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Comment by aazaa | Hacker News Reader

The interview here is compelling. Yang's book is even more compelling.

But what Yang doesn't do here or in his book is make a powerful case to fiscal conservative spelling out just how universal income will avoid demolishing the economy through inflation. Until this happens, UBI is going nowhere.

Although COVID-19 is on everyone's minds right now, it wasn't too long ago that Venezuela, its hyperinflation, and empty stores were the topic of concern.

COVID-19 has brought with it store shortages, which no doubt is a massive shock to most Americans. Nobody knows when those shortages will end.

Imagine what could happen if you dropped a grand in everyone's pocket every month. Also imagine the humanitarian crisis that would result by trying to suppress consumer inflation through price controls.

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There is nothing inflationary about UBI. It's interesting how people think the onus is on UBI proponents to justify why their policy wouldn't cause inflation. Even if it did cause inflation, ultimately it's just a redistribution of wealth, and it still helps those most at the bottom.

You mention Venezuela which is a totally different scenario. They had an economy overly dependent on imports paid for by the revenue from oil exports, so when the price of oil crashed, so did their economy along with it. With resulting large amounts of foreign denominated debt, their only options were to 1. default 2. print money to pay off those foreign-denominated debts. They went with option #2, and their currency collapsed. Furthermore their country has extremely weak property rights (eg. businesses being seized by the government), enormously high levels of corruption, and ridiculous price controls.

Now what does any of that have to do with UBI?

There is a large risk of inflation under UBI. You cannot make an honest argument about UBI without accepting this risk.

1. On the margin, UBI reduces employment and production. This contributes to inflation.

2. On the margin, UBI increases consumption of consumer staples. This contributes to inflation.

3. On the margin, UBI increases the velocity of money. This contributes to inflation.

4. Under most assumptions, UBI increases government spending. Either taxes will rise, increasing the real cost of goods and services, or the money supply will increase, contributing to inflation.

UBI advocates should not dismiss these effects outright but should argue that they are small in comparison to the benefits of UBI. The lack of proper consideration of these arguments (and other arguments) by UBI advocates is pretty dang spooky.

1. Early evidence of UBI reducing employment actually shows the opposite.

2. Increased demand for consumer staples, if met with increased supply won't lead to inflation, if suppliers and entrepreneurs see the increase in demand as stable, they will make investments to increase supply. As long as we allow the price seeking mechanism of the market reach equilibrium, inflation will be at most momentary.

3. Velocity of money doesn't, by itself create inflation. Said another way, it's not a sufficient condition to bring about inflation. Sometimes a massive increase in money is just hoarded and doesn't enter the economy in any real sense.

4. Taxes don't necessarily have to rise in a regressive way such as sales tax and instead could be redistribution. I suspect what we would see is less inflation in the luxury art and real estate market if taxes were increased and the proceeds redistributed.

1. Below is a summary of evidence that UBI reduces employment. The reductions of working hours are substantial, even in studies widely spun as "no change". Below that is also HN debate about it.

https://www.chrisstucchio.com/blog/2019/basic_income_reduces...

https://news.ycombinator.com/item?id=22493537

2. Assuming that the equilibrium point remains at the same price level is difficult. It requires assumptions about the elasticity of demand and the elasticity of supply. Generally, if UBI has disincentivized work, you would expect less work, less supply, and a higher equilibrium price.

3. Under a constant money supply, increased velocity of money does create inflation. This is fairly standard economic theory. Increased hoarding is definitively a decrease in the velocity of money.

4. Fair enough, but it requires you to trust the politicians to pass a tax that impacts only the extremely wealthy. This is not guaranteed or even likely.

That first paragraph is a hell of whipsaw. It's not inflationary, you need to prove it is inflationary, and even if it is inflationary it doesn't matter.

UBI as a policy is trivially putting lots of money into circulation, so it's not unreasonable for people to be worried that would be inflationary.

Venezuela is a great example of the problems of inflation, which is a big concern with UBI as a policy, that's what it has to do with UBI.

Seems pretty similar to a tax break though no? I think UBI and taxes need to be intertwined. I could get behind UBI if coupled with a flat tax as a simpler system than progressive taxation (that has the same effect, but without all the loopholes).

Irrespective of UBI, is the US similarly not highly dependent on imports paid for by debt issuance, demand for which is not guaranteed to persist in the future just as Venezuela's oil income was not guaranteed?

Two important points. 1. US debt is denominated in its own currency not the currency of a foreign government. 2. The US economy is not dependent on one volatile commodity. Worse for Venezuela is the price of oil is set for a large part by OPEC so they have little control of the price.

In fact, the crisis in Venezuela was driven by OPEC dropping the price of oil to keep market share and prevent US oil production from fracking and the like from being viable.

Every time you think of Venezuela, think of these issues because any model of economics without this complete picture will yield inaccurate conclusions and fear of inflation being right around the corner when that is not the case.

I’m so confused why this inflation argument keeps popping up.

If you’re paying for the Ubi with taxes then there’s no inflation. Net money supply hasn’t changed (0).

If you pay for ubi by printing money then yes, inflation would be a problem. But no one has suggested that.

(0) I’m willing to entertain an argument about the velocity of money increasing from ubi but I really doubt it would be too significant.

Rich people aren't spending all their money on stuff, they're investing it. If wealthy people were to take all that wealth and start buying stuff (themselves or via redistribution through taxes to UBI), there isn't magically more stuff, so the price of stuff goes way up => inflation.

What do you think investment is? That money doesn’t disappear. It still enters the economy.

Investing is just lending money to people who need to buy something, such as capital. That money is still spent. In fact it needs to be spent on production, in order to produce returns.

You can’t just store wealth in a vault and have it grow.

> there isn't magically more stuff

Most companies can easily ramp up production to meet increased demand. It's not magic, it's the modern world.

Most general goods companies are demand constrained, that's why they need to do marketing campaigns to make more sales. It's only if they had too many orders and couldn't grow production that we'd have inflation. So there may be some inflation immediately but not long term.

But there would be more stuff, the increase in demand would be met with an increase in supply. Thats the magic of the market.

> Net money supply hasn’t changed

But where it lands has. House prices and Ferraris might be cheaper. Milk and rents will be more expensive.

I don’t buy that it’s a necessary consequence.

Even In your example if demand for houses goes down and demand for milk goes up, what prevents more land being used for dairy farming, more builders becoming farmers?

Poor people already have to live somewhere. It just paid for with rental subsidies and low income housing now, both of which also drive up rents for others.

Similarly, the US government already buys up milk to create a price floor, giving the milk away to the poor and to school lunch providers.

Housing would be a problem where supply is constrained, I can't see it being a big issue in the US.

I'm not sure how one would manage to produce $1,000 per month per citizen over 18 without printing money. That's $2,500,000,000,000 per year. You'd have to raise taxes by more than 50% to cover the costs.

The average American pays $10489 in taxes each year. Double the taxes and give average Americans $12000 and they'll come out ahead. Median Americans will do even better. Even if you assume no efficiency improvements, no benefits from velocity of money changes, and no cuts to existing social welfare programs such that the average tax increase equals the $12000 expenditure, you can fund it purely on taxes and most people will still end up with more money in their pockets.

The US govt has recently dumped trillions into the banking system in a matter of days. Last I checked they were talking about additionally cutting payroll taxes for the year.

Somehow they were able to do this without raising taxes by 50%... Turns out we have the money after all.

This isn't a fair comparison. That injection is a loan. I support UBI, but we can't be making bad comparisons like this. It doesn't help.

He doesn't do it all with taxes. He cuts a lot of welfare programs, as those would now be covered by UBI. He cuts spending in Social Security, as 12000 dollars a year of that is covered by UBI. There were some more overlapping areas he laid out that I heard him mention in an interview. It wouldn't be, "Oh, you get this program AND this program" unchanged, but more of, "You already get $12000 in UBI, now what more of a subsidy do you need? Not as much." At least, that's the way he was laying it out. He was far more conservative with spending than a lot of people were getting by just looking at the headlines, but that's one of the failures of our media structure.

My understanding is that if it's known that every American adult collects $1000 in addition to their regular income, prices will rise in an attempt to capture some of that known financial excess, so that the net result isn't that everyone gets an extra $1000 in discretionary income, but that everyone ends up paying that extra $1000 back in inflated prices.

Similar logic to how raising tariffs doesn't hurt companies as much as they hurt customers because the cost is passed on (speaking from an American perspective, not considering tax systems like VAT).

Surely McDonald’s already knows everyone has an extra two dollars but they don’t raise their prices because of it.

The thing is people would still shop around for the lowest price. The vendor with the lowest price gets the business. Even opec can’t raise their prices in unison without someone cheating.

> The thing is people would still shop around for the lowest price. The vendor with the lowest price gets the business.

But we know economically this isn't necessarily true. Some industries are more monopolized than others. Some people aren't in areas where they have good alternative shopping choices. Goods like toilet paper have many different price points and it hasn't been a race to the bottom among the brands to become the cheapest toilet paper. "You get what you pay for" is still a common rule of thumb. Veblen goods would also rise in price.

It's my opinion that UBI would give businesses an opportunity to raise prices in certain sectors, but I concede it wouldn't be universal inflation across the board.

If there are sectors where UBI gives businesses an opportunity to raise prices, then it follows that there is room for competitors to enter.

Competition will eventually drive prices down and lead to more consumer choice.

You could not be more wrong.

When everyone gets $1000 for sitting on their ass, wages have nowhere to go but up. Why go to work for minimum/low wage, if basic needs are met? Wages go up + inputs go up --> end prices go up --> even the "vendor with the lowest price" is charging much more than before.

> prices will rise in an attempt to capture some of that known financial excess

The assumes financial excess. The reason for UBI is that there isn't excess. If 78% of Americans are living paycheck to paycheck, then that's not excess. If 63% of Americans can't afford an unexpected $500 bill, that's not excess.

You're right that inflation happens when there is excess, but given these stats, I don't buy that part of the argument. Even if these stats could be explained away from being financially irresponsible (I don't believe this is the common case), it still wouldn't be excess because people are still spending. If we don't assume excess then this argument becomes as silly as saying that giving people jobs with an income will cause inflation.

So where could this money be captured? A person that couldn't afford a car can now. I person with a $1k beater car can now buy a $5k car. Someone that was living paycheck to paycheck can now take a breath, buy a TV and a Netflix subscription. Someone that was unable to invest before could use that money to invest. The money affects everyone in different ways, but supporters of UBI think it is clear that there are already avenues to "capture" this money without inflation and that different income groups will spend the money differently. Studies have also shown that when there isn't full market capture cash injection doesn't cause meaningful rises in inflation.

> A person that couldn't afford a car can now. I person with a $1k beater car can now buy a $5k car.

Wouldn't car dealers raise their prices some value up to $1k because they know anyone coming in that month to buy a car also just received a $1k check from the government?

> Someone that was living paycheck to paycheck can now take a breath, buy a TV and a Netflix subscription.

Netflix may raise their prices knowing everyone has a little extra cash to spend, and that people would rather pay a dollar or two more than cancel.

If your streaming subscriptions, phone bill, and everything else goes up incrementally because companies begin to factor UBI income into their pricing, then without making any lifestyle changes, you'll see that overtime you're spending an extra $1k a month due to higher prices (of course it won't work out exactly like that, but the point is that some portion of your $1k UBI will go toward paying for things you were already buying, but that are now more expensive as a result of UBI-aware pricing.)

If you believe that companies won't act that way or that other market forces (such as increased competition) will renormalize prices, I can see the argument, but I don't buy it personally.

> Wouldn't car dealers raise their prices some value up to $1k because they know anyone coming in that month to buy a car also just received a $1k check from the government?

Why would they. They just got more customers. They already have a surplus of supply. In fact, you could make the argument that they could reduce car prices because with more customers you can operate on smaller margins. This is literally operating at scale. But it is hard to say, I'm just pointing out that the exact opposite could happen.

> Netflix may raise their prices knowing everyone has a little extra cash to spend, and that people would rather pay a dollar or two more than cancel.

Or look at Netflix's strategy. It is to corner the market. The classic Silicon Valley strategy. Corner the market, hemorrhage money, and then make a profit. More customers works into their plan perfectly without raising prices. In fact, now they have more competition. If every streaming service raises prices then people will have less of them and pirate more (this is already starting to happen). Even a lot of companies outside SV run a loss in the beginning, until they reach scale.

TLDR: More customers doesn't mean prices go up. Frequently it means the opposite. Scale.

For people who can afford cars today -- Why wouldn't they?

I'm not convinced economy of scale applies the same way in this case. Cars (and mattresses, etc) are large and infrequent purchases dominated by preference. Dealerships make most of their money through sketchy financing and tricks.

There's a large class of financially illiterate people who routinely make massive mistakes like monthly income spend planning. Given an extra thousand per month, two hundred more on a car is both feasible and justifiable. Lifestyle creep.

I would agree if the topic was commodities like eggs or rice -- sure, I purchase by efficiency. And I'm not sure about the SV strat and dealerships. It could work in theory, but as of today dealerships are basically fungible and signal the same way as each other. I have no idea how a dealership could signal their lower marginal costs, especially survive in an industry with insane scaling costs.

Because you're only applying economy of scale to a single market. What I tried to illustrate is that different classes would spend the money differently. So it isn't just everyone buying cars. Come on, that's idiotic and unreasonable. But what I'm saying is that new people are entering MANY markets. Not a single one. That there are so many markets and that we are no where near full market capture (this is the important part) that thinking just rent would go up is also an unreasonable assumption.

They would raise prices because their costs just went up, with a huge emphasis on rent.

Also, this has nothing to do with operating at scale

How did their costs go up?

> They just got more customers. They already have a surplus of supply.

Um, wouldn't that be increased demand? More customers with more money. That's the definition of more demand.

Economics 100 forecasts a price increase under those circumstances.

I too think naive models are the most accurate. Linear fits for everything.

But seriously, no. I literally gave you examples of this strategy happening. Here's some more companies doing it: Venmo, Move Pass, YouTube, Google, Amazon (store), Facebook, Robinhood, Vanguard, need I continue?

Simple models are great to get the basics, but if they worked for most things in the world everything would have a O1 solution. Frankly the world is more complex and can't be explained in a 10 minute lecture. That's why we have experts in subjects and why basic knowledge is drastically different than expertise knowledge.

> Wouldn't car dealers raise their prices some value up to $1k because they know anyone coming in that month to buy a car also just received a $1k check from the government?

There is still competition between car dealers, so I doubt this would happen.

It would absolutely happen. When I was in the military, the town I lived in had to pass laws preventing landlords from changing your rent based on your rank because everyone's pay information was public. It's naive to think dealerships would try to undercut each other instead of colluding to all get more money.

Charging rent based on rank would be a form of discrimination... also this is anti-competitive behavior. It is pretty well understood that regulation should exist. It is just a question of how much and how to regulate.

In America, this is the problem that has to be addressed before we can consider rolling out projects like UBI. I agree with you that regulations have to exist for this to work, and we simply don't have the regulations in place right now to enable it widely.

I was suggesting that regulations have to exist in general. Over the entire market. But what you said just flat out confuses me. That we shouldn't implement something because we currently don't have regulations for it? Why would we? We haven't implemented it. I mean with that kind of attitude we can't get anything done.

Do I expect hiccups and bumps in the road? Yeah, why wouldn't I? Humans aren't perfect. Never have been, never will be. But just because there are speedbumps in my neighborhood doesn't mean I should never go to the store. I still need to eat at the end of the day.

> That we shouldn't implement something because we currently don't have regulations for it? Why would we? We haven't implemented it. I mean with that kind of attitude we can't get anything done.

I think before implementing UBI, we have to address the broader issue of anticompetitive behavior in American business, due largely to decades of ill-advised deregulation, coupled with regulatory bodies who refuse to prevent anticompetitive mergers. Once we have undone the damage of deregulation, then I believe it's prudent to start putting UBI proposals on the table, but not before. Otherwise we risk making the situation worse for consumers and better for rent seekers.

I mentioned something similar in another comment. But I'm confused why everything is becoming an "or" conversation. We're a pretty rich nation, we can have more than one cake. There's lots of talk about regulation, we don't have to focus on only one topic at a time.

I agree with you generally, but believe this is a case where the two events have to occur one after the other.

Putting UBI on the table today without already having a reformed regulatory framework in place from day one will result in a failed project, IMO. Opponents of UBI will use this to say that UBI is broken, instead of pointing to the real problem, that regulation is broken.

Colluding to prevent competition is and should be illegal in a market economy. We can't say we can't implement a viable and beneficial social policy because people will break the law. We should enact the policy and ensure the culture, norms and laws are in place to make it effective.

I disagree. Policy should be pragmatic. As an extreme example, self driving cars shouldn't ignore the possibility of jaywalking.

I don't think there would be this sudden collusion at such a large scale though. Would be pretty obvious and begging for a crackdown IMO.

>The assumes financial excess. The reason for UBI is that there isn't excess. If 78% of Americans are living paycheck to paycheck, then that's not excess. If 63% of Americans can't afford an unexpected $500 bill, that's not excess.

But if the core problem is that everyone is bidding away all their financial slack on rent, then they will still take any such windfall and do the same with it, pushing themselves right back to the same (low) level of slack they have today.

Earlier advocates for poverty alleviation noted this effect early on. Winston Churchill told of a time when they got the tolls on a bridge removed, and then rents advanced by the cost of using the bridge twice a day.

http://www.landvaluetax.org/current-affairs-comment/winston-...

(search for "bridge")

This is what bothers me most about arguments against UBI. They seem to have baked into them an assumption that any reduction of inequality will be eaten by rents. Then it follows that the only thing is to balance concentrated private economic power with concentrated public economic power. But what I want to see is more people with more control for themselves not planned for them by a program or economic happenstance.

So if it’s hopeless then what’s to be done?

So you're saying the argument must be wrong because it would imply things are hopeless? That's a textbook fallacy of appeal to consequences. You're not actually addressing whether it's true.

The point is that the UBI isn't going to fix things until you first fix the dynamic that's responsible for gobbling up all the economic slack, so that should be the priority.

They are saying you are wrong because there are other things in the market besides housing. If you inverse your logic it means lowering wages provides cheaper rent. And that just sounds ludicrous.

>They are saying you are wrong because there are other things in the market besides housing

They said nothing like that; that might be what you think, and I'd be glad to address that, but it doesn't help the discussion when you invent arguments that were never made and expect me to have already answered them.

Real estate, unlike cars or food, can't be brought on the market to rapidly respond to demand, and people don't keep raising bids to the point where they leave a certain amount of slack in their budget.

There are ways to get around this (like with faster building and scaling up of transportation infra) but it would need to be address before throwing on a UBI, which was my point.

>If you inverse your logic it means lowering wages provides cheaper rent.

Rents generally do decline when wages fall.

I am obviously not addressing whether it's true or saying the argument must be wrong. I'm pointing out there's some circular reasoning here that's unexamined in most online discussions about UBI.

I am pointing out there is an assumed and implied argument that 1) inequality is a problem and must be corrected, but 2) straight redistribution of some wealth with UBI will fail because-inflation/rents, but 3) we should have less inequality though even if we did that would put us in the similar position as with UBI where costs rebalance.

And at the end I ask, rhetorically but still, what's to be done. So here you also assume it's true without addressing it and offer no answer to how to address the gobbling up of the economic slack.

>I am pointing out there is an assumed and implied argument that 1) inequality is a problem and must be corrected, but 2) straight redistribution of some wealth with UBI will fail because-inflation/rents, but 3) we should have less inequality though even if we did that would put us in the similar position as with UBI where costs rebalance.

I wasn't making anything like that argument. I was saying that, if you don't address the dynamics that gobble up household economic slack, then a UBI won't produce the additional slack you're trying to produce. Three's nothing circular about that.

>And at the end I ask, rhetorically but still, what's to be done. So here you also assume it's true without addressing it and offer no answer to how to address the gobbling up of the economic slack.

In fact, the link I gave was from (the aptly named) landvaluetax.org and is from an organization that has one theory and solution for how land rents eat up slack and a solution.

And even if I didn't, it's still a valid point that the primary problem is "things that extract household slack", and needs to be address before any UBI is piled on.

Hey, you're right :) I was talking past you because I didn't realize you were the OP that prompted my thought. Also I was thinking about a more general trend in points and not yours specifically. You've got a great point about land too. I'm in Texas so I hadn't considered some places don't have a land tax because while it has it's challenges (disagreements between state and citizen on land value) it's kind of backwards not to have one.

I'm not saying the argument fails because there is a circular loop. I am saying there is something more to the system and we shouldn't drop consideration for UBI based on the argument that inflation will gobble up all of the increase because that argument holds true equally if we improve equality to everyone gets a wage increase.

Which really makes your point even more important. Particularly the one about land having the strongest growth pressure.

Disclaimer: I live in a relatively prosperous community. My perspective is skewed accordingly.

Your numbers seem fictitious to me. 78% of Americans living paycheck to paycheck? Look at what they are spending their paycheck on. One car per person. 2.1 people per house. 3.2 game consoles per person. A new laptop every 15 months. A new car every 36 months. A new $800 smartphone every 11 months.

Every low-income 10 year old I see is carrying around $1000+ of electronics and treating them like they're disposable. But our school district offers free breakfast to 100% of the students. We have student parking lots for 16 year old kids.

We're all living paycheck to paycheck, but I claim there is still huge excess. Giant houses for average families, computers, ATVs, boats, cars, TVs, 2 movies every night, 4 Amazon deliveries a week, direct access to Chinese suppliers, personal juice presses, occasional cruises.

Air-bnb and uber are not luxuries for 1%ers. These are basic human rights chiseled into the constitution.

There are, of course, truly poor people in the population. But our definition of poor sure has changed a lot in 50 years.

Show me any random collection of 10,000 Americans and I will show you $2 million/year of disposable income without sacrificing a single smartphone or smart TV.

Your view of people's buying patterns is not accurate. I own a home care agency with 500 employees that live on low income (the government sets the Medicaid reimbursement rate so we have no ability to raise wages). NO ONE is buying a new car, let alone every 36 months. Half our employees don't own a smart phone. We pay $10hr, in rural North Carolina, so lots of people live on even less. Please research this issue and go and meet people in this income bracket, you will see a different picture. I also encourage you to read Nickel and Dimed: On (Not) Getting By in America by Barbara Ehrenreich.

The truth is most American's wages have gone to Health Insurance, College, and Housing.

See https://www.msn.com/en-us/money/personalfinance/this-chart-i...

By definition, you're the one with a narrow perspective -- your employees are all low-income workers in a rural town. The parent never said NOBODY is poor -- in fact, he specifically acknowledged that there are poor people. His claim was that he doubted that 78% of the American population is. Additionally, many (many, not ALL) who technically are "poor", still find money to purchase expensive electronics.

1) It doesn't matter if you're rich and living paycheck to paycheck. This is argument actually supports the idea that UBI won't cause inflation because clearly there is still inefficiencies in market capture if people are rich AND living paycheck to paycheck. (like I said above, inflation doesn't really happen when you don't have full market capture).

2) Selection bias is a thing. While there are rich Americans living paycheck to paycheck, most of the people in this situation are not rich.

3) I'm not sure I'd consider a smartphone an expensive electronic. You can get one for under $100 and a plan that is <$20/mo. This isn't exactly breaking the bank...

4) I also wouldn't call a cell phone a luxury item in today's society. Even a smart phone. You can't get a job without a phone number, which now usually means texting included. A smart phone just means you have a single device that can also get you on the internet. Again, we're talking about a purchase that is well under $1k, has high utility, and is being held onto for years.

Sure, this isn't poor like poor in Africa, but does that really matter? We don't live in Africa. We live in a rich society, I'd like to live in a wealthy society. One where our poorest can get shelter and food. If our definition of poor becomes having constant access to housing, food, health care, and are able to do so on 40hrs/wk, and nothing more, I'd call that a success. But we're clearly not there yet. If we have that, I don't care if someone has a trillion dollars and can buy rocket ships because we're in a post scarcity society (maybe not world, but society).

Take it up with supportlocal4h. I never even used the phrase "paycheck to paycheck." Nor did I specify "smartphone" when mentioning electronics.

Except that my narrow perspective is a sample size of the large group at issue and is more accurate. Its the sample size that matters.

I also gave recommendations for a much broader sample size in the book that spans multiple industries and geographies.

Finally, I posited a specific theory as to why 78% of Americans are living pay check to pay check...the basic social mechanisms of survival, Health, Education and Housing, have risen at a rate far exceeding inflation and have actually exceeded average income levels. These rises are due to governmental policy and not some failing of individual citizen consumers.

I would argue that if a person can't afford basics like Health, Education and Housing, the are poor. In fact, they report feeling poor; their bodies and minds exhibit the stress and anxiety of being poor. We can and should create companies and governmental policies to work to reduce this reality, rather than blaming people for their condition.

If we as a society determine that it is necessary to have a car or cell phone to contribute in a productive manner we should ensure that as many people as possible have the tools to be productive. That's just a rational policy to boost GDP, the tax base, the total size of the Market for goods and services, and trade with other countries. You know, capitalism.

> my narrow perspective is a sample size of the large group at issue and is more accurate

You stated 1/2 your employees don't own a smart phone. That is simply not representative of the general US adult population. Additionally, all your employees earn $10/hour. Again, not representative.

Again, nobody is arguing there aren't poor people in dire situations. supportlocal4h's argument was that godelski's stats were exaggerated.

> Show me any random collection of 10,000 Americans and I will show you $2 million/year of disposable income without sacrificing a single smartphone or smart TV.

That's $200/year on average. Not exactly a compelling argument.

Has this happened with the oil dividend in Alaska? https://www.aoga.org/facts-and-figures/permanent-fund-divide...

> prices will rise in an attempt to capture some of that known financial excess

Why is there no incentive to undercut one's competition in this model?

Because the most likely destination of excess cash flow is into the hands of landlords, not salt miners and bakers.

This assumes they aren't already squeezing every cent they can out of people...

out of curiosity, why not just tax people less rather than offer UBI?

either lower the tax or start offering monthly tax refunds?

would that work as an alternative or equivalent to UBI or am I thinking of something very different?

That’s just a UBI with a different mechanism. The problem here is most proposals for negative income tax pay out annually rather than monthly (you specifically do not), and fail to account for people who do not work but otherwise provide useful input into the economy like stay at home parents and adults taking care of elderly family.

Because the people who need/would benefit aren't paying anything remotely near 1k/month in taxes, that's the whole point. Your solution only works in a society where people already have a reasonable amount of income.

Yeah, no. When Greg Mankiw, probably the foremost conservative economist in the world, endorses Yang's UBI, then it's probably worth considering seriously:

https://www.nytimes.com/2019/09/27/business/yang-warren-taxe...

https://youtu.be/HDKfdmbCuvw?t=31615

My quick read of the NYT piece is a comparison of Yang's plan and Warren's plan, and it concludes that Warren's is unworkable (e.g., how do you value the present value of Rihanna's future royalties? This has to be determined for Warren's wealth tax, but not Yang's VAT tax).

It does not read like an endorsement — just an assessment that Yang's plan is better than a plan he describes as unworkable (Warren's).

In the Youtube, he says: "My own view is that a universal income financed by an efficient tax, something like a value added tax, might well be worth considering" — hardly a full-throated endorsement.

Has he said anything else that is more positive? Or more specific with regard to the amount of UBI that he thinks would be appropriate/efficient? I wouldn't call either of these things an endorsement.

I feel like the quote you pulled out of Youtube is slightly unfair in the extent to which he endorses the idea. In my opinion, it sounds like he full-throat endorses the general method and aim of the idea just not the exact transfer amounts and the method to raise revenue (sales/VAT tax vs carbon tax). Here is the quote in more context:

"The plan is just a version of the negative income tax. Milton Freedom first proposed it...and as a student 40 years ago I thought it was a pretty good idea. And it turns out I wasn't alone in that judgement...In 1968 a 1000 economists endorsed a negative income tax along these lines. What Andrew Yang is proposing is a version of what these 1000 economists endorsed back in 1968. Could 1000 economists all be wrong? Laughs Well yes they could. But I don't think in this case they are. My own view is that a universal income financed by an efficient tax, something like a value added tax, might well be worth considering. And I'm one of the signatories...of a plan to do something similar with a carbon tax."

I don't hear the words you hear. At the end, he says "of a plan to do something in a smaller way with a carbon tax"

As in, the $1k/month thing is too big, and he thinks we should consider doing something smaller. How much smaller? We don't know for sure, but I doubt economists would support a carbon tax that would approach the level of $1,000/mo for every adult in the US. The primary purpose is to internalize the externalities of pollution, not to generate revenue.

The fact that an economist thinks a concept is worth considering is a far cry from saying they are endorsing a specific instance of one of those things. It's one thing to say he endorsed the concept. It's another thing to say he endorsed the plan. He didn't.

I agree that it needs to be addressed, but my worry is that it’s complete conjecture.

So many people were predicting massive inflation from quantitative easing but that never came to pass.

To me, the scary thought is implementing UBI without a mechanism to reel it back if our model wasn’t right

QE added ~$3 trillion cumulatively to the money supply at its peak. And most of it sat on banks' balance sheets because in a $200+ trillion global financial asset market ($300+ trillion today), $3 trillion doesn't do much to change banks' incentive structure for making loans, it just propped up the existing incentive structures so the whole system didn't collapse.

I can't fathom how adding $2+ trillion every year directly to working Americans' wallets wouldn't lead to greater consumer price inflation than we've seen with QE. That doesn't actually tell us much about whether UBI is worthwhile, but I don't see the point in denying it. In fact, it's important to have that discussion because there are ways we could mitigate it. For example, most of UBI would likely get sucked up by supply-constrained markets like housing, so it's probably a good idea to combine UBI with housing reform, such as development as of right for missing middle multifamily projects.

I agree, we should have an exit plan. But we should also have an entry plan.

You made very good points and I think we probably agree on the need for both good entry and exit plans. The larger point I was trying to highlight is how much of each side is based on conjecture, not data driven evidence. Which makes good planning that much more necessary

Why would giving everyone an grant a month result in inflation? That is entirely not clear, alluding to Venezuela does not make it an argument.

Essentially you seem to be saying that creating a more equal society results in higher inflation. I don't see your argument being supported by reality, I am not aware of studies showing that the North European countries have statistically higher inflation.

Unfortunately, many people equate "printing money" with inflation, which is too simplistic.

That said, all those monetary grants could lead to excessive demand which leads to inflation, especially in sectors of the economy that are not competitive. Whether it actually would lead to inflation and, more importantly, to how much is a question that needs to be answered empirically.

This Medium article that addresses this point has been pretty wildly shared throughout his campaign: https://medium.com/basic-income/wouldnt-unconditional-basic-...

Inflation is a non-issue. Economic growth has largely been constrained by demand, not supply. And the modern economy is saturated with replacement goods. If the demand for milk goes up, I can switch to soy milk. If soy milk goes up, I can switch to Almond. And if all of them go up, I just drink water. Once most basic needs are met, inflation looses its power with a few exceptions. The financialization of our economy has resulted in crazy high house prices, education, and to some degree health care. And that was driven by excessive monetary stimulus. Giving working class folks an extra $1k a month is not going to cause houses to go up by $1M. But giving speculators access to absurdly low interest rates will.

> If the demand for milk goes up, I can switch to soy milk. If soy milk goes up, I can switch to Almond. And if all of them go up, I just drink water.

I don't understand how this example describes a situation where inflation is a non-issue. I used to be able to afford to drink milk; now, due to inflation, I can only afford to drink water. That sounds like inflation. What am I missing from this example?

It’s a commentary about available options meaning that beverage makers can not exploit a market without shrinking their own market. If they want to maintain revenue the suppliers will need to ensure they retain their market.

In addition if it got to the point where someone priced milk so high that customers were abandoning that segment of the beverage market, an aspiring milk empire builder could enter the market with lower prices.

The assumption being made in the allegory is that water and milk fill the same role as “something to drink,” with no qualitative difference in consideration.

There are 2 issues that I was attempting to demonstrate, but perhaps I conflated them a bit. Here is second attempt:

Inflation requires a persistent and durable increase in the price of a good. The first issue is that a large proportion of individuals in modern economies are barely making enough money to make ends meet. They are very sensitive to price. An increase in the price of milk would likely cause them to switch to alternatives, thus lowering demand for milk which would then bring the price back down. In effect, the constraint on the wages of the lower classes acts as a constraint on prices of goods. And the second factor, is that in these modern global economies, we have plenty of replacements for almost all types of goods. So if a drought in the mid-west causes soy prices to spike, people will just east less soy based products and switch to something cheaper for a while.

COVID-19 could disrupt that of course. But my hunch is that within a few months after the lockdowns are over, most supply chains will be back up and running. At that point we will be back to being demand constrained (perhaps significantly so if the economic impact is severe enough).

1) Real inflationary problems are always about money supply, not regular changes in supply/demand.

When Chavez goes nutty, people don't want his currency, it starts to crash, he prints to pay his bills, it really crashes. This is where all the inflation crisis comes.

2) The 'milk substitute' thing I think illustrates the opposite point you're trying to make. Having to give up Milk to drink water is a severely negative consequence! Projected across all of one's lifestyle and habits, it would be comparable to giving up a car to ride only the bus. Giving up Netflix for 'library books'. This implies a serious degradation in the quality of life.

If anything though, we've been concerned about deflation for a very long time, not inflation.

> Giving up Netflix for 'library books'. This implies a serious degradation in the quality of life.

If everyone gave up Netflix for library books, I think that’d be a massive societal win.

Other than that, I agree with your point.

Ah yes, shouldn't we all?

But we can choose books anytime, and we don't. So when you and I think about 'win' it must be different than what 'everyone else wants' at least in terms of how they actively chose to spend their time.

Not sure I follow how the milk as a substitute for water analogy translates to housing. There are no substitutes for housing in desirable areas. When the entire working class suddenly has more income, it doesn't create more housing, it pushes up the price of housing. Sure we could build more, but why? After all, if the price of affordable housing goes up, so does less affordable housing, and luxury housing. And we end up in the same place, except with inflation.

UBI removes the geographical constraints that have been distorting the US housing market. There are plenty of areas in the country that would gladly absorb excess housing demand, but the lack the jobs and economic prospects of those areas make it difficult under current circumstances.

This makes no sense.

For example, even with UBI, a startup will still tend to want to locate in Silicon Valley than in, say, Amarillo Texas.

The sheer ability to grab a drink with someone who can change you life in tech does not exist in the same proportion in Amarillo as it does in Silicon Valley. Hence, housing prices will differ.

This is also why there are more oil companies in Houston than in Atlanta, despite the roughly same size metro area.

Right - UBI could be one of the best solutions to the housing issue. It would be even better combined with another libertarian idea, land value tax.

If people are moving to areas that lack jobs and economic prospects, because they can survive on UBI, you’ve just burdened a bunch of small towns with people who aren’t interested in making more money.

Towns need tax revenue, which doesn’t come in sufficient quantity from people happily volunteering on a UBI wage.

These places are already overburdened by people living off of social security and disability insurance. At least with UBI they will get a better mix of working aged and abled bodied individuals.

Yes. Also, first home owner's grants increased prices. Reduced interest rates increased house prices. Perhaps the great covid-19 WFH experiment will (partially) undermine the housing geography monopoly.

Would socialist free housing, utilities, food, medical care, education might work better than UBI? What incentives would make capitalism provide them?

Capitalism can't provide housing, utilities, food, medical care and education for free.

People would just quit their job if they got all that with no effort. Then how would the government be able to pay for the free stuff if it wasn't able to tax workers?

Edit: It occurred to me the government could lock people up in work camps in order to be able to tax them.

>Edit: It occurred to me the government could lock people up in work camps in order to be able to tax them

So people end up in a situation where they are forced to work in order to survive, the same situation they are in now.

Ah, but in Capitalism, they can choose not to work.

You could have the choice to refuse the UBI and end up in a similar position to homeless today, though most homeless did not make a choice not to work.

But, could you choose to not be one of the taxpayers to fund UBI?

I say if you want to do UBI, add a checkbox on the tax return where a person can choose to donate $1000 to the UBI program out of their tax refund. Let the UBI recipients all have an equal share of the funds collected from that checkbox.

If you don't make any income, you aren't paying for it. You can have your issues with UBI, but "the government could force you to work to pay taxes" isn't any scarier than the current situation, where not working can just kill you.

Your opt in situation couldn't be considered UBI.

Then why should I have to pay $1000 in taxes to get $1000 UBI?

> Capitalism can't provide housing, utilities, food, medical care and education for free.

> People would just quit their job if they got all that with no effort.

Citation needed. All previous experiments on ubi have shown the opposite. You are just painting a boogeyman, without evidence to back it up.

People still work in countries with free medical care and education.

I think the effect on motivation is the central issue of UBI. There might need to be an adjustment. I know for myself, it can be helpful to be compelled to do something that I've been putting off. Sometimes, people don't feel they have a reason to act, but having to go to work can help. It prevents inactivity and isolation.

Perhaps a focus on mental health and intrinsic motivation will be the answer.

But I think most will naturally aim at higher goals than survival... as they do now.

I was talking about the list of Socialistic welfare handouts the parent said should be free, not UBI.

I'm not sure what would be worse, for this to be trolling or for you thinking what you just wrote makes sense.

Uh, the housing market is more complex than you think. If the bottom of the market gets bid up because of an increase in purchasing power that will affect higher priced units too - if previously I was considering a shitty studio in a bad area for $500/mo vs a 1bed in a good area for $1k/mo, and now the studio is $800/mo, don’t you think the 1bed is going to cost more too?

Also everybody has low interest rates for their houses. It’s not only open to speculators- there are people getting almost 3% interest, which is quite low.

It's certainly more complicated than I understand, but I see it like this...

Case 1: With no UBI the person who works in food service has to live an hour or more out of town and commutes to work each day. This is because their pay is better in town than out of town so it's worth it financially overall. Or they simply are paying more in housing costs than they should, are feeding money up the rent chain instead of saving to say own their own house and have a tenuous living environment for a family.

Case 2: With UBI the person can just move to a place where housing costs are $300 a month and do whatever they want without worrying about how they'll support themselves in an emergency where they can't find work. They could start a business. Volunteer. Stay at home and raise kids. Take care of the neighbors kids and teach them gardening. Or work if the pay is actually high enough to justify it, which seems to push more money down to human workers over profit automatons. Hey, teachers could live and teach in cities with smaller school budgets!

Is that inflation? I suppose in the sense of rising buying power diluting the dollar some, but assuming it's paid for by a high progressive tax after a certain income amount, I think it's just wealth redistribution that levels out the overall geographical housing cost to income ratio.

I think it would reduce the power of landlords, though certainly doomsayers say it will just push up rental and house prices. I think this is possible to a point, but honestly seems too locally focused. I think a lot of people would leave where they are if they knew they could support themselves somewhere new.

$1000 a month would offset decreased pay more in an absolute sense in a lower cost of living area. This will make it feasible for a family to move safely to a new place without a job lined up. Or know that if they join a union and get fired they'll have baseline support. It's hard for me to see this as favoring anyone but lower income human workers even if it's not perfect in every way.

You make a good case why UBI might not affect rent in high-rent areas, but what makes you think there would be a place where housing costs are $300 a month when everyone has UBI? Why wouldn't the floor immediately become $1000 everywhere?

In the hypothetical case where the minimum rent in the entire US becomes $1000 (and the laws of supply/demand have not magically disappeared), then that means all of the livable areas in the country have been revitalized enough to demand such a price. Considering how poorly many rural and exurban communities have fared in the last few decades, that feels like a nice problem to have.

Its also worth mentioning that the US is very big and there are a lot of places that are just not that attractive to live in[1]. So I feel like it will be quite a while before we get to that point.

And a final point. UBI is not meant to provide free rent. It is a form of social welfare and safety net. The fact that the real estate market is so imbalanced in the US is a failure of capitalism (why aren't startups and companies moving to low-cost of living areas?) And the fact that UBI can help bring some balance to real estate markets is nice side benefit, but its main goal it to act as a counter weight to the ruthlessness of market economies.

[1] https://dimewilltell.com/free-land/

I don’t see how it would reduce the power of landlords. If more people want to live in an area than housing can support, rents will increase to whatever level they can sustain to find the equilibrium where fewer people can afford it. If fewer people want to live in an area than housing supports, rents will fall.

Right, a market where a lot of people suddenly have the ability to move to a less expensive town and not have to worry about finding a job or worry about commute times. They may do so eventually if they wish, but I think this is a huge amount of leverage over landlords and would reduce housing demand.

I'm not saying it's good for San Francisco tech workers, but I don't think rent costing two thirds of your take home pay is historically typical. Based on that history I do not think landlords could effectively collude to keep prices high if people are willing and able to walk away.

>If the demand for milk goes up, I can switch to soy milk. If soy milk goes up, I can switch to Almond. And if all of them go up, I just drink water.

What happens when the water gets privatized and you can't afford that?

https://www.foodandwaterwatch.org/insight/water-privatizatio...

>After privatization, water rates increase at about three times the rate of inflation, with an average increase of 18 percent every other year

We are not getting any economic growth right now.

I disagree.

There are two kinds of goods. The ones like computers and phones which are steadily getting cheaper and the ones like housing whose price has got inflated enormously. Remember how we tried to fix the education problem by student loans and how we tried to alleviate the housing burden by mortgage tax deduction and subsidies of interests? I don't think the problem is people are unable to afford milk or a shiny iPhone. It is the price of housing, education, and healthcare.

> Remember how we tried to fix the education problem by student loans and how we tried to alleviate the housing burden by mortgage tax deduction and subsidies of interests?

I don't understand how anyone ever thought that making it easier to borrow money would make things with inelastic demand more affordable. People will pay what they must to get food and shelter. If you make tertiary education non-negotiable in getting a job, then people will pay what they must to get an education. If you loan them huge sums then you just reduce price insensitivity and create a massive pricing bubble.

And yet, people do fail to see this. The inflated price of college is almost entirely the result of easy credit and inelastic demand. And it creates a cycle: as college prices increase, more people need credit to access education, which puts more pressure on politicians to ease credit rules, etc.

My original comment could probably use an edit or two, but we are actually in agreement.

Some context that was left out, inflation has been stubbornly low this past decade[1]. For many of us, this feels counterintuitive based on our experience with housing, education and healthcare. But as you pointed out, globalization and industrialization has resulted in downward pressure on prices of a wide array of goods. And when you factor housing costs across the entire US population (and not just the high COL areas), the inflation math sort of pencils out[2].

And my original point was that inflation caused by UBI should not be a concern because a) the prices of iPhones and milk are constrained by forces that are beyond the impact of UBI (globalization, hyper-efficient capitalism, etc..) and because b) prices of housing, education, and healthcare have long since untethered themselves from needing to be affordable (so UBI, which largely benefits the working class and poor, will have little impact there).

[1] https://www.frbsf.org/economic-research/publications/economi...

[2] I disagree with how the Fed has handled monetary policy the past few years. Even if the inflation numbers support their moves, they seem to be willfully ignoring very large bubbles (real estate, VC) forming due to their policies.

I still don't think we can put out the fire by pouring more fuel.

For instance, rents are proportionally related to the income of the population. How can we prevent the extra cash flow from being translated into higher rent/housing prices? If I have that extra cash, I would certainly 'leverage' it to expand my real estate portfolio :)

That said, I don't object to UBI per se and I agree that the Fed's policy would lead to some undesirable consequences. But without addressing the problem systematically, UBI would go nowhere better, I am afraid.

Rents should be limited by marginal utility of living in costly city. If you can have higher wage by living in costly city compared to small town, than it make sense to accept higher rent. But if you receive extra income regardless of where you live, then it is hard to say what effect it would have on prices. It may even cause people to prefer cheaper small towns as marginal utility from wage difference would be lower.

That has to assume that most people would choose lower-paying jobs if the extra income presents. But I don't think it is necessarily true. It is also unlikely that people would right away leave their current job if rents are on the rise, at least not until the net gain gets surpassed by the alternatives. The extra income probably gives the tenants more 'tolerance' to the rent increase and that is simply how subsidies interact with market.

I think you are looking at this from SF/SV centric point of view. The correct solution to the problem to high housing costs is to build more housing, not lower everyones income.

Here is another angle to look at the issue from. We have been relying on monetary stimulus for the last decade to keep the economy chugging along. The landlord class has been benefiting from that via cheaper interest rates. What if, instead of lowering rates, we did a UBI and in your proposed scenario, most of that money just results in high rents. Well, we would be roughly in the same spot we are in (stimulus largely benefiting landlords), but with the key difference that people who are really struggling (living in their car for example) can use that cash to get back on their feet. Also, because the money passes through multiple peoples hands before eventually getting sucked up by the wealthy, it will actually result in higher measured economic activity (because GDP is basically measure the velocity of money).

So I guess, that is what I don't understand. Our current policy is to just shovel money to the wealthy. They in turn just bid up the price of stocks, real estate, art, yachts, super bowl tickets, etc.. creating an inflationary bubble for rich people things. With a UBI, the working class gets first dibs on that stimulus, and every one up the chain will benefit (including small businesses, which also don't bet much benefit from monetary stimulus).

I think the "financialization of our economy" => higher house prices is at best a part of the story. The other part is absurd zoning laws and restrictions on the supply of housing. This couples with people's expectations that house prices should always be going up and that housing is an investment.

>Economic growth has largely been constrained by demand, not supply.

This is the most basic misunderstanding of economics that I'm 95% confident you have never taken even an introduction to macro course. Demand shocks don't lead to growth, only inflation.

I wonder if there are any economic studies on whether social security increased inflation when it was first enacted. It's not the ideal comparison because of the sheer scale of UBI vs social security but it would be something to get notion of the impact.

Hard to tell. We'd have to ping similar programs in order countries because there was massive depression on the value of the dollar than.

Why would it increase inflation? An equal amount of money is taken out of taxes. There’s no new money being created.

It's not just the net money supply that results in inflation, it's also the prospensity for it to be spent, and on what it is spent (inelastic/elastic demand curve goods and services) which determines the amount of inflation.

If you took 100 dollars out of the pocket of every American and gave it to Warren Buffett, that would most likely be deflationary.

I don't know whether it would or wouldn't. I was just replying to the parent comment which said this:

> But what Yang doesn't do here or in his book is make a powerful case to fiscal conservative spelling out just how universal income will avoid demolishing the economy through inflation. Until this happens, UBI is going nowhere.

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