Comment by billmalarky | Hacker News Reader

Comment by billmalarky | Hacker News Reader

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>Housing prices and rent will assuredly rise proportionally to the basic income amount if this were to be implemented nationally, so wouldn't pumping all this money in basically just have the effect of increasing inequality?

Unlikely. UBI removes the connection between location and income. As a result you can move to somewhere incredibly cheap to live since there's no need to be in an in demand market in order to have a nice job.

Housing is really quite cheap in the US. With Real Estate you pay for the location not the actual land or building.

Of course people won't necessarily want to move away from their "hip" city, but UBI is "basic" and if you want to stay in a high demand area you will have to supplement UBI with work.

As for basic consumables, demand is unlikely to go up for these fundamental goods because people are _already_ consuming them at their basic required levels under the current system (toilet paper, eggs, milk, bread, chicken, beans, rice, birth control, etc).

If people in every location have their income increased, then the housing prices inflate in every location. Saying, "People can just move" is missing the point.

It isn't that they can't afford to live where they are now, it's that BI will be absorbed by price inflation everywhere.

I think it's you who's missing the point.

A big reason for the current rise in real estate prices is urbanisation (centralisation of population in big urban centers) - e.g. London, NY, SF, and plenty other cities. (The other reason is foreign investments, but I'd argue the investment comes after the initial rise in prices, simply because real estate is perceived as a good investment opportunity.) This urbanisation is to a large extent driven by the fact that the most high-paying jobs are available in these cities, which consequently also increases the availability of lower-paying jobs. I.e. people move to cities to succeed/earn money.

If you remove the last implication - if people can earn a living without moving to big, overpopulated cities - then arguably the concentration of population would drop and the "bubble" would pop/deflate.

You're assuming that there can only be one cause of real estate price increases.

Housing prices are a function of income elasticity - raising the income for everyone will raise housing prices for everyone. Note - this is not the only way that real estate prices can increase (as you described urbanization), but it is one that BI would cause.

>raising the income for everyone will raise housing prices for everyone

This is a truism but incorrect in the context of this conversation.

UBI does not increase incomes for everyone. It is a wealth redistribution. Many will see their income fall, especially initially, in order to prop up the incomes of the poor and those who decide to live solely off UBI.

Universal Basic Income (UBI) at it's core increases income for everyone - universally.

What you're thinking about is a negative income tax or some other BI that is disproportionately weighted.

A universal income increase is not a universal net income increase, if taxes on non-UBI income become more progressive at the same time.

At a glance (and because of the name) it appears that way, but it does not universally increase income, it gives everyone universal access to basic income.

Many people (the wealthy) will have their net income (income after taxes) go down considerably in a UBI system.

For example, everyone gets $12k a year in UBI income, however funding such a system will require a fairly stiff tax increase (this is how the wealth redistribution will occur), so for high earners, their $12k in UBI will be negatively offset by the increase in taxes.

As an extreme example, someone earning $1MM annually will get the $12k UBI same as everyone else, but an (example) increase in the top income bracket from 39.6% to 60% will cause them to pay $118646.4 more in taxes resulting in their net income under a UBI system to go down (-$118646.40 taxes + $12000 ubi) $106646.40.

The top income bracket is 3% of the population. You're still increasing the income of 97% of the population, which is what causes inflation on income-elastic prices like housing.

This is a misunderstanding of how both macro inflation occurs (money supply growing faster than true value of wealth it abstracts), and how price is set (supply and demand).

UBI does not "create" new money and just give it to everyone (which would cause inflation). It's a wealth redistribution. That is, many people will see their income go down under UBI (probably most HN readers for example). The money supply will represent the same amount of wealth, what changes is who owns that wealth and as a result who decides how to use that wealth to consume.

Regarding price changes, price is set by the amount of a good/service demanded by consumers, and the supply of the good/service created by suppliers. High discretionary income does cause the demand for certain goods/services to go up (especially luxuries), but UBI is so basic at $1k per month it won't make much of a change in the demand curve because the type of goods/services that will be consumed by someone living on UBI are so fundamental they are already consuming these goods at the same rate under the current system.

So far as housing is concerned, UBI will pretty much "explode" the supply of acceptable housing for people living solely on UBI since they get access to housing in the entire US instead of having it constrained to locations where they could conceivably "make a living." I'm sure you realize what happens when supply increases drastically but demand stays somewhat constant (everyone has to live somewhere and you can only live in one place at once) -- the price of housing on avg will plummet considerably for UBI'ers.

>UBI does not "create" new money and just give it to everyone (which would cause inflation). It's a wealth redistribution.

UBI is Universal Basic Income, meaning that income is increased for everyone universally. Nobody is claiming that money is created out of thin air.

What you're thinking about is a negative income tax or some other disproportionately weighted welfare program.

Not true see https://news.ycombinator.com/item?id=15306562

That still doesn't explain why you think people are saying that money is created out of thin air.

Increasing the income for the vast majority of the population inflates the prices of income-elastic goods and services.

The idea of UBI at $1K per month shows that UBI advocates don't know how to do math. The US tax revenues (combined Fed and State) are roughly $6 Trillion. Giving 150 million people $12K per year is $1.8 Trillion. Unless you raise taxes by 1/3, you're going to cause inflation.

This is a strawman attack. Everyone knows UBI will require an increase in taxes that's fundamentally how the wealth redistribution will work.

Not a strawman at all. Many UBI proponents claim that it's more efficient, by directly paying for services already provided. Then when called on that, they switch to your strawman that "Everyone knows UBI will require an increase in taxes..."

Again, good luck trying to raise tax revenue 30% without killing the US economy.

My taxes are already pushing oppressive. Raise them further, and I'll seriously consider "going Galt" - cash in my investments, buy real estate & capital equipment outright, and live quite comfortably on $4000/mo ($UBI * family population).

You're subsidizing the unproductive, and punishing the productive. I can be productive in untaxable ways.

>My taxes are already pushing oppressive. Raise them further, and I'll seriously consider "going Galt"

Under UBI that would be your prerogative. Most highly productive individuals and all corporations will carry on producing.

>You're subsidizing the unproductive, and punishing the productive.

You may have moral qualms with a UBI system. You will need to come to terms with these doubts in the midterm future, as UBI will be the only system (we currently know of) capable of sustaining a market economy in a world where automation has displaced the workforce.

The same "displace the workforce" arguments abounded during the Industrial Revolution. Most everyone is still employed (biggest impediment isn't lack of jobs per se, it's oppressive regulation making employment of low-productivity people untenable).

There does indeed come a point where taxation reaches high enough levels that people (and groups of them a la corporations) lose interest in exerting greater effort. The popular actor Ronald Regan famously noted that he would have produced far more movies, but it just wasn't worth it under the confiscatory tax rates. Most of the time, people will indeed continue producing without such drastic obviousness - but there WILL be a tapering off of productivity, and history makes that clear to those willing to see the objective facts.

:thinking_face: maybe we need a reverse-graduated income tax i.e. you are taxed less the more productive you become. Then the most productive are super encouraged!? There's definitely some unintended consequences in there... but it might be the start of an idea.

It doesn't seem like a strawman to me. The money has to come from somewhere or else mass inflation will happen instantaneously. The number of goods and services that exists is finite. Giving people free money which removes their burden of supplying value to others will not only fatally harm the buying power of the dollar but it will actually reduce the number of goods and services available which will have the opposite affect than intended. UBI will fail spectacularly if implemented at any meaningful scale.

Sounds like yet another argument trying to deny the law of supply-and-demand, like those who quote the laws of thermodynamics and then claim they have a perpetual motion machine.

Instead of having to work for that first $1000/mo, it just...appears. Yes it was earned elsewhere, and whoever earned it won't miss it as much as the recipient will appreciate it, but since the recipient has done nothing for it, its local value plummets. Instead of some low-income people having $1000/mo for rent, now everyone has $1000/mo for rent - and basic prices will rise accordingly.

I won't notice much change for losing a sub-1% of my income, but those for whom UBI is really intended can go from really struggling to renting (even buying) housing. With limited housing supply, suddenly prices will rise.

While I'm a staunch advocate of "move already!" for solving economic problems, I don't see enough people moving - nor enough housing for them to move to - to cause "the price of housing on avg will plummet for UBIers".

Imagine the poor section of town. Many/most rent. Suddenly, with no additional productivity, everyone is getting checks for $1000/mo. You think rent etc prices aren't going to suddenly skyrocket? I grasp your theory that people can now move to more affordable locations, not needing to be near jobs - but will they really? before they can, rent prices just shot up, consuming their newfound income. Destination rental prices similarly increase - still relatively attractive, but higher than before since there is more demand and more money to pay for it.

Yes the supply of acceptable housing for UBIers increases, but those markets already existed and were already priced for a low-demand market; now you've "exploded" the demand - prices will rise, matching people who now have $1000/mo and few expenses.

Here you claim to earn more than $100k every MONTH, yet in another comment you claim the amount you are taxed is nearing oppression. It sounds like maybe you're just saying whatever helps your argument at the time.

I’m not convinced that UBI will dramatically affect the housing supply for many people who would rely on it. Maybe you can expand on what you mean in light of an example:

I live near Vancouver, which is the most expensive housing market in Canada. Poor people here have access to free health care, a provincial welfare program, and a permanent disability allowance. The income amount is enough to live on in some parts of the province, but not Vancouver. Still there's a glut of unemployed poor people who prefer substandard housing or homelessness over relocating to where they could afford to live. They don’t choose to live anywhere else, even though they're not in Vancouver to “make a living”.

Programs aimed at helping the poor here focus on providing subsidized housing, not relocation.

It seems to me that if UBI doesn’t help these people afford a better standard of living where they are now, then it won’t help them at all unless they’re forced to relocate. What am I missing?

Figures put 14-20 million unoccupied houses in the US. A lot of those are just rich people buying valuable real estate and hoarding it as a store of value, but a lot of them are also in locations where nobody who would want to buy them can afford to live because there is no work available. There are thousands of ghost towns in rural America which depopulated for a wide variety of reasons since the 70s but all could be cheaply renewed if people could survive living there without guaranteed constant employment.

So its not that the whole housing market just moves up the value of UBI and nothing changes. UBI introduces a new market of houses that currently are unsellable and rotting.

Those are obviously not a long term solution, but the existence of UBI and the economic pressure it produces will incentivize builders to develop the cheapest possible living conditions to supply to people living on UBI. That almost certainly would be an entirely new model of building - constructing for density, but without the limitations of building in already densely populated areas.

The unoccupied homes in the U.S. is primarily due to banks holding onto foreclosed properties.

You could say, "This is a problem with the current financial system," which it is, but it's not a problem that UBI will solve.

If UBI is enacted, then prices will still inflate and people who purchase foreclosed homes at auction will continue to do so today, because they will also have the same increase in income as everyone else.

The net increase in income won't be the same for everyone.

If UBI is funded by printing money, people with assets will see them devalue through inflation (people with no assets won't have this loss).

If UBI is funded by taxes, it's likely to be progressive. So sure, the high income people get the UBI check. And a bigger tax bill to go with it.

If you assume UBI is based on an income tax, then that's not universal basic income, that's negative income tax.

Even so, if you hypothetically see a decrease in income for 3% of the population and an increase in income for 97%, you still have inflation. 100% of the population purchases housing, which is income-elastic, meaning housing prices will increase because 97% of the population's income will increase.

I'm not assuming it would be distributed through the tax system, I'm insisting that it is either funded by taxation or inflation.

Maybe it would be funded by magic fairies, who knows. I guess funding it with inflation would be close enough to that.

The point I'm making is that the "universal" or "unconditional" just means that everyone gets it. It doesn't mean that everyone is better off after it is put in place, because there will be tax and economic effects from putting such a thing in place.

And the point of this thread is that if everyone is to get UBI, economic principles like inflation need to be addressed first.

This is why traditional welfare programs tend to limit the type of spending - i.e. medicaid or food stamps.

This assumes both A. everyone is suddenly just making more money and B. the supply of housing remains constant.

In terms of A, some people would drop out of their current employment. In all likelihood temporarily, but a lot of people are doing things they don't want to do because they don't want to be homeless. Likewise, it would almost certainly not be 97% of people making more money - that kind of progressive tax threshold would mean you don't even start taxing for UBI until 6 figure income.

In terms of B, a lot of areas of the country are currently unlivable for a huge percentage of people because there is no way to earn money to afford to live there. Living there in absolute monetary terms would be cheap, but absolute money is pointless if you have nothing coming in.

UBI reduces demand for housing in cities because anyone that doesn't want the added income from living there would now have the option to move away. City housing prices are extraordinarily beyond the flat costs of construction and maintenance - the scarcity of work means a scarcity of high demand housing in cities surrounded by deserts of unlivable land.

Finally, for all those dropping out of the workforce, the UBI is not an elastic income - it will be a simple binary can a UBI recipient afford to live in your apartments or not. For those who want an extremely reliable tenant who has a guaranteed ability to pay rent every month, meeting the UBI threshold becomes an extremely strong price ceiling on affordable housing.

Inflation isn't magic. Inflation happens insofar as someone is willing to pay the higher prices and nobody can produce supply to drive the price back down. Introducing UBI does neither to housing (especially when as a percentage of income UBI relative to the cost of home ownership would be a relatively small gain in income for most people, and almost all current homeowners / tenants).

So you expect people to relocate from California to Detroit... Good luck with that happening.

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