The UBI should be inadequate | Hacker News Reader

The UBI should be inadequate

arnoldkling.substack.com

11 pointspaulpauper40 comments

> I am in favor of a Universal Basic Income (UBI) to replace the status quo of benefits, including Medicaid, food stamps, housing subsidies, etc. But I want the UBI to be a relatively small amount, something like $750 a month for a family of three.

Okay, but it's not basic income if it can't cover the basics. That's just a subsidy. I mean that's not even rent. Let alone healthcare.

A basic income allows a basic life allows for people to take more risks and start new businesses.

If you are really against people being able to not work, than instead of UBI you want to support Employer of Last Resort.

https://en.wikipedia.org/wiki/Employer_of_last_resort

If you were going to invest your own money in somebody for them to start a business, would you choose somebody who had been living off government handouts, or somebody who had gotten a job, worked a job, and thus learned something about how a company operates? which resume looks better to you? What if they actually worked a job in the field they wanted to start the company in?

If you want to see more such resumes, what incentives should the government offer for resume building?

I'm not necessarily against UBI, who doesn't want to eliminate poverty, but I have trouble understanding how it doesn't immediately result in price inflation of the goods and services most consumed by those at the lower end of the income spectrum.

For example, if everyone is given an additional $1,000 / month, would most of that not immediately get captured by landlords through inflated rental prices for low-income rental units? Wouldn't it be the same story for used cars? etc?

UBI doesn't magically increase the supply of goods / services, only the demand for them, right?

I don't see how it would cause rent to rise, unless it somehow increased demand for housing.

Which, I suppose, it might if it made it possible for the homeless to actually be able to find homes.... of course, I fail to see how that would be a bad thing.

> I don't see how it would cause rent to rise,

I mean one argument is implicit collusion amongst landlords. UK price fixing like this is illegal, but in US I believe it is legal as long it is not explicitly.

Some people, given $1000 a month, would move to locations where rent is less than $1000. There are still lots of those, but they are in locations without jobs. Lots of people are originally from those low rent locations and would like the opportunity to move back. So if UBI makes people more mobile and able to move to find low rent apartments, it limits the ability of landlords to raise rent.

Some people, given $1000 a month, would move to locations where rent is less than $1000.

With all due respect, you don't know that. What's for certain is that it would increase money supply in the economic system. Everything else is pure supposition.

What's for certain is that it would increase money supply

With all due respect, you don't know that. The more well thought out UBI systems are fiscally balanced. They increase taxes enough to pay for UBI. The average taxpayer would receive a tax increase for the same amount as the UBI they receive. People with less than average income would see a smaller tax increase and Bill Gates would see his taxes go up by much more than the UBI he would receive.

You just use the words fiscally balanced when describing the American economy. Specifically handing money out. The country cannot even pass single spending bills, you have no idea if it would be fiscally balanced or not. UBI is like communism, it hasn't worked anywhere it's been tried, and would still require taking money from one group and giving it to another. In the past, when the government hasn't been able to do that, they just print more.

> they just print more.

No they don't. They borrow more. Similar effect, but more accurate and a very different connotation.

But from whom do they borrow more, now you're talking about increasing the national debt. There's no way UBI can actually function or work without harming the system. It's a pipe, dream man, if you want money work for it

But you just a described a scenario where demand increases in these locations. It enhances, not limits, the ability to raise rent prices.

People moving from an expensive city to a poor city do not increase overall demand -- letting go of an apartment in a rich city to rent one in an inexpensive city does not effect overall demand.

But what does have an impact on prices is the elasticity of demand. If you're willing and able to move to get a cheaper apartment you increase elasticity of demand, lowering prices. OTOH, if you're stuck in your apartment because it's the only one close to your job...

Rents are regional, "overall" (by which I assume you mean either national or global) demand is irrelevant. If the government provides a program that incents people to move to low-COL areas (low, because there are no employment opportunities), rents in those areas will increase.

And, more significantly, rents in the high-COL areas will decrease.

net win.

That's simply incorrect. Imagine 5000 people decide to leave Manhattan (1.6 million) to move to beautiful Saratoga Springs (28,000). It will have no noticeable effect on Manhattan rents, but will vastly increase Saratoga rents. It's amplified because people who were forced to share a housing unit in Manhattan due to economics can live alone thanks to lower COL in Saratoga combined with the government subsidy. So total housing demand increases.

This phenomenon is clearly demonstrated every summer when people flood Saratoga during racing season, and every hotel room and Airbnb doubles, maybe triples, in price.

Your entire hypothesis relies on you being blind (by choice, it appears) to some easily-observable realities of the world.

Unrealistic scenario is unrealistic. 5000 people didn't move from Saratoga Springs to NYC. And 5000 people on UBI aren't going to from NYC to Saratoga Springs, it already has expensive rent. No, if you're on a marginal UBI you aren't going to move to attractive places, you're going to move too someplace where you can stretch your money -- aka someplace cheap and someplace where you have support, AKA family.

People moved from tens of thousands of different American towns to NYC, and lots of people in NYC would love to move back to those tens of thousands of different towns. And if you move back to where you came from, it means that you're not going to stretch the capacity of where you're moving to.

5 people moving from NYC to 10,000 different towns is far more realistic than your scenario. And 50,000 moving from NYC is likely going to affect rents there more than 5 people moving elsewhere.

> 50,000 moving from NYC is likely going to affect rents there

You're just making things up. Despite losing 10-20,000 people every 3 months, NYC rent increased steadily. Rents did drop initially at the start of the pandemic when outflows were 40-50,000+ per quarter, but even as the outflows remain greater than 30,000 per quarter, rents have fully recovered and continued increasing to record levels. And you believe that handing out money freely is going to lower the rent? Come on man.

net outflow chart: https://www.crainsnewyork.com/economy/are-people-leaving-new...

rent price chart: https://nypost.com/2023/04/13/manhattan-median-rents-reach-a...

Inflation isn’t simply driven up by supply but also greed.

It is highly important to remember economics is snake oil for the lost part. As short a time as a few years ago, the Nobel Prize was awarded for work proving wage increases did it limit jobs, as was claimed for generations. One would think this had been proven long ago, but that’s not the case. It’s propaganda.

Indeed, a great deal of the economic orthodoxy is little more than propaganda. All economic notions should be considered such until proven beyond a doubt.

And it probably would be a good thing to track how wrong is the nonsense of people like Kudrow and Summers, yet they are trotted out as gospel constantly. Jamie Dimon too.

What makes it basic is that you can earn additional money on top of it. It's the basis of your income.

Again with the "The best life is one of grinding labor". We should recognize the Protestant Work Ethic when it is used as a blunt instrument, and call it out.

In the 1950's, Science Fiction was all about how robots were going to lift the yoke of labor from our shoulders and let us live our better lives.

Now that it's happening (automation taking over almost everything) we see panicky wrongheaded articles like this one, that cannot imagine a world where not everybody has to sweat for their daily bread.

Very good points. Thanks.

The Horatio Alger school do economics. All BS, all the time, but orthodoxy nonetheless and the basis of conservative and libertarian economic thinking.

This is, bluntly, dumb. The only way you can justify having UBI be below poverty is if you don’t accept any of the philosophy or studies of how UBI actually works and stick with the long-since disproven approach of “let people starve”.

Geo-politically, you can’t outcompete China to the bottom, stop trying. And stop incentivising firms to drive their employees into poverty.

It would probably be a good transitional tool. We can start with 50 per month, it is enough to do the organization of it and end that part of the debate (both real and imagined) When in place it is really easy to increase it to 100, 250 etc

The author is saying that reducing benefits is good because it will force people into marriage and into the very lowest tier of the job market. Kind of a terrible idea.

He’s right that means testing is wasteful and can create disincentives, but the premise that it should be “inadequate” is not only antithetical to the very idea of UBI, but is grounded in an unfounded belief that people will just lay about instead of engaging in productive and enriching activities. That’s simply isn’t true. We know that’s not true because we’ve run multiple real world experiments. Mix in the the laughably misguided idea that charities will somehow fill in the gap, and you get the classic motivated reasoning with some straight line graphs that have dominated economics until very very recently.

But hey. I welcome the Overton window shift.

This article is not really about UBI at all but about "cliff-edge" withdrawal of benefits. And it's pretty uncontroversial in the point it makes there.

It’ll be inadequate no matter what because an area that institutes a UBI of $x will simply see their rent rise by $x.

It's worse than that as long as they can loan you money to cover this weeks debts at high rates and soon enough garnish all of your UBI. It would end up a wealth transfer to payday "financial institutions", if you allow debt. If you don't allow debt, is it really income?

A UBI will always be detrimental to the overall economic system. Any additional money in the system, such as the massive amount of quantitative easing done during the pandemic, will cause inflation in the market. A UBI will also be erased by the market responding to an increase in the available money in the system. Why shouldn't a car dealer increase its price by however much the UBI is? Why would any business leave money on the table? Any mandated extra income to people will be negated by an increase in things like rent, commodities, cars, everything.

A UBI is nothing more than a wealth transfer that has no long term viability, just as a political football. Who doesn't want free money? Vote for me and I'll make sure you get free money.

Surely people won't want to spend the money just because they have it. Won't competition continue to fight for people's dollars?

How does the car dealer determine how much to raise the price? 1 UBI payment seems arbitrary.

Back when 15$/hour minimum wage was being widely argued for, I always thought 7.50 min wage and 7.50 UBI would be a much better proposal. Much more minimum wage jobs worth creating at that point, and no disincentive to do them.

Why should my tax dollars subsidize businesses who don't want to provide enough incentive for people to come work for them?

I'm all for a UBI, but it should be enough to live on, and not (effectively) just the government paying wages on behalf of companies who don't want to pay for labor.

> not (effectively) just the government paying wages on behalf of companies who don't want to pay for labor

Well the arguments is that there are jobs that aren't worth doing at the current minimum wage. Imagine someone working in a garage who might be willing to hire someone for a $2/hr to fetch tools for them, but at $15/hr they would just rather get up and walk across the shop themselves. $2/hr is enough to cover transportation to work, so the UBI is used to bridge that gap. There are existing programs like this now for the developmentally handicapped.

One of the main divisions of UBI is whether we require people to work no matter how demeaning (informed by the protestant work ethic) or whether it should guarantee people a certain level of dignity (informed by social welfare mindset).

Not taking sides, but this is a schism that everyone in these conversations should be aware of.

Sure. Along with price controls, so companies pass the savings onto consumers, instead of just making obscene profits, right?

I'd see that as a separate issue and not be in favour of holding one good reform hostage by demanding another.

The author’s thesis is to give every family (not person) $750 a month, and that eliminates all benefits including Medicaid. This isn’t a serious proposal, it’s Paul Ryan-style dismantling the social safety net rebranded as UBI. Just more Welfare For Me, Nothing For Thee so-called “fiscal conservativism”, the likes of which brought us budget-busting tax cuts for the wealthy, and austerity for the rest of us.

Giving poor people a thousand a month caused them to get more jobs. Giving them 6k up front caused them to get even more jobs.[0] Author's argument is invalid.

Percentage of Participants Working Full-time, Enrollment and 6-month Follow-up:[1]

Group A (1000usd/m): 18% -> 25%

Group B (6500usd one time + 500usd/m): 21% -> 35%

Group C (50usd/m): 22% -> 22%

[0]: https://news.ycombinator.com/item?id=37836296

[1]: https://drive.google.com/file/d/1gqtOfZG2sSanWgUdzn-lx-pwSXZ... page 22 (pdf page 23) figure 9

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