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Comment by brabel | Hacker News Reader

That always seems to happen with this sort of protections. It's like when the government tries to incentivize people to buy electric cars by paying 25% of it (example from the climate bonus in Sweden, which was given for years), but what happens is that buyers actually end up paying just maybe 5% less as the car companies now can increase their prices and still sell the cars they produce while making more money.

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That happened in New Zealand, where the govt. paid $5,000 for electric cars. When this subsidy expired, prices decreased by a few thousand.

If a consumer was willing to pay $20,000 for a car why would they sell it to them for less than $25,000 when the final bill to the consumer will be $20,000, with the govt. paying an extra $5,000.

That's why the better policy is not to subsidize the purchase price of the car, but the various taxes associated with owning one, as well as offering certain perks like being able to drive in the bus lane. This was a huge success in Norway. Though now the percentage of new car purchases that are electric is so large that the subsidies are being rolled back because they've gotten too expensive(and the bus lane thing no longer makes sense because if the majority of cars can drive in it, it's not really a bus lane anymore). But I think that's fine. You can make an argument that when subsidies were introduced, electric cars were still struggling to compete with combustion cars in numerous ways, like range, capacity, access to chargers and repair services, etc. Subsidies/perks acted as compensation for those downsides for early adopters. The playing field is obviously a lot more even now. Chargers(including home chargers) are generally widely available, range is improved via better battery tech, there's a lot more players in the market, meaning more choice, etc. Not really a car guy, but I assume the repair situation is also improved, though it may not be on par yet.

In principle, that still injects cash into those companies though; it's just that the popular conception is that these subsidies are intended to make the product cheaper for consumers, instead of encouraging companies to produce them because they're more profitable due to the subsidy.

(This should not be taken as a blanket endorsement, god knows that companies follow the incentives, which is rarely perfectly aligned with the intent)

This is basically what everyone said would happen with Yang's proposed UBI in 2020.

Basic Econ 101 - The only way to lower prices is to increase supply (or decrease demand, however I'd really rather not have a huge pandemic, war, illogical engineered recession, or other situation that decreases the number of viable consumers...)

The electric car does illustrate what happens to prices well.. but I just want to point out that those incentives are not necessarily meant to decrease prices. The incentives are as much for EV car companies as it is for the consumer. Giving them better margins makes them motivated to keep investing in EVs and coming out with new models. It encourages them to do marketing for those EVs since they can actually get some profit from selling them.

One of the reason why EVs was going nowhere for so long was there was no incentives for the car companies since there were no prospects of increasing profits by selling EVs.

This also happens when a certain price range gets different benefits.

For example lower mortgage rates if the house costs below $X. Now houses that could sell for far lower than $X actually list close to $X.

That this would happen is evident to everybody with a minimum knowledge of economics. It’s the same reason UBI won’t work because it would make prices skyrocket.

It certainly could. Depends a lot on the specifics of how the UBI is implemented, and how UBI affects salary levels. If everything remained the same and everyone just got x more income each year, then yes, inflation is very likely. On the other hand, something more like no questions asked/no demands made social security, where the only requirement is being unemployed, could improve conditions for people who are unable to work while paying for itself in eliminating heaps of red tape, and also freeing up a lots of manpower towards helping people sort out their lives instead of pouring over disability pension applications, without paying out a bunch of money to people who don't need it because they earn plenty from work already.

One could also pay out ubi universally, but have a one time down-adjustment of salaries the first year.

Right and wrong. Right if it increases aggregate demand more than available economic production thus leading to inflation.

But if we overall had capacity to tame in the added UBI, then no. Unlike targeted subsidies like EVs, UBI is do much better. Each industry is still competing with other industries

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