Labor Is a Market Distortion, we need VAT and UBI | Hacker News Reader

Labor Is a Market Distortion, we need VAT and UBI

wilsoniumite.com

17 pointsWilsoniumite32 comments

We're not going to get economic change until the people revolt. This doesn't need to be a revolt with guns and bombs, it could just be a refusal to pay taxes and to purchase things. The US has shown that it's extremely vulnerable to economic warfare given how little slack there is in the system for absorbing shocks, so it's the perfect avenue for asymmetric warfare.

Perhaps, but this is actually a both a somewhat novel framing of the problem and of the solution. If academic economists agree with this theory and subsequently get behind it, it could be like climate change.

Except this change isn't anti growth and is a lot simpler to fix than climate change. It can be bi-partisan, if framed right, we have to at least try.

Aren't people going to revolt still have to work? What's the point? If the revolution succeeds they'll have zero access to imported goods, because nothing to exchange (and that includes TV's, smartphones, computers, cars, internet, ... for essentially everywhere) AND have to work way more.

That's the reward the revolution can conquer. Hurray!

Even if you have a magic fairy wand, and make this happen, UBI can never exceed worldwide average income. What does that mean? The global PPP average income is 2000 dollars BEFORE tax, so let's say 1200 after tax. Oh and that's PPP, not USD. So that's adjusting so rent is the same as now. Food costs the same as now. Restaurants charge the same as they do now.

Why would any American at all be in favor of that?

the end goal is to cause bad actors to go bankrupt and force politicians to bend the knee to the people rather than oligarchs with a unified show of force, not to reduce the USA to developing nation status.

And I guess you don't name any bad actors because of course nobody would agree who is a bad actor and who isn't.

I have my opinions, but it's ultimately up to collective action and advocacy to decide. I'm pretty sure Oracle or Adobe wouldn't get any pushback though.

Who will replace their software? I mean, Oracle is famous for somehow convincing many hospitals to run on their software. So you'll have to either accept they won't run anymore or rewrite thousands of systems ... And I bet worldwide we're talking hundreds of thousands. Who will do that and how will you pay them?

But even that is nothing compared to the other question. You want the US to be better than third world. Ok ... but that depends on the third world not getting these advantages. So how will you force the actual third world to keep working for much less rights and ... than you give people in the US for free?

Because "the revolution" of course doesn't work without that.

You submitted this article with another title 6 days ago.[1]

[1] https://news.ycombinator.com/item?id=48434114

I've changed it a bit, but yeah that's true, sorry.

Labor is not a market distortion and average wages not following average productivity is not evidence that it is. In a competitive market, wages should follow marginal productivity.

Probably what happened is America was in an increasing returns to scale part of its production function. Now it's in the diminishing returns to scale portion. If I had to guess why, it would be due to growth boundaries of cities and lack of new cities. There's no new Manhattans. Instead Manhattan has just gotten more and more expensive to live in.

Anyway, if F(Population) is the production function, then wages should be F'(Population) and total wages should be Population.F'(Population).

F(Population)-Population.F'(Population) is total production minus total wages and is known as economic rent.

The right thing to do would be to tax economic rent. Use a tax on land value and natural resources to fund UBI.

That's true, I think the real problem is a liiiiittle more nuanced than just the great stagnation. But that's the graph people know. The issue can be read out in more detail from other graphs too, I'm working on an updated piece. I mention georgism at the end of the piece as well.

But do you agree with the theoretical framing? People not being able to not work forces them to find something. It's like an iron ore deposit being forced to be mined rather than being mined when it's needed?

I don't really. It smells to me like the lump of labor fallacy. Labor participation results from supply and demand and it going down does not necessarily indicate less demand, but can also indicate less supply. That's what you'd expect as countries and the world become wealthier. Leisure is a normal good.

That's fair, they seem similar at first glance.

The difference is that we are asking the economy to create jobs even when it doesn't "want" to. It still will, the lump of labor fallacy is indeed a fallacy, but that doesn't mean this isn't causing a lot of harm.

We aren't draining the earth's oceans (yet) because its supply is more than the earth needs right now. One day we might, but how much we draw is decided by the economy.

But for labor supply is forced, capital flows there when it shouldn't, politics chases it. The economy, ever adaptable, provides jobs where it can.

I have a better response now.

The ability to take leisure is still conditioned on labor. To take time off, you have to save up. To save up, you have to work. Labor is distorting the real value of leisure if the production of that leisure needs less labor (leisure time still requires you to be fed, housed, and more if you go on holiday, travel, or consume to keep yourself entertained or educated).

That's not a distortion, that's just what the choice is.

When a new gaming console comes out and someone works extra shifts to afford it sooner, that's not a distortion.

I think your mistake, based on how you're talking about the "real value of leisure" is thinking there is a single value of x. That's labor theory of value era thinking. There is only marginal utility and marginal rates of substitution.

Trading leisure for consumption via labor is the choice, not a distortion.

VAT for essentials like food, medicine and household supplies makes zero sense; it will greatly hurt the poor. Save the VAT exclusively for luxury items like clothing, furniture, travel, etc. which the rich spend a lot on. Computers qualify as essential and must not be VATed either.

---

VAT joke:

Question: Why is there is no VAT in the Vatican?

Answer (reversed): "!tcelloc t'nseod dog esuaceB"

What is needed are enforceable laws that force companies to pay a living wage. The wage paid is based upon the cost of living in various US metro regions. The wage must be updated every 6 months. And we need a single payer health system.

Plus a type of tax that forces the ultra-rich to pay, if needed, a wealth tax that some countries are enabling.

That works only as long as people are employed and there are enough jobs to employ people. Simplest solution for a company is to outsource or automate jobs away as much as possible. After a couple years customers will adjust to the new norm even if it's a worse experience for them.

All businesses run on a profit margin. It's a resource game, thinly veiled by the money layer as means of exchange. If you make the price of buying labor by decree, the owners of the business will either buy less of it (supply/demand ratio), automate it, raise the price to offset the increased cost or close the business down, because the costs are too high.

Businesses are shaky constructions and when you regulate them out of existence who will be generating the taxes for the government to redistribute?

About the "single payer health system", it's not a panacea. Many countries struggle with single payer systems, because there are also problems there too. The best working example for a medical system is Singapore. Compulsory medical saving account with government subsidies in that account for the poor. All prices are transparent and patients pay from that account and have premiums over the basic treatments, thus creating the market dynamics needed for the market to work and still requiring personal responsibility, by making sure the patients sees the costs and chooses himself.

Isn't VAT generally a regressive tax so does the exact opposite of what the author thinks it does? The rich spend less versus their income than other demographics. I guess the UBI is to offset that but that just doesn't seem like a stable system.

The author addresses this exact concern.

The same way a random redditor addresses concerns about their proof of Riemann Hypothesis.

Badly

I'd say a better alternative to taxes and handouts is to normalise and incentivise to give a stake in the company/business to every worker.

It's the only reasonable way to avoid the main flaws of our economy/society. Billionaires would be way worse off, as they won't freely reap the fruit of the labor of the workers that power their ideas, and the workers will be way better off, as their productivity is no longer decoupled with their pay.

I agree, and in some sense I argue this at the end, but I didn't want to make the piece even longer.

In fact if you look at the economics of this policy over the long term it leaks capital through rents, so it doesn't actually work forever.

A sovereign wealth fund can solve this (essentially an expansion of the "buffer" I wrote about). That functions as almost exactly what you want, giving a stake in every company to every worker (except broader, to every citizen).

If you buy the framing that labor is currently a distortion, you wouldn't want to only give stakes in companies to workers of those companies, if you do that the distortion will continue.

There is something to be said here, the government may be democratic but almost all of us are subservient to fascist corporations. Employee owned companies is a great start to get out of this mess

the diagnosis has data behind it, but the proposed mechanism doesn’t, by your own admission

I have a new version that uses US and Finnish consumption data to model the mechanisms effects.

https://wilsoniumite.com/2026/06/14/labor-pressures-causing-...

Keep dreaming, we are in hyper capitalism mode, ebshitification, etc. They just spent weeks of government time state and national worrying about people on food stamps buying candy or coke, to save pennies, they watch the poor like a damn hawk but let millionaires rape children in the biggest pedo ring in history.

That's a very sad outlook.

This problem is hard because it's hard to spot, but the fix is actually surprisingly easy (at least in the short term).

The scale is on the order of climate change. If the academic base of economists were to unify behind this theory, change could happen. Only a few countries need to adopt this to show merit to the idea (although, that will take like a decade to truly show). Unlike climate change though this isn't fighting growth, it can recover it, and it's much, much easier to implement. That's why I think it can be truly bipartisan.

> Why VAT?

> This is a little harder but not too hard: Because it’s the mirror of UBI. The UBI will fund consumption, VAT taxes consumption.

This is dumb; there's literally no other way to put it!

VAT is a tax exemption on the rich; that's all it is.

100%, VAT is a regressive tax. Poor people use a large portion of their wealth on products and services. Rich people use a much, much smaller portion of their wealth on those things.

Plus rich people all have companies pay for a lot of their stuff. Need a new laptop? Buy it through your company. Internet and cellular plan? Company. New cell phone? Company. Many even have their cars paid by an compaby. All those purchases through your company are VAT exempt. Poor people buy their own laptops and their own cell phones and have their own Internet subscription and cell plan and car. They pay the VAT.

I'm in Norway, where the standard VAT rate is at 25%. I don't understand how such a vast regressive tax is so uncontroversial here. Get rid of it and replace it with a larger wealth and capital gains tax.

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