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Comment by zpeti | Hacker News Reader

Something no one ever talks about with UBI is how the effects will be eliminated in a few years. The very things poorer people would buy from it would get more expensive by the UBI proportion, it will just be inflated away.

When everyone has an extra $1000 do you really think landlords won’t increase rent? The price of food and clothing won’t increase? When literally an entire country is richer by this amount?

UBI does not create more wealth. It does not mean all the people receiving it will put more value into the economy. It just means everyone gets X+$1000 more tokens for the same wealth/goods. Poor people will still be in just as difficult a situation as they will be competing for the same goods against the same people as before.

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Someone brings this up in literally every UBI discussion ever.

Because it makes sense. Why wouldn't rent seekers - both landlords and more abstract rent-seekers - just raise prices?

Maybe competition takes care of that? But that doesn't seem to work very well in the current housing market.

UBI is no more susceptible to this than a minimum wage raise, for example.

Basic rent controls and other affordable housing initiatives are usually advocated by UBI proponents. There's no reason we can't have both.

Housing is the largest issue here, and probably needs gov correction.

OTOH, basic goods becoming more expensive means producing them becomes more attractive which leads to lower prices or better wages (because less people will be willing to work shit jobs with crap pay like in the meat industry today).

Housing is rarely the issue on its own, because it is what it is due to related factor. Why live in one particular location? That's the motivator towards housing, and it relates many different things.

e.g in my city, I am positive the rent is high because of issues with transport i.e. poor transport means you need to live closer to work for a reasonable commute.

> Why wouldn't rent seekers - both landlords and more abstract rent-seekers - just raise prices?

Why doesn't every change in income level and distribution just change price levels of goods demanded by different groups resulting in no change in relative buying power? Several reasons:

(1) No one has access to idealized monopoly rents, and

(2) (relative to redistribution) Very few goods are demanded only at one point in the income distribution.

Maybe there should be a word for, the most important "crux", flaw, or impediment to an issue that isn't discussed in proportion to it's importance.

Discussing the benefit of UBI is wasted time before you fix the market-adjustment problem.

Your argument is easily shown to be silly if we replace $1000 with $1 mil.

Now everybody is a millionaire. Does this mean that prices will increase? Of course.

But will people be just as poor as before? No! People that were millionaires before are nothing special after this measure. That's what UBI does, it reduces wealth inequality between lower and upper class.

Now this argument does not and will not apply to the billionaire class. For that inequality we need a different solution, starting with unavoidable progressive taxes.

So... why isn't it $1m? Or $1bn for that matter?

As long as its something like $1000, my argument still applies. Are you saying you'd like to see a UBI of $1m?

You stated that the poor people would be in the exact same situation if they got UBI. Clearly this is not true if the UBI would be $1M. Perhaps $1000 is not enough to accomplish this, but it is obvious that UBI has the potential to lift people out of poverty. It is a wealth equalising measure.

Everyone gets X+1000 instead of X. That means if X used to be 1000, you now get double your income. If X used to be 100000, basically nothing changes for you. Perhaps double the income does not mean double the purchasing power because of the effects you stated, but there is no doubt your purchasing power will increase.

Rents will go up, that is very likely. However, it is extremely unlikely the rents will go up by $UBI everywhere. Most other products will remain unaffected. That means that if your rent goes up by $UBI/2, your purchasing power has still increased by 1.5X. This is a gigantic increase for poor people that live paycheck to paycheck.

Giving the poor $1M is the same as taxing the rich more heavily. The richest would just leave, and those with more modest wealth would be less happy, possibly leaving in the future. There have been countries that seized the assets of corporations and the wealthy, and redistributed them; this rarely worked out well.

> there is no doubt your purchasing power will increase

Why is there no doubt? Just because you having more money, you must have more PP? But if everyone* gets more money, it might not.

What you are doing is devaluing currency. Everyone invested in currency loses as their investment loses value. The rich have more "money" so it might seem this proportionally penalises the rich, but it doesn't - a person whose large wealth is invested in things that aren't dollars doesn't really lose a lot, the dollar-amount value of their investments just increases, which cancels out the effect of a lower-value dollar.

> Giving the poor $1M is the same as taxing the rich more heavily. The richest would just leave, and those with more modest wealth would be less happy, possibly leaving in the future. There have been countries that seized the assets of corporations and the wealthy, and redistributed them; this rarely worked out well.

This is a rather nop argument that can be made against any and all taxation. Giving everything to the rich and leaving the poor to starve has rarely worked out well either. It tends to lead to rather violent uprisings and riots. Those also tend to make countries less attractive places to live.

> Why is there no doubt? Just because you having more money, you must have more PP? But if everyone* gets more money, it might not.

My post was stating this from the perspective of poor people. UBI equalises purchasing power. If the amount of products produced remains the same, adding a constant amount of money to everyone's income will increase the purchasing power of the people in the bottom, and decrease it for those in the top.

It is obvious in extreme examples: if Bob makes 1000 per month, and Alice makes 99.000 per month, then Bob has 1% of the total PP, and Alice has 99%. If we then add 1 billion to both of their incomes, both Alice and Bob now have roughly 50% of the total purchasing power.

>Giving everything to the rich and leaving the poor to starve has rarely worked out well either.

Not taxing the rich does not equate to "giving everything to the rich and leaving the poor to starve".

Almost all the decline in poverty over the last 30 years was due to economic development which, according to economists who study development, was massively facilitated by the spread of market institutions like property rights

1. https://www.theatlantic.com/magazine/archive/2010/07/the-pol...

2. https://www.csmonitor.com/World/2016/0207/Progress-in-the-gl...

3. https://www.economist.com/leaders/2013/06/01/towards-the-end...

The solution to poverty isn't for government to take money from the productive and give it to the poor. The actual solution is to increase employment options and the earning power of the poor. Socialist ideologues need to look at the empirical evidence, and the economic literature, and learn that the welfare state works against the solution to poverty. The profit-motivated investment that emerges when people's right to their private property is protected, is the solution to poverty.

> the decline in poverty over the last 30 years

This isn't correct. The figures are not founded in reality.

“Over the past decade, the UN, world leaders and pundits have promoted a self-congratulatory message of impending victory over poverty, but almost all of these accounts rely on the World Bank’s international poverty line, which is utterly unfit for the purpose of tracking such progress,”

https://chrgj.org/2020/07/05/philip-alston-condemns-failed-g...

Unsurprisingly, [2] and [3] of your links uses the above mentioned poverty line by the World Bank. [1] seems to be some kind of a opinion piece?

>>This isn't correct. The figures are not founded in reality.

I don't have time to look at this link right now, but it's a broad set of metrics that have dramatically improved over the last 30 years, including nutrition, infant mortality, wages, percentage of people with running water, percentage of people with permanent dwellings, etc.

This rejection of the established Economics is no less superstitious/anti-scientific than the rejection of the established findings of epidemiologists on the efficacy of vaccine. It has the same layman's fallacies, and conspiracy theories about the scientific discipline bringing out these findings.

"Philip Alston, the former UN Special Rapporteur on extreme poverty and human rights, upon the release of his final report, which will be presented to the UN Human Rights Council tomorrow by his successor, Olivier De Schutter."

Anti-scientific conspiracy theorist?

Affiliation with the UN doesn't make someone credible. There were UN human rights officials claiming the George Floyd killing was an indication of widespread "racial violence" in the US, a claim for which zero evidence exists. There is absolutely no evidence that even Floyd's killing was motivated by anti-black bias.

Alston's statement doesn't provide any substantive criticism of the statistics. He points out that the cutoff for extreme poverty used by the UN is extremely low, as if that is in itself a moral failing.

The point of any poverty line is to measure progress, not to imply that the line is a sufficient standard of living.

Alston also points out that the number living with a wage below $5.50 a day has declined very little since 1990, which omits how much smaller this cohort's share of the global population is today than it was in 1990, due to population growth that has occurred since then.

> that can be made against any and all taxation

Only if you assume the wealthy have zero resistance to moving, and would leave for a country with lower taxes at any level of taxation. You're essentially saying nothing can be described as expensive without the same complaint being valid against anything not free.

> It is obvious in extreme examples

That extreme example only applies it to 2 people. Applied to all Americans, and the dollar becomes worth less.

Your PP equalisation has the exact same effect of heavy taxation, although it feels more like revolutionary redistribution. Whatever you feel about that, it's still short of redistributing PP because it only applies to currency, and not other investments.

UBI increases aggregate demand, so as you point out it increases inflation. However, it doesnt increase individual demand equally. Rich people’s demand will increase fractionally less than poor people’s. This means consumption inequality will decrease. So the choice of how much UBI to give is a balance between the good of decreasing consumption inequality (us has too much) and the bad of inflation.

Many places where I have seen people wanting to introduce UBI, increased (flat percentage) tax is often also suggested. The percentage is then suggested to be set at a level so that:

- People at low average income will have more money (the UBI-increase will be higher than the tax-increase)

- Average income: You get as much as before.

- Higher income: you pay more in taxes than you get from UBI.

Basically it ends up being a way to move money from the ones with higher incomes to the ones with less. It will ofc still give some inflation as poor people have more funds for basic needs. But other people will have less - and the average person just as much as before. Limiting the effect of the inflation.

Even if average inflation doesn't go up, when you look at specifics it doesn't look very good for the poor, the very people it's supposed to help. Take your example.

- Low income housing costs will probably inflate because all poor people will have an extra $1000 to spend. - Avocado costs probably won't rise, as middle classes will have the same spending power - Bentley and yacht prices might decrease as the rich have less spending power.

So you haven't helped the poor. You've created the usual issue with socialism/communism that in the end all it does is pull everyone down, rather than lift anyone up.

If that's your goal, fine, admit that you hate the rich. But the marketing promises of UBI are not that, they are about helping the poor.

I will admit that I don't have enough understanding about macro-economics to know how everything will be affected. But inflation on low-price housing does make sense, but I will admit I don't know enough about the field to understand to what degree. So at this point I just wanted to state the points I've heard other people make related to UBI. (basically that is also comes with increased taxes).

My own opinion is that I don't know the correct way to do economics in the future. But I do think that we at some point should think very different. I don't think the current system works out for most people in the future. And UBI looks more like a band-aid than an actual fix.

> Something no one ever talks about with UBI is how the effects will be eliminated in a few years.

No, this is something someone raises in literally every conversation, without any support.

> The very things poorer people would buy from it would get more expensive by the UBI proportion,

The argument you are making is that redistribution regardless of magnitude cannot affect buying power, even if the after-redistribution distribution is perfectly flat, people (at least those coming up from below) will retain exactly their pre-redistribution buying power.

> UBI does not create more wealth

Not as a first-order effect, no; it's first-order effect is redistribution.

> It just means everyone gets X+$1000 more tokens for the same wealth/goods.

Only if it is fully monetized, which doesn't seem to be anybody’s plan. If any of it is financed by traditional fiscal means (taxes and/or debt) it's redistribution, not flat addition.

If everyone has 1000 Euro more, for some people that’s 200% more than before, for others it’s 1% more.

This means that the amount of money overall does not increase as much as the amount of money poor people have.

Therefore, even if there will be a bit of inflation, it won’t cancel the effect of UBI.

Those who earn a lot will have less than before (Because of inflation), but those who earn little or nothing will have more.

Spoken like a true economist talking from the ivory tower.

Just because average inflation is the same, doesn't mean every product's inflation is the same.

You will see much larger inflation in goods everyone needs, especially low income housing, and maybe some deflation in luxury goods.

On average theres maybe no inflation, but you haven't actually helped the poor. Well done.

While my argument surely had some simplification, it holds approximately.

Whereas for your argument, I’m not sure how you come to the conclusion that inflation will cancel out all benefits. There is no reason to assume that.

Your argument rests on the assumption that poor people consume a set of goods completely distinct from middle income and wealthy people. If the price of a loaf of bread increases by 200% in an attempt to take advantage of increased purchasing power, why would the wealthier consumers accept this, if their income had not increased? Competition would put an end to rent seeking behaviour.

And on the subject of low income housing, it's often highly regulated, and can't be hiked arbitrarily.

If I've understood correctly, your argument is that the inflation in the basket of goods consumed by low income people exactly cancels out the increased purchasing power, I'm not sure you can argue that's definitely the case.

Basic goods demand is fairly stable. Poor people will always need to pay for food, shelter, etc. Just with basic income, they won’t have to worry about how they’re going to scrape together the money next month for the rest of their lives. These inflation concerns also assume zero elasticity on the supply side, which seems odd since there is no monopoly situation on any basic good, with the exception of housing in specific areas. Fortunately, the ability to move places strongly increases with a guaranteed income too.

"Will landlords increase rent" is a real economics problem.

Maybe UBI is financed through massive deficit spending, leading to inflation, and rents increase.

Maybe UBI is financed through broad-based tax increases that offset the increased income, leading to nothing in particular.

Maybe UBI is financed through increased taxes on rich hedge fund managers, who all quit their high-paying finance jobs to pursue their low-paying art passions, and rents decrease.

Any of these are plausible. UBI is a political topic, and how it is financed is crucial to understanding its impact.

Not everybody will get an extra $1000. For people on welfare, social security, etc. UBI will mostly just replace that. The big advantage is that people who start to work from a position of unemployment don't lose that money and won't get punished for working. The other big advantage is that you save a lot on bureaucracy figuring out who is entitled to what according to which rule, because everybody gets the same.

It will help the working poor a lot, but any market where there's real competition, that competition will continue to keep prices low. If prices go up anywhere, that's a sign that in that market, there's no real competition.

Or it could be that wages go up due to basic income, in which case costs and prices will indeed go up, but then there will be a good reason for it.

Saving on bureaucracy is a frequently made argument that I have never seen supported by a quantitative analysis. Do they exist? Such a claim seems untrue on its face.

You can't eliminate the welfare bureaucracy with UBI because:

- You won't want to be giving free money to literally everyone, only people within your jurisdiction. So you still need to figure out who those people are and whether they're authorised to receive UBI.

- It will act as even more of a magnet for illegal immigration, so you'd still need to spend on border reinforcements. Same problem as they have now in Germany and Sweden: lots of people turned up who can't work and sit on welfare forever. If you don't stop this it's in reality a policy of giving out enough free money to live by western standards to the entire world, which isn't how it's being advertised.

- You still need to deduplicate everyone and ensure people can't register for UBI over and over.

- You need to stop people creating fake identities to receive UBI for people who don't exist.

- You still need to ensure UBI stops being paid when someone dies, even though families and friends have strong incentives to stop the state finding out about a death.

- You still need to decide how much the UBI is, how much it should change, and whether the amount should vary by location. What's plenty for someone in the countryside may be considered insufficient in the city.

- You still need to track where people live, the moment you give way on the amount being adjusted regionally, which you will because the sort of people who most enthusiastically support UBI are all-in on the type of "fairness" that invariably means not treating people the same. Or are they going to advocate for a single income tax rate across all earning bands as well?

- You will need a huge rise in taxes to pay for this, meaning tax evasion and avoidance will also go up quite dramatically. You'll need to bulk up the tax bureaucracies to handle this.

UBI is just a modern rebranding of what in the 20th century was called the socialist utopia. People tried it, it doesn't work. That was Russia at the start of the 1900s. UBI advocates today seem to have forgotten about all that, but they're re-treading intellectually dead ground.

> "So you still need to figure out who those people are and whether they're authorised to receive UBI."

You need to figure out who they are to be able to give them money in the first place. That's not the thing you're saving on, but all the other checks to see if you're justifiably unemployed/disabled enough to be receiving this money.

A big problem with the welfare system is that people only get it when they don't work. They lose it when they get a job, which can often mean they actually lose purchasing power, so they're effectively being punished for working. UBI creates a system where you always get ahead by working, even if it's only a little bit.

Of course you still need the basic civil bureaucracy; every country needs that. But you don't need an extra layer of bureaucracy on top of that.

Yet people routinely choose to get off welfare and get a job, so clearly, the thresholding can't be that bad. Obviously there's going to be some cases where some jobs and welfare package combinations don't make financial sense in the instant, if you assume no chance that the job will ever lead to a pay rise. But it works well enough most of the time.

I've argued above that in fact you will still need a complex welfare bureaucracy that looks very similar to the one we have today, given even basic constraints like "there should not be excessive levels of fraud". Deciding if people have a job or not is a trivial cost compared to the entry-level costs of just making sure you're paying people who exist and you only pay them once.

Again - does anyone have a rigorous, convincing analysis of the cost of means testing specifically? Perhaps I'm wrong, but I don't think so. Especially because people who argue for UBI do not argue for the abolition of things like disability benefits, government subsidised health insurance and various other means-tested subsidies.

Some people do, some people don't. The threshold is surmountable for some people, but it could be a lot lower.

> "you will still need a complex welfare bureaucracy that looks very similar to the one we have today, given even basic constraints like "there should not be excessive levels of fraud". Deciding if people have a job or not is a trivial cost compared to the entry-level costs of just making sure you're paying people who exist and you only pay them once."

I strongly disagree. For one, there's a lot less room for fraud if it's something that everybody gets. Secondly, the government already needs to know that people exist. People get born, they go to school, they pay taxes, they vote, they die.

> "Especially because people who argue for UBI do not argue for the abolition of things like disability benefits, government subsidised health insurance and various other means-tested subsidies."

I would prefer those not to be means-tested, but equal for everybody. If you're disabled, you get disability benefits on top of your basic income, and you get to keep them even if you do manage to get a job despite your disability. Similarly, I'd like to see health insurance as part of that basic income.

The only place to test people's income would be for paying taxes. Basic income takes care of everything else. (I suspect even progressive taxation might be replaced with a single flat tax rate in the basic income is high enough.)

Disability benefits are means tested by checking if you're disabled, so I think we're talking at cross purposes. Abolishing means testing for that would mean abolishing disability benefits entirely. It'd just be rolled into general welfare or UBI. Is that what you want to see?

What about income tax? Shall we set a single income tax band for everyone? You say no but where's the consistency? Means testing is good when taking money but bad when giving it? Why?

The logic of a strictly egalitarian universal welfare system would also suggest governments be strictly egalitarian in all ways, meaning all taxes would be poll taxes. Everyone treated the same. But nobody is arguing for that, which makes it look like they're not working from a general principle of lower bureaucracy and more equality, just a general love of welfare.

Is means testing not about income? I mean to take income out of the equation, so people don't lose benefits when their income rises, because that would create perverse incentives. If you manage to hold a job despite being severely disabled, more power to you. That's not something that should be punished.

I think I already addressed all of this in the comment you're responding to: if UBI is high enough, I think there could indeed be a single tax rate for everybody. Because the UBI would already provide a comfortable living income, and only income for luxuries would be taxed.

But I think UBI will start lower than that, which means that at first, progressive taxation will still be necessary to some extent.

Alright, I've been using means testing to mean, a test of eligibility. But I just checked the dictionary and it's indeed defined in purely financial terms.

So we can add to the list of welfare bureaucracy that'd still be needed, disability tests. That's where a big part of the fraud comes from in any welfare system, because fraudulently obtained disability benefits is effectively a form of UBI: for those who have it, it never ends even if they get a job, unless the job is one that their pretend disability would prevent them from doing. Very attractive. Also, doctors and assessors don't pay for it so they tend to be willing to grant it to people in very lax ways.

This can be seen in the way people on disability benefits rises and falls with the economy in the USA.

As for a "comfortable income", again, you're dreaming. For everyone to have a comfortable income without having to work, with extra income only for "luxuries", isn't physically possible. It's literally the original communist vision that was abandoned because it didn't work. Comfortable income was simply redefined back then as subsistence income in a broken economy, and luxury was not only reserved for Party members but redefined as a standard of living lower than that available to ordinary people in the supposedly deeply unequal west. UBI is just centuries old political ideas re-heated and re-branded.

> Again - does anyone have a rigorous, convincing analysis of the cost of means testing specifically? Perhaps I'm wrong, but I don't think so.

We don't actually need a rigorous analysis of the costs of means testing to conclude that arguments that extending a benefit from <10% of the relevant population cohort (e.g. an unemployment benefit with eligibility testing) to 100% of it (i.e. all working age population) will cost more than the testing, unless governments spend 90%+ of the relevant component of their welfare budget on admin rather than payouts. Common sense as well as the published statistics confirms they generally don't.

Yes, you're right. I'm being rather over-generous to the UBI case here.

Your comment assumes that UBI is financed through printing more money.

If UBI was financed through taxes, UBI would not have the inflationary effects that you describe.

If the landlords are not being taxed at least as much as they increase rent, they have an incentive to increase rent in response to UBI. The result could be an inflating effect in essentials like food and housing, even if offset by a deflating effect in non-essentials, disproportionately affecting the poor whose main expenses are essential.

IMO the only viable responses are either rent control, or more elegantly, high availability of public housing at fair rents mixed with private units so as to not create class segregation.

UBH - Universal Basic Housing.

You can tax jeff bezos as much as you want, low end property prices will still go up, (and food etc), because poorer people will have more money, and will spend it on the same things. You might decrease the demand for luxury yachts, but demand for necessities will be the same.

I think you would only see inflation where supply is constrained and even then only in limited areas. Food is likely to be safe as supply exceeds demand.

Slum properties in richer areas might see it however perhaps those people living on the breadline in a rich city would take their BI and migrate away.

UBI does not create more wealth.

Nor do pensions for the elderly yet we still pay them.

The solution to that is to produce more goods. There is no physical law that says that there is a fixed supply of housing. Currently, it is difficult to get approval to build in many urban areas, but if we eliminate that barrier, there is no reason somebody else can't jump in and undercut an extortionate landlord by offering housing at X + $999, etc. until the price is pushed back down.

UBI doesn't directly create more wealth, but it would spur demand for creation of more actual goods. After all, poorer people tend to spend much more of their income than wealthier people. And once that is done, society will in fact be wealthier in a concrete sense.

it will also impact salary negotiations, as company tend to give you the absolute minimum for any job where's the slightest competition among employees.

I still think some form of UBI is worth considering, especially to remove bullshit jobs and help the poorer to come by, but should be complemented from other more positive initiatives (free tuition, free healthcare, free transit) and it will be extremely important to pin down where the money for it exactly comes from, as putting the burden primarily on the middle class would do more damage than not on the economy.

> When everyone has an extra $1000 do you really think landlords won’t increase rent?

Before even going there the key is to ask where this money comes from. Handing any significant amount of money on a recurring basis to everyone is tremendously expensive.

Without considering inflation the first issue that comes to mind is that people will use the extra money to pay the extra tax needed to give them extra money....

I wouldn't be worried about prices of food. Money from UBI should end up in the hands of people that provide poor people with what they need. It's societally useful thing.

Rent however...

People make this argument whenever there's a discussion of raising the minimum wage, and guess what? It's thoroughly disproven every time.

ubi doesn't automatically mean that you get a flat increase. there are models where it is modelled with taxes in mind. so simplified. if you had nothing before you know have $1000. if you had $2000 before it stays. if you had $3000 before it goes down to $2500. so sure if you just stupidly add $1000 that wouldn't work

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