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Comment by PKop | Hacker News Reader

Can you explain to me, because I've never understood fully, how if we give everyone some lump sum amount (which I agree is the desirable vs. means testing etc.), how it won't result in inflation of prices whereby it will be the equivalent of dropping money out of a helicopter, everyone gets equal cut.... prices rise correspondingly, and real purchasing power does not change at all?

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More demand does not always result in higher prices. Price depends on the elasticity of supply for all of the different goods as well. Some might increase, while others wouldn't.

Probably the most significant cost for most people is housing and that does seem to have an in-elastic supply. My guess is this is where the money will go.

We have seen an element of this in the UK where housing benefit largely ended up in the laps of landlords.

If you don't need a job, you don't have to live in the city with everyone else. There's plenty of cheap empty land you could live on.

There are other reasons to live in a city besides a job. I imagine that as we move toward a "jobless" future cultural and scientific output will increase, and you'll still want to be around the people who are doing the "cool stuff."

You'll want to, but you won't be able to afford it. In a future with UBI the city will be for employed people only.

But you will have the choice. Also, I imagine that a jobless future will be heavily automated. Cheap autonomous transportation might expand the housing area with sustainable commute. Even more so if you can work remotely part-time and shorter hours.

But when you're not spending 40+ hours a week working, an hour long journey to do cool stuff isn't as big a deal.

And besides, I think a most of the other people doing cool stuff will want cheaper accommodation as well, and over time particular kinds of cool stuff will congregate in different smaller towns.

Elizabeth Warren of all people has focused on this as a problem in the US also.

The move from single-income to double-income families produced far less than a doubled standard of living, but it drove housing prices sky high. It's an interesting natural experiment for what we might see with UBI programs (which act a lot like adding a 'free' wage-earner to each household).

The money doesn't come off the printing press out of thin air, it's a redistribution of wealth. That is, additional wealth (or currency which is an abstraction of wealth) isn't created, it is redistributed.

That wealth can be used to consume the same amount of goods/services that it could have before the redistribution, but now many users get to make those consumption choices instead of one or few.

Yes, this redistribution will have a massive impact on the _pricing_ of different goods and services within an overall market. However, total wealth (ability to consume in aggregate) will remain the same within that market.

If prices rise in perfect proportion to the new income, that means there's something severely restricting supply, otherwise price competition would force them down again.

Or alternatively the stores could compete by offering better service, in which case people benefit from that.

Inflation has more to do with the amount of money in circulation. If you finance with taxes and not debt, the value would stay constant.

But a bit of inflation may not be the worst thing – the current almost-deflation is a lot worse and both private and public debts could finally be lowered. Unfortunately, it's a pretty imprecise mechanisms and there are some people that suffer disproportionally such as those around retirement age getting fixed pensions.

Let's for a moment make a thought experiment.

Everyone just magically has enough money to buy 'the basics', but can't use the money for anything else, in fact they never see the total.

What happens the the price of 'the basics' then? What happens when everyone can afford to not be wanting?

There are probably 'better' basics, for example penthouse apartments, but those will are all already above basic, so buying caviar or high end steak might be off the table.

What would happen if demand is just met?

The money would need to be spent anyway, these are basics. Not having spent it would result in what? More crime, more jail time, worse medical outcomes? All of that sounds like expense to the population at large, in the form of emergencies that use social safety nets.

I think the argument for UBI / BIG is that it identifies the root cause of the expenses and attempts to just fix the problem (by, for example, having a basic minimum of housing, or in the case of areas where housing costs too much; causing more housing to be built).

I think the other poster's argument is that the price of the basics will be artificially inflated as those sellers know that low income/basic income people have additional money to spend on required items. The price of a penthouse apartment will not increase, but a slumlord that knows the government will be mailing checks to everyone would certainly have no qualms with raising the rent by a few hundred dollars to accommodate the extra income he knows his tenants have available.

EDIT: To add to this, it's worth pointing out that many corner stores in low income neighborhoods already take advantage of peoples' lack of access to easy transportation to charge unusually high prices for common convenience store items. It's already more expensive to be poor, and I think basic income would just increase the predatory practices that are already happening.

I agree that it's hard to say what would happen with regards to rent seekers, but corner stores aren't in the same situation. Their increased costs are either due to the rents being increased by the person who owns the building, or the simple fact that they do not have economies of scale so they end up with higher prices on the items that don't expire quickly in order to make a profit as they won't make much off of gasoline or milk, for example.

There are plenty of discount stores that are working their way in, e.g. Dollar General, Family Dollar, but they don't have control over the rents either and in alot of larger cities they also are facing opposition from the small businesses that would be out of business since they would have no chance of competing on price at that point.

Whether having every small bodega or other small retail shop replaced by 7-11, Dollar General, Family Dollar, etc. and yet another avenue for access to the middle class shutdown is worth the affordable prices for everyone else is debatable. I can see both sides of this anyways.

Why would people stay in expensive slums when they can e.g. move to countryside and live there for a fraction of those money on basic income?

I think predatory practices will decrease because people will be voting with their feet, no longer constrained by where they live.

People are social animals. Not everybody will move even if they were personally better off by moving.

Also not everybody can afford to move.

> can afford to move

Basic income is precisely about "afford" part.

Those who won't move will benefit too because landlords will have to work on retention.

> Basic income is precisely about "afford" part.

This assumes that basic income either includes an allowance for moving or contains enough of a surplus over basic needs that savings can be accumulated.

I actually think that communities might sponsor your moving on their turf as this will mean you'll spend your BI there for prolonged time.

One of the most attractive aspects of basic income is exactly this. $10000 a year stretches a lot farther out in the boonies than it does in SF or NYC, and if you don't have to be there to work, that opens up a lot of degrees of freedom.

At the same time, it does create potential for severe clustering based on income, possibly resulting "basic income ghettos", with all the problems that entails.

I don't think this would be a problem. There's no reason for people moving out of cities to cluster anywhere in particular. Housing costs near jobs may remain out of reach for basic income alone, but they should still be much more reasonably aligned with wages, since if people start to get stretched, they can just quit and move away.

> There's no reason for people moving out of cities to cluster anywhere in particular.

Economy of scale. Given fixed size of the UBI check, you want to live where services are cheapest. And services will be cheapest in places where more people are serviced together, because that cuts down on distribution costs and other such overheads.

Also, areas where people who have more money than just UBI live, would have higher prices simply by virtue of there being more money in the local economy. This isn't really dissimilar from the existing arrangement, where rich areas are expensive to live in, and so there's natural geographic segregation. But UBI would boost this into high gear.

To clarify, I am a strong proponent of UBI personally. But I think we should be really careful with these kinds of unintended side effects, and try to anticipate and manage them before they cause a bigger mess than what we're trying to address.

Also, have a look at this: https://medium.com/migration-issues/should-a-universal-basic...

Economies of scale have failed. It's official.

Huge retailers today offer worse prices, lower quality and lousy service because they can get away with this, being the only game in town.

At the same time, rent in cities skyrocketed, making low-density and rural places much more affordable.

We now know that economy of scale peters off at some fixed scale.

That's about monopolies, not economies of scale. Yes, they often go together, but they don't necessarily have to.

a slumlord that knows the government will be mailing checks to everyone would certainly have no qualms with raising the rent by a few hundred dollars to accommodate the extra income he knows his tenants have available

He can try, but then he'd lose out to competing landlords who don't raise rents as much (or at all). It's like gas stations; owners know that people are willing to buy almost as much gas at $3/gallon as they are at $2. But when the price of oil falls, they can't just keep charging $3, because their competitors will charge less and take all their customers.

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