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Comment by yummyfajitas | Hacker News Reader

This article is internally contradictory. First, the article claims consumption will go up:

No longer will poor Americans have to choose between heating oil and food, between medicine and shoes for their children.

Then it claims investment will go up:

Also, demand increases — giving firms reason to expand production and hire new workers.

Firms may have reason to expand production, but the resources needed to expand production are instead being consumed. Rather than building a factory, workers are making shoes for poor children.

(At least the ones who didn't tell their boss to "take this job and shove it" - a direct quote from the article. That's just a deadweight loss the article ignores for no apparent reason.)

I really wish someone would write an article about BI that was more than just clueless pop Keynesianism - "Demand Good, Investment Bad, Free Lunch for All."

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Marginal utility of money. If rich americans use oil heating up their 50 unused vacation homes and they have to slow down a bit, the statement can be true.

I.e. it's not "rather than building a factory, workers are making shoes for poor children," it's "rather than spend man hours making hundreds of shoes for a single rich person, make more shoes for the poor, less throw away shoes, and still end up freeing up time to make factories."

If that shoe example is too contrived for you, just do a google image search for "shoe closet":

http://1.bp.blogspot.com/-nOKYKVt_gf4/TZllEf3kD2I/AAAAAAAADc... http://www.theshoegirlblog.com/2012/02/celebrity-shoe-closet...

If rich americans use oil heating up their 50 unused vacation homes and they have to slow down a bit, the statement can be true.

Did you read the article?

"A rich person, presented with a tax refund, will not necessarily increase his or her consumption. Instead he or she might well save the money ...When the poor and lower middle class get cash in their pockets, they generally spend it straight away..."

Or perhaps this comment from 27 minutes ago where I pointed out the exact same thing to another person who didn't read the article: https://news.ycombinator.com/item?id=10397010

I didn't read things right.

That argument would make sense as a short term thing if fighting a contracting economy during a recession, especially if there is an ongoing flight to safety and if banks are worried about reserves and not making loans so the extra savings aren't getting spent (e.g. 2008).

But I do see some of the contradiction you are talking about.

A basic income doesn't necessitate increased consumption, only shifted consumption from the rich to the poor. If you think a basic income is going to have an adverse effect on savings/investment rates, there are plenty of ways to bump this up (sovereign wealth funds for example).

But your comment is pretty clearly motivated by an ideological commitment to the rich having more and the poor having less, rather than some genuine concern with insufficient investment. Why not just be honest about it instead of hiding behind this ideological wordplay?

Labelling the freedom of choice of a low income worker to leave a job they hate and/or work a bit less as "deadweight loss" is reveals a lot. I suppose you think the lack of ten year old children working in coal mines is deadweight loss too.

A basic income doesn't necessitate increased consumption, only shifted consumption from the rich to the poor.

Did you read the article?

"A rich person, presented with a tax refund, will not necessarily increase his or her consumption. Instead he or she might well save the money...When the poor and lower middle class get cash in their pockets, they generally spend it straight away..."

If you think a basic income is going to have an adverse effect on savings/investment rates, there are plenty of ways to bump this up (sovereign wealth funds for example).

Please explain the mechanism by which this would work. Specifically, consumption of shoes and the number of people producing shoes goes up correspondingly. Some people quit working because their boss is a jerk. Where do the people building the new shoe factories come from?

> Did you read the article?

Did you read my comment? There are ways around this. Worth noting also, that if poor and middle class folks have a higher and more reliable income, they are more likely to save.

> Please explain the mechanism by which this would work.

It's called supply and demand. Rich people will have less, so demand will drop for things like jewellery and superyachts, and labor will shift from these industries into stuff producing things like shoes.

I feel like you are making the complete opposite argument from the linked article: "We should have a BI because it will reduce consumption by the rich and increase savings by the poor, thereby increasing investment."

Is that a fair statement?

Also, given that you believe the rich and poor have equal propensity to spend, I assume you have no objection to Keynesian stimulus targeting the rich during times of recession?

I see you've given up on responding to my points so you're making up strawmen you think you can knock down instead.

I didn't claim that a BI will increase investment.

I didn't claim that believe the rich and poor have equal propensity to spend.

I said that if you want to increase investment (with or without a BI) there are plenty of ways to do that.

...only shifted consumption from the rich to the poor...

I didn't claim that believe the rich and poor have equal propensity to spend.

The former implies the latter.

I didn't claim that a BI will increase investment.

... if poor and middle class folks have a higher and more reliable income, they are more likely to save.

Now you seem to be agreeing with me that the article is wrong, and that a BI would increase real consumption and reduce real investment?

Could you state clearly what you think will happen to real (not nominal) consumption/investment under a BI and what the mechanism for that is?

You're assuming the economy is running at full capacity.

It would be interesting if basic income were tied to some combination of the Gini index and inflation rate. It would serve as a nice automatic offset to deflation, then fade away as the economy took off and wages increased.

What I'd like to see - and never see suggested in these discussions - is starting with a revenue-neutral carbon tax to fund a BIG. Since the tax would internalize the externalities of pollution and climate change, the government could cut subsidies and tax breaks for energy production and efficiency, and throw those savings into BIG as well. Anyone willing to be a below-average greenhouse gas emitter comes out on top, while anyone who owns a private jet is doing well enough not to care.

totally on board with something like this. I never understand why people say market forces will solve global warming, pollution and the future of energy.

Pollution is THE textbook case for an externality. By definition it cant be fixed by the free market.

a revenue-neutral carbon tax to fund a welfare state..

Love the idea, but we had one of these for a couple of years, and at $23/t there was at least an order of magnitude less money in it than needed for a GBI. And per capita, we are among the highest carbon emitters on earth.

Tying BI to observed inflation seems dangerous. Targeted inflation seems advisable. The former because a BI set higher than conditions can support seems likely to cause inflation, which would reduce (real) BI.

It's not so much an assumption, it's more just looking at our 5.5% unemployment rate (aka "the natural rate") and 3.5-4% NGDP growth.

Even if we aren't, this article provides no mechanism by which a BI would get us to full capacity or increase output at all. All it provides is a mechanism which would take us away from full capacity (If your boss is an unreasonable jerk, you can tell him to “take this job and shove it”...).

https://www.google.com/search?q=real+unemployment+rate+us+20...

I find it interesting that most people coming down against GBI do so under the assumption that coercion is the strongest incentive to work. I think it much more probable to look at GBI as separating the monopolistic part of the work market (if I don't work I will starve) from the competitive portion. Surely more competition in the employment market is a good thing?

Even then, I still think it is the third order effects of GBI (the ones we don't know about, or are to complex to model) that are most likely to cause massive societal upheaval. But then, maybe massive societal upheaval is what proponents of GBI are most excited about.

...monopolistic part of the work market (if I don't work I will starve)...

That's not what "monopolistic" means. "Monopolistic" means one supplier.

Is the argument for BI really "we have no idea what will happen but it'll sure be massive and we believe without evidence that it will be good?"

Missed the forest for the pedantries.

In an employment market, I am the supplier, my boss is the consumer. I hold a monopoly over my supply. All of my competitors offer my employer a slightly different product. The market is a monopolistic competitive market. On the other hand, my boss holds a temporary monopoly on my income, whether I eat or not.

With a GBI, these monopolistic parts of the market may be removed. My boss does not have to choose between me and another employee offering slightly different products, we can both be hired for the distinct bits of work we are can provide, and for an agreed price we value the work at, not an amount we need to satisfy our need to live. ie.it opens the employment market up to purer competition.

Is the argument for BI really...

Let me be clear, I don't think this is a good thing, but that is the sense I get from pro-GBI advocates. The scary thing is it most probably would be massive, in time, and there is little good evidence on the knock-on effects. I get why anti-GBI advocates are scared, they stand to lose money, but pro-GBI advocates should be scared too. So I guess what surprises me is they both should be arguing for trials, surely?

...my boss holds a temporary monopoly on my income, whether I eat or not.

The former is not the latter. Google "savings account".

Transaction costs are, economically, only a monopsony in the regime of small price changes compared to switching costs. I.e., if the cost of finding a new job is $2,000 then your boss can only underpay you by $2,000.

So I guess what surprises me is they both should be arguing for trials, surely?

I have no objection to trials. Unfortunately, a lot of BI "trials" are not really trials of BI at all - they are experiments in transferring wealth from outside the trial area into it. E.g., Mincome, the Uganda experiment. These trials certainly show that imperialism makes the empire richer.

Google "savings account".

Google poverty.

Savings are stocks, incomes are flows.

http://www.boeckler.de/pdf/p_imk_wp_100_2012.pdf

I think you mean https://en.wikipedia.org/wiki/Monopsony

The suggestion that a change could increase both consumption and investment is not inconsistent. Economics isn't zero-sum, and if there policy accelerated aggregate expansion it could do both of those things.

OTOH, you complaining initially that the article sells increased investment as a benefit of the policy, and then at the end of your post characterizing the article as "Demand Good, Investment Bad" is a fairly direct contradiction.

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