed people earn less. 3. Prices generally increase.

I would guess at all three occurring simultaneously. Almost like the devil is rubbing his hands in anticipation.

Re: Ask HN: Would a universal basic income lead to inflation?

#79

Post by myshpa »

throwaway4aday wrote: post #70
myshpa wrote: post #42

Earlier quoted context omitted.

We don't need everybody working. 75% of jobs are bullshit jobs. Just 2% of people work in agriculture. We slave 30-40 years for a priviledge to live in a house. (Almost) all money in circulation is owned/issued by banks, and the inflation/interest is a way to keep us all in the rat race, all the time consuming, amassing things, never thinking. Our civilization is a construct, a glass cage, and we're all afraid to bre…

I'd rather live in a house that fits my needs and wants and personal style than I would in a mass produced apartment. I'd rather eat the type of food I enjoy rather than some standard rations cooked up by a factory. I want a certain amount of stuff in my life to satisfy my interests rather than living in a bare room and only enjoying communal property. I prefer to live in a world where silly things like mobile phones…

You know, the way I see it, we can have either star-trek like future, or blade-runner like.

I would very much prefer the first one.

And it does not mean we would have to have mass produced apartments (see cob buildings, hemp crete - the legislature/corporations is/are the problem). There is enough place to give everybody a house & a garden, ideally sustainably built (no plastics in the walls etc.), and with UBI live a good life, without beeing dependent on a job, you don't want, just to be able to live. What progress that would bring.

I'm also not talking about rations and/or soylent - I want healthy vegetables/nuts/seeds, not the unhealthy food & poisons (herbicides,pesticides, vegetable oils, antibiotics, pfoas ...) we're fed right now with our exploitative market economy.

I want healthy planet, full of (free-living) animals and clean air & rivers.

I also want computers (not devices) and agi - but without nsa & patents, please.

I can only dream.

But if we continue to do business-as-usual and keep doing the same stuff over and over, pretending that the rat-race is essential to our progress, and pray for economic growth in expense of our living space (the little blue dot), that's the insanity Einstein was talking about.

We don't have to eat & consume to the extinction. That was my point. And UBI might just be the way to do it.

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