Hacker News Reader

Comment by yummyfajitas | Hacker News Reader

Presumably you are taxing income to pay for this. The net result is a transfer of wealth from people who work to people who don't.

As a result the money supply does not increase. If any inflation occurs, it is caused solely by a shift of spending from goods/investments not measured by CPI (or the swiss equivalent) to those that are.

(I.e., if money shifts from investment in electronics research to pizza consumption, the price of pizza will rise and the price of of oscilloscopes will fall. Since CPI includes the price of pizza but not oscilloscopes, inflation will rise.)

View on HN

I'm going to elaborate on the parent's confusion a bit. Even if, as you suggest, net inflation doesn't increase, price distribution might. That is, yacht prices fall, while food/rent prices rise. Since the poor spend the vast majority of their income on food/rent, much of the basic income would thus be recaptured. In fact, while the equilibrium might be different, it appears to me that the overall impact might be minimal, or at least less than expected.

OTOH, it might help with our aggregate demand problems.

It's quite possible I'm missing something, however.

You're assuming the poor don't eat. I would argue the price of food would not be considerably affected. We all need to eat poor or not so unless their dead their still buying food. Rent on the other hand may rise since there's people sleeping on the streets at the moment.

Not exactly sure what you're suggesting, but I'm not assuming the poor don't eat. On the contrary, I'm saying that the poor spend a greater percentage of their income on food and rent, and that overall price inelasticities of food/rent would result in inflation for that class of goods.

Let me put it this way. If you were the only grocer[1] in the neighborhood and you knew that everyone in the neighborhood just got a 10k raise, would you not consider raising prices? Or, put another way, if you're the only grocer in the neighborhood, and everyone gets 10k/yr of free money, and that induces, say, 10% of your workforce to quit for various reasons, then you have to pay more for labor and pass the costs to customers. Either way, food prices rise.

[1] Note, that's not improbable in many poor areas.

[2] I'm just armchair speculating here... so, like I said, I could be way off base.

He is saying that the actual demand (amount of food people buy) is not going to increase much, so the whole argument rests on you being the only grocer -- and if you decide to increase your prices that much, that would only result in either (i) your former customers now carpooling to go to nearest Walmart, or (ii) more grocers opening nearby (since the grocery business in this neighborhood suddenly became much more attractive).

When everyone, even poor people, have an extra (say) $10k, basic cost of living could go up $10k because that's what the market will bear.

> When everyone, even poor people, have an extra (say) $10k, basic cost of living could go up $10k because that's what the market will bear.

If you assume a totally monopolistic marketplace (so that there is no competition to drive down prices but instead there is unlimited capacity to extract monopoly rents), sure. In a marketplace with any kind of competition you'd expect some increase in each the market clearing price and the market clearing quantity of each of the goods that would be purchased by the people who end up with a greater net income after the policy change.

Are you saying the cost of production doesn't have a say in the price of the product it's how much people are willing to buy it for?

Because if that's done with basic necessitate like food so people are force to starve because corporations want to charge as much as possible they should all be charged with the death penalty.

Cost of production sets a floor on the price of goods, not a ceiling.

True, but competition among sellers sets the ceiling.

In the long run, the price of food and housing should match the marginal cost of producing them. Since a relatively small portion of the (Swiss, at least) population is poor, we should expect that feeding and housing all of them won't move the price much, because the supply curve just isn't that steep. There's no reason to expect an objective material shortage in food or housing - it's relatively easy to make more of both if poor people have the money to pay for them.

Doesn't research tend to put downwards pressure on electronics prices (I guess you've just made a typo...)?

An interesting side effect might be an increase in the ability of people who work to extract the value of their work from people that hold capital.

Won't vendors and landlords charge what the market will bare? If all the people not receiving subsidized housing now have +$10,000 per year, they can all bid up to that much more.

In certain places where there is a limit on the supply of housing this will probably happen.

However, when rent prices go up, it encourages people to build more homes/apartments which in turn drives prices down. There is a feedback loop (granted, many times it's interrupted, and there is a delay)

If the prices of things like food rise that is a good thing. It means more people are buying them than before, it means more people have access to those things. It's a net benefit.

Reply on news.ycombinator.com