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Comment by zoky | Hacker News Reader

The thing I’ve never understood about UBI is how it wouldn’t immediately be counteracted by inflation.

Money is like water or electricity; its only ability to do work is when it flows. Just like a water wheel can’t do any work without a river flow, or a motor can’t do any work with a potential difference, money is useless when everyone always just has the same amount. It is only the transfer of money from one entity to another that causes work to be done.

The difference between 9V and 12V is 3V. The difference between 12V and 15V is still 3V. The amount of work you can do is the same, but the bar to entry is higher. So somebody explain to me, when everyone gets the same baseline amount of money, how that does anything but raise the baseline?

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> The thing I’ve never understood about UBI is how it wouldn’t immediately be counteracted by inflation.

I think you are not wrong, but not completely right either! It's true that the income difference among people would not change, but the distribution would: homeless people begging on the street could afford something in a stable way, at last; people on minimum wage would double their income; medium class would see their disposable income increase; and rich people would not notice any difference.

Sure, the purchasing power of the UBI sum would be reduced the moment the UBI is introduced, but still poor people would see their situation get better: the poorer, the "more better"!

Furthermore, most of the money flowing to the poor people would be spent right away, boosting the economy, which is a very nice side effect. In the end, UBI would be a way to force the rich to take some of their money out of the vaults and spend it (1st benefit) for the poor (2nd benefit).

The only problem lies in how much money you'd need to take from the rich to implement UBI in a meaningful way.

This is probably also a flawed analogy applying simple ideas to an extremely complex system / set of overlapping systems, but I see UBI as a sort of social and economic lubricant.

People at the bottom of the economy are not able to effectively participate in it. At the absolute bottom it's homeless people with no real path to employment or any real ability to improve their situation. You get above that layer and you've got people making constant compromises between competing necessities like housing, nutrition, and clothing.

Inconsistent and/or substandard nutrition can be massively impacting to adults and even more so to children. Their immediate and long term mental and physical capability is lessened compared to others. People who aren't able to effectively participate in the economy today have kids who aren't able to effectively participate in the economy tomorrow. This creates a persistent drag on the economy as a whole.

It's absolutely possible UBI causes some degree of price increases, but in exchange we get an economy with a larger number of effective participants and less drag at the bottom.

Unfortunately, this thinking is predicated on the idea that those at the very lowest tier of society would participate given the opportunity.

To be clear, this is not about the working poor. I don’t think this would ultimately help them. This is also not about those currently on welfare; I don’t think it would help them either.

The question is, would it help the homeless man living under a bridge or the homeless woman walking around naked at 7-Eleven? Sadly, I don’t think these people can be helped, at least not just by throwing money at them. Even if UBI were implemented, I don’t see them claiming it, and I don’t see them spending it on anything more than drugs and booze.

As far as I’m concerned, rather than implementing UBI, if we were to take that money and use it to implement prison reform and mental health care, it would be far better spent.

> this is not about the working poor. I don’t think this would ultimately help them.

I think you are generally right, but I strongly disagree on this specific point: the working poor would be the most benefitted. They are working, which means they are already taking good decisions and making efforts to improve their lives: money could not be spent in a more productive way than handling it to those gentlemen.

Perhaps, but the problem with UBI being, well, universal is that everyone gets it, including those that the working poor buy from. All of a sudden the suppliers see the purchasers having more money, and they have more money themselves, so where is the disincentive to raise prices? That’s how inflation works, and it’s well known that inflation screws the working poor most of all.

You seem to be putting all homeless people into a bucket where they're all equivalent to a crazy person walking around naked in a convenience store.

Yes, absolutely, we need to have a real function in our society that provides housing and care for those who are so impacted by mental health challenges that they will never be able to care for themselves.

I think it's a mistake to think of most homeless people as you seem to - that they're irredeemable and forever broken.

> As far as I’m concerned, rather than implementing UBI, if we were to take that money and use it to implement prison reform and mental health care, it would be far better spent.

This is kind of trickle-down-ish. When you put a dollar in the pocket of an individual, that dollar was fully spent on helping that individual (your point about what he does with it, and whether that counts as helping, still stands).

When you put a dollar in the pocket of a business or institution that "helps people", $0.50 goes to the executives and shareholders, $0.25 goes to all the bloated administrative staff, HR managers, Directors of Paperwork, and so on, $0.20 goes to sub-contractors and sub-sub-contractors who, themselves have executives, shareholders, administration, and at the end of the chain, maybe $0.05 goes to the actual enterprise of helping people.

I’ve had the same question. We saw this, to some degree with the stimulus checks during the pandemic. Initially people got all this money and reports were that savings rates had never been higher… but most of the world was also shut down. As things opened up, or people simply got bored at home, what did we see? People spent everything they were given, and more. Personal debt is now at an all time high, and we’ve seen a bunch of inflation (for various reasons). Most people are in a worse place now.

Financial literacy is extremely important. Giving more money to people who don’t know how to handle money, allows them to dig bigger holes.

That said, everyone’s investments and 401ks are reliant on this reckless spending to keep returns high.

A fiscally balanced UBI is one which increases taxes on the average taxpayer exactly the same amount as it pays to the average taxpayer. It would not increase the money supply and would have minimal impact on inflation.

No, what you’re describing is a “take from the rich and give to the poor” welfare program. The idea behind UBI is that everyone gets the same amount regardless of what they otherwise make. If those who make more are taxed more, and thus ultimately net less, how is that in any way “universal”? And for that matter, how is that any different from what we already have?

What you are describing as UBI is nothing more than disguised calls for increased taxes on the rich and greater welfare for the poor. Which, fine, if that’s what you want then why not be honest about it in the first place instead of couching it in misleading terms such as “UBI”?

This isn't some secret. Of course the wealthy are going to pay more into it than they get out from it. "Take from the rich and give to the poor" is the entire point. This should be understood by anyone with basic economic literacy, or even a modicum of logical reasoning. How else in the world are you to have any welfare program?

If you object to the existence of welfare programs on principle, then you should make that argument.

What I object to is the call for such programs under the guise of them being something other than what they are. If UBI is just welfare, why not just call it that?

Because it's a different approach than the welfare systems we have today. It's not the same thing. There are similar elements, but the structure is very different. The terminology difference helps reflect that they're different concepts.

From wiki: "Universal basic income (UBI) is a social welfare proposal..."

Perhaps this perceived deception is just in your own mind?

This is a misunderstanding of how a budget works when you can print money. You don't have to take from anyone to give to everyone when the money supply is only limited by your concern for inflation beyond the capacity of the economy to do more useful things with the money than would have been done without it.

>Money is like water or electricity; it's only ability to do work is when it flows.

Precisely.

"Frozen Desire: The Meaning of Money" by James Buchan (1997) is a superb book that expands on your statement.

This argument seems to imply that if you had a big red button that would uniformly distribute all the world's resources, that we would be stuck in a steady state and unable to produce anything. This conclusion is obviously false, and I think if you work backwards you can probably find where the analogy breaks down.

One interesting thing about giving money to the poor is that when they have money, they spend it immediately because they have to. I don't think this addresses the inflation question, as there are guaranteed to be check cashing rackets and price gouging where thing costs 1 UBI unit all of a sudden.

Universal Basic Water would be a great achievement!

If it is funded by taxation, it need not be inflationary.

If you think about it, the Fed only really has one "knob" they can turn to control inflation: they can either raise or lower the interest rates.

However, raising taxes is also anti-inflationary, and in stagflationary environments (like we had at the end of Trump's presidency), it lets the government control inflation without making borrowing more expensive.

If it’s funded by a flat tax, then yes, but then what’s the point? Seems like nothing more than a shell game.

If it’s funded by a progressive tax, then how is it anything more than a tax increase combined with increased welfare?

Either way, seems like nothing but a recipe for inefficiency and increased government bureaucracy.

Current welfare frameworks generate massive amounts of extra work for both government and those receiving assistance.

In the means-tested approach, the agencies administering welfare have to understand the means of the people receiving assistance. And monitor for changes that might push recipients outside the accepted range or cause a change to benefits.

The recipients carry extra load because they need to understand where they themselves are in that accepted range and organize their lives around that. The current system creates perverse incentives where an unemployed person receiving assistance may find themselves worse off if they get a job.

When the agency's job is "Send $X to every citizen" it's actually a lot simpler for everyone involved. There's no qualifications to verify, no changes to monitor. The recipients don't need to continually re-prove themselves or contort their lives. There's still some fraud potential but the attack surface is now far smaller.

There's still complexity on the tax side because progressive taxation is the way to go to make this work, but we have that already. IMO it'd be a net reduction in complexity and administrative overhead vs the current welfare system.

Sometimes, the means-testing apparatus itself costs more than the benefit that it is supposedly "protecting." Occasionally it costs multiples of the benefit.

Exactly! We're so concerned about someone getting something they don't "deserve" that we'll spend ourselves to death to prevent it.

These are good questions; I'll try to give you good answers.

// If it’s funded by a flat tax, then yes, but then what’s the point? Seems like nothing more than a shell game. //

yes.

// If it’s funded by a progressive tax, then how is it anything more than a tax increase combined with increased welfare? //

A couple of points:

1. We actually already have UBI and a single-payer health care system--you just have to be 63+ to get it :-) Social Security is the very paradigm of (as you put it), "A tax increase combined with increased welfare." And yet, everybody seems to love having it, or not having to pay for their parent's and grandparent's housing and medical bills.

2. If we had a UBI--say one that paid proportionally to our GDP--nobody would be fearing AI, robots doing the dirty work, etc etc. Every voter would be massively incentivized to vote for public policy which would have our GDP growing as fast as technological progress could let it. This alone, IMHO, is worth the price of admission.

3. I'm going to go out on a limb and guess that you are a big fan of Hayak? :-) UBI is a cornerstone of Hayak's "road outta serfdom." Imagine driving an Amazon truck--and being told when you can and when you can't go to the bathroom. You probably don't have to imagine your employer putting key-and-mouse monitoring systems on your computer. If somebody can tell you not to go to the bathroom when you need to, and if somebody can punish you for not pounding your keyboard fast enough, lets face it, you don't have any freedom. UBI would give us the leverage we need to exercise our inalienable right to freedom even at our workplaces.

// Either way, seems like nothing but a recipe for inefficiency and increased government bureaucracy. //

As others have noted, it is quite the opposite. Think about how MANY different ways the government subsidizes things...sugar prices, corn prices, beef prices are all artificially high because farmers get subsidies. And we're just getting started--oil companies getting subsidies, subsidized student loans---and there are *square miles* of buildings staffed with people to administer them all.

Literally (not metaphorically, or hyperbolicly) literally *square miles* of bureaucracy would no longer be needed.

And if we had UBU--it would be OK to lay them off!

You're cramming an analogy into your point. Systems like economy and people dont fit into an electrical diagram.

Am I? I don’t think so. Please describe for me a situation where the simple possession of money, absent any potential for that money to flow, causes work to happen.

If you can, you’ve described nothing less than perpetual motion.

The simple possession of money by a hungry person causes that money to flow by encouraging the person to spend the money on food. That causes work to happen at the food producers. Maybe even so much more work that they're willing to hire additional hungry people to do that work.

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