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Comment by TrevorJ | Hacker News Reader

I wonder what basic income would do to cost of living? If everyone ends up with x amount of guaranteed income, does the cost of living eventually rise by the same amount across the board and basically negate it? It seems like rent-seeking behavior would come in to play here.

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Inflation is the obvious issue here IMO. If basic income is X, then X really just becomes the new zero. We either need to provide products themselves (free food, housing, healthcare) or somehow lock the price of those things. I suspect both of those tactics will have identical challenges in terms of implementation though.

I continue to believe that the best way of 'locking' a price is to ensure that the market remains with the correct supply to buyer ratio.

As an example: to decrease the cost of rent in a city, an increase in rent-able locations and attached commercial business and non-retail jobs need to be in those locations.

This is also related to suggestions that say controlling medical care could be achieved by allowing more agents at all (doctors or not) to be able to treat obvious conditions. I agree that in the short term the suggestion would be viable, were it not for regulations; however I think that artificial diagnosis neural networks will probably achieve adoption before the regulations catch up.

I often have the same inclination of thought with regards to university education and government-guaranteed student loans. If I'm a university executive, and I know that the average student can afford $X, and I know the average student can also receive a guaranteed $Y in student loans... Why would I not set my price at $(X+Y) and take the full rent that I can?

Only works if every university does the same thing.

Can you explain why "price creep" will not occur, i.e., universities increasing their prices with small amounts (say $10 a year), so that eventually, all of them will end up at (X+Y)$ ?

According to a study be the federal reserve, it actually is happening right now. Education isn't a commodity product so this kind of pricing doesn't require collusion between different schools.

A cursory search leads me to believe this may actually be happening:

http://www.bloomberg.com/news/articles/2015-07-09/why-is-col...

http://www.businessadministrationinformation.com/news/study-...

The money for the basic income comes from taxation. Even though everyone would get it, higher tax rates on people with middle or high incomes would mean they were no better off, or worse off. This isn't supposed to be a way to make everyone $x per month better off, it's a way to change incentives and replace welfare.

What I'm curious about is what's stopping a large portion of the population from simply quitting their jobs to live off basic income, thus decreasing the potential pool from which taxes to pay for basic income can be extracted?

If it really worked out like you say it would, where people with middle or high incomes are no better off, I wonder what they would think when suddenly large swathes of the population are able to live off the dole without busting their humps.

>thus decreasing the potential pool from which taxes to pay for basic income can be extracted.

Basic income proposals usually work something like this (numbers all made up, but close to those I've seen):

Each person gets something around the poverty level (say $10k -$15k per year). The taxes that are raised to pay for it would increase gradually based on income up so that it would be a wash for someone making $55k a year, and once you start making more than $75k a year, you start paying more.

If you look at those numbers anyone who decides they can live off of the basic income was unlikely to have been making enough to pay any federal income tax at all, much less enough to have been contributing to the extra UBI tax.

> where people with middle or high incomes are no better off, I wonder what they would think when suddenly large swathes of the population are able to live off the dole without busting their humps.

They will be living off the dole at the poverty level, not living middle class lifestyles.

But remember, living off the dole also means not contributing anything back to society. These people could be doing something of value, but are incentivized not to.

It's not really quite that simple though. You have to look at a UBI in comparison to our current system.

How many more people will quit their jobs instead of working if we replace our current system with a UBI? Small scale preliminary studies seem to indicate not that many.

>But remember, living off the dole also means not contributing anything back to society. These people could be doing something of value, but are incentivized not to.

That's not true at all unless you think people on welfare and disability are incapable of contributing anything back to society.

Lets say we have a single parent who can't afford day care. He parks his kids in front of the TV, or pawns them off on inattentive relatives, so he can go to McDonald's 30 hours a week and make $8 an hour. I think that he would contribute more to society in the long term by staying home and raising his kids than he does making minimum wage at McDonald's.

Then we look at the economic upsides to a UBI. It is likely that a UBI will reduce crime. It will also likely encourage more entrepreneurial risk taking. And like in my previous example, a UBI will allow more parents to stay home and spend time with their children, potentially allowing the children to earn more money in the future.

Countries with generous (compared to USA) per circumstance income transfers don't generally have a big problem with this. People have a pretty basic need to feel useful to society, and for status. It does raise the bargaining position of the employee on the job market somewhat for the low end of the job market. But it's just much better for everybody if cleaners and janitors get respected a little more by their employers and aren't just a pink slip away from the gutter.

And UBI will do better in this respect than per circumstance income transfers since you get to keep all the money you earn on top of it.

If someone is willing to do this, they are likely to be people who currently are on low incomes and thus unlikely to be paying much tax if any. I think it would have the opposite effect though. In most countries, the welfare system harshly punishes people who do a small amount of work, withdrawing benefit at a very high marginal rate. This is a massive disincentive to finding work. With a basic income, people can for example do voluntary work. People on sickness benefit can gradually try to go back into work, doing a few hours per week. If you can top up your income without being penalised for it I reckon quite a lot of people currently on welfare would start working a little.

Most people don't want to be poor.

I think the cost of a lot of basic goods and services would fall. Employers would only need to offer relatively modest wages because the marginal value of those wages would be so much higher. This could drive down labour costs without driving down net pay for low wage workers. Basically a worker on $1,000/Mo now might be on $600/mo basic income and $600 wage after (fantasy numbers). This could make low wage workers much more affordable for employers leading to more employment and cheaper goods and services, leading to lower cost of living. A win for employees, won for employers and win for customers. Of course this is an idealised scenario, it would all need to be funded from higher overall taxation.

This is exactly wrong. The cost basic goods would increase. Basic Income would immediately have an inflationary effect as the money supply for these good would be expanded drastically.

The Employer would not see as much benefit as you'd think as presumably he would be amongst the class of people/entities (including the middle class, upper class, and corporation) which would be paying for this indirectly in the form of taxes.

Alternatively, if Basic income is debt finance (and not financed directly through taxes), incurring more debt also has inflationary effects.

It may or may not be wrong. There will definitely be some inflation, but there will also be an equilibrium. It is also a possibility that if the UBI is adjusted accordingly, that the relative costs of things will remain roughly the same.

As for whether employers will benefit, recognize that demand will also increase when those who were formerly impoverished begin consuming things. It is direct and distributed economic stimulus.

I don't suppose it's guaranteed that the overall incomes of the lowest earners would actualy increase though. Maybe they would, but it's possible wages will fall and rents will rise to cancel that out.

You may well be right about employers. Basic income isn't going to wish away all the problems of the poor. The main benefits are likely to be a simpler, fairer and more efficient benefits system and more opportunities for employment.

3D printing and market forces will take care of raised prices. Cost of production are going down. If company X decides to sell for 100% increase company Y will see an opportunity to undercut and we will continue with our race to the bottom. If no one offers value a new company Z will enter the market and provide it or people will just start manufacturing/growing it at home.

Inflation only occurs with increased supply of new money into the system so whether or not there is inflation depends entirely where the money to pay for BI comes from.

Like Walmart paying workers less and not giving them insurance because they can still be on welfare.

Of course it does, it's the same thing with minimum wage increases. When businesses have to pay all of their employees more, that just doesn't come out of their pockets. Price increases across the board are passed down to customers.

But businesses won't have to pay employees more. If anything, they can pay less because the UBI covers it. See @simonh's comment [0] to parent.

[0] https://news.ycombinator.com/item?id=10982605

In competitive markets - short term you'll see inflation, long term prices come close to production costs(which are unaffected by inflation).

But it may different for housing and uncomeptitive markets.

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