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Comment by HisGraceTheDuck | Hacker News Reader

Until I read this I was more or less pro-UBI but this article makes some excellent points.

UBI essentially assumes that everyone is a rational actor and that they will not succumb to spending the basic income on non-productive things (drugs, alcohol, gambling, excessively expensive consumables, etc). This is demonstrably false, especially if individuals don't have a day job. On an individual level it's easy to say that people should be responsible for their own wellbeing. But as a matter of public policy, it's just plain bad policy.

It's also hard to see how that money would /not/ be extracted in the form of higher prices across the board.

And the main point of the article is a very good one: what happens to all the now-unskilled labour?

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> UBI essentially assumes that everyone is a rational actor and that they will not succumb to spending the basic income on non-productive things (drugs, alcohol, gambling, excessively expensive consumables, etc). This is demonstrably false, especially if individuals don't have a day job.

Most people that collect social welfare payments in Australia and New Zealand don't do this - they are frugal with what they get and are careful to pay for their essentials first.

Those that aren't able to budget like this are often offered help in the form of budgeting advice and planning. Sometimes they will find themselves in a situation where they receive the payment they are entitled to, minus the cost of their rent - which is paid directly to their accommodation provider (often the government).

Beyond this, the number of people that don't benefit from their welfare payments because they fritter them away is vanishingly small.

BTW, here in NZ we do actually have a UBI, it's available to everyone regardless of income. The only condition is you have to be of retirement age. Unsurprisingly, it is very, very popular and nobody ever brings up the kind of objections to it that you have here with regard to UBI.

I wonder how many UBI proponents here would be willing to adopt your immigration rules, which go a long way toward making your system work as well as it does.

I'm not exactly sure which rules you are referring to, but if you are alluding to Australia and New Zealand being difficult to emigrate to, I would just point out their respective population growth rates relative to the US (this growth is not due to natural increase - it is immigration that is driving it).

https://www.google.co.nz/publicdata/explore?ds=d5bncppjof8f9...

I am referring to the points system and income requirements, which give priority to people who are young, healthy, well educated, in demand, and/or wealthy. This ensures that most who are approved will provide substantial funding into the system before needing to draw from the system. As a result, the immigration-driven population growth you point to actually helps support the system.

That condition is important though. Have you ever wondered why the retirement age keeps going up despite there being a constant shortage of work? That's because society will only grant you a certain number of years off in return for the years you spent on the job.

So retirement is just deferred wages. That's a different concept to getting paid for nothing all the time.

How to afford a UBI is a different issue. (As an aside, I believe it is possible, but only after fundamental tax reform that shifts the burden away from earned income and towards unearned income.)

My point with the pension example above was to illustrate that a universal 'living allowance' doesn't necessarily get squandered.

> they will not succumb to spending the basic income on non-productive things

Actually, they can, there is no problem. Somebody still has to produce these things, and they have to pay them. So naturally, cost of these things is bounded from below by their supply.

As someone noted, you can look at rich people who don't have to work, they mostly don't do that.

Also, from ecological perspective it would better for people to spend most of the money on alcohol rather than say travel, because the ecological impact of drinking is much smaller. It's in fact interesting, because we tend to see unproductive things as bad, but they often have smaller ecological impact.

> It's also hard to see how that money would /not/ be extracted in the form of higher prices across the board.

Yes, the price of the labor would be higher, but that is the whole point. Although the best I think would be to tie the UBI to %HDP or income taxation, so that even if more is given to the productive people, the same portion is again returned to everybody at some point.

People get this intuitively wrong, because they don't understand that in basic money equation, there is also velocity of money. The UBI in fact artificially increases the velocity, by redistribution of money at many points in economy to everybody, forcing another redistribution from everybody to production.

> what happens to all the now-unskilled labour?

Why don't you ask this today in the context of disabled people, or retired people? It's really nothing to freak about.

>>The UBI in fact artificially increases the velocity, by redistribution of money at many points in economy to everybody, forcing another redistribution from everybody to production.

Increasing the velocity of money without increasing production just leads to devaluation:

    MV = PY

Where M is money supply, V is velocity of money, P is nominal prices, and Y is the real value of production

So P = MV/Y. Increasing M or V increases P.

You don't get more stuff just by moving money around faster. And production will decrease with higher welfare spending, so you'll have less per capita GDP/consumption/quality-of-life.

Producers receive less per hour worked because now a portion of their production has to be given to other parties who are not contributing production in exchange. Imagine if all the non producers got zero dollars. Now the money the producers earn could be traded for goods other producers are producing, letting the producers consume more goods.

Production is not an unlimited resource that can just be increased by increasing some party's consumption level. Increasing one group's consumption through income redistribution comes at the expense of lower consumption for another group.

The primary motivation of UBI is not to increase production, but to change its structure so that people who are poorer are better of. After all, according to the theory, the production should already be at the peak.

My point is though, if you naively ignore V in the equation (and yes, usually it's considered to be a constant), then you might think that increasing price of labor can lead to decrease of production, because the term PY must be constant. But it's not constant if you increase V correspondingly, and so the decrease in production won't happen in UBI, even with inflation.

In practice, the production is often not at a peak, and there are savings too (not everything gets invested or consumed). Redistribution in UBI has then potential to reduce savings (because savings really make rational sense only if you're powerful enough) and through that increase the economic production in the slump.

>>My point is though, if you naively ignore V in the equation (and yes, usually it's considered to be a constant), then you might think that increasing price of labor can lead to decrease of production, because the term PY must be constant.

The P represents the nominal price of goods/services, which is not the same thing as the 'real' price. When V is increased, P is increased correspondingly, which means the price of everything goes up, and the faster circulating money buys the same amount as before. So Y doesn't increase if you increase P. The PY side of the equation can increase without any logical inconsistency, since it represents the nominal price of all economic output, and not the 'real value' of that output.

When PY increases without an increase Y, you're simply getting inflation, where everyone earns $2 increase of 1, but everything costs 2X as much.

Anyway, the point is that increasing V has no effect on total consumption, so there's no benefit from deliberately boosting V. If that weren't the case, you could grow the economy simply by mandating that everyone spend more, which obviously would be magical economics.

>>Redistribution in UBI has then potential to reduce savings (because savings really make rational sense only if you're powerful enough) and through that increase the economic production in the slump.

Most savings are in the form of investment. Reducing the savings rate and savings not only will make the economy more fragile to shocks, but will also reduce the investment needed for economic expansion. The ultimate source of all economic growth is investment. A policy that reduces investment is harmful to efforts to grow the economy.

Yes, but the point of UBI is not boosting V, it's just a side-effect. The point of UBI is change in structure of production.

Also, regarding savings, according to standard theory, savings are indeed equal to investment. But I think it is wrong, because in the real world, there is a difference in reversible and irreversible actions. So I consider investment/consumption to be only irreversible actions on the world (for example, building a factory), while savings are reversible actions (buying a gold brick from someone). In the real world, it makes sense to postpone irreversible actions if possible (you can always react to others), and so investments and savings are not the same thing!

In fact, this happens in deflationary crisis, people hold money (that is, postpone irreversible decisions, and by above definition, save) in expectation that the money will gain more value. And they are effectively deadlocked, waiting for each other to make move and make irreversible decision. This is bad for economy, because economic production requires people to make irreversible decisions (to invest and consume), and so giving everybody some amount of money (especially to people who have no option than to spend, in the form of UBI) can break these deadlocks.

And yet another case of "the poor have no morals or responsibility, and deserve terrible they get" - no matter that evidence / research doesn't show this. And in fact shows the opposite.

How is the comment saying anything about the poor? If I got UBI I would instantly quit my well-paid job and just slack off all day long. It has nothing to do with being poor or not.

My guess is you might do this for a month or two, but eventually you will get bored and end up doing something productive.

How many people with substantial inherited wealth just slack off?

Why instantly quit? UBI gives you more negotiation leverage because the consequences of being fired are much less severe. You could probably negotiate better working conditions or fewer hours in exchange for less pay.

There's a whole range of possibilities between low pay, maximum freedom (nothing but UBI), and high pay, low freedom (continuing to work as before). That's one big advantage of UBI over other benefits schemes: there are no breakpoints where working makes you worse off.

To the contrary, nobody has any morals or responsibility. Dial back the victim complex.

If you have to work for money you value it in terms of the work expended. So you will only let it go when you can exchange it for sufficient value. Exchanging money for insufficient value is what causes inflation.

Which then leads to the idea that the idle rich can cause inflation because they have a reduced sense of value to the poor.

If we are to share the same currency we have to have a similar sense of what it is worth in exchange. Spending eight hours doing something in exchange for 80 dollars gives you a very good idea what those dollars need to be worth.

Work is actually what we do with our day to get a sense of value. If you expect somebody else to give up their day to produce stuff for you then you have to respond in kind or they'll stop doing it.

The reason we resent the idle rich is that they expect something but add nothing of actual value back in return. So it would be with anybody receiving free money. It would be seen as the theft it is.

I think many people mistake "going to work" with "adding something of value to society". From my observations not all jobs equally or directly benefit us all and some have a marked negative impact on society.

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