Comment by jganetsk | Hacker News Reader

Comment by jganetsk | Hacker News Reader

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A basic minimum income is the right answer, but not for the purpose of increasing demand. People demanding to increase demand is utterly silly. We have succeeded as a civilization: we are providing far more than we could ask for. In the big picture, what does increasing demand really do for us?

But there's definitely a need to reduce poverty. And there's a need to allow ourselves to stop working as hard as we do. A basic minimum income would help accomplish these things. Where do we get the money from? It doesn't really matter, there's plenty of it sloshing around. As Charlie Munger said:

“This has basically never happened before in my whole life. I can remember 1½ percent rates. It certainly surprised all the economists. It surprised the people who created the life insurance industry in Japan, who basically all went broke because they guaranteed to pay a 3% interest rate. I think everybody’s been surprised by it, including all the people who are in the economics profession who kind of pretend they knew it all along. But I think practically everybody was flabbergasted. I was flabbergasted when they went low; when they went negative in Europe – I’m really flabbergasted. How many in this room would have predicted negative interest rates in Europe? Raise your hands. [No hands go up]. That’s exactly the way I feel. How can I be an expert in something I never even thought about that seems so unlikely. It’s new territory….

I think something so strange and so important is likely to have consequences. I think it’s highly likely that the people who confidently think they know the consequences – none of whom predicted this – now they know what’s going to happen next? Again, the witch doctors. You ask me what’s going to happen? Hell, I don’t know what’s going to happen. I regard it all as very weird. If interest rates go to zero and all the governments in the world print money like crazy and prices go down – of course I’m confused. Anybody who is intelligent who is not confused doesn’t understand the situation very well. If you find it puzzling, your brain is working correctly.”

The economics of this inertia is easy to understand, and there are readily available remedies. The world faces a deficiency of aggregate demand, brought on by a combination of growing inequality and a mindless wave of fiscal austerity...The only cure for the world's malaise is an increase in aggregate demand. Far-reaching redistribution of income would help, as would deep reform of our financial system -- not just to prevent it from imposing harm on the rest of us, but also to get banks and other financial institutions to do what they are supposed to do: match long-term savings to long-term investment needs.

Simplified primer by Joseph stiglitz.

http://huffpost.com/us/entry/world-economy-2016_b_8908560.ht...

We have succeeded as a civilization: we are providing far more than we could ask for.

Really? There is nothing you could improve in the human condition that would make life better?

Of course there is. The point is, we've reached the stage of our advancement when, on aggregate, we produce more than we actually need. Our current issues are with distribution of what is being produced.

Not sure that I would agree there. What if the "excess" production funds a cure for cancer? What if that cure requires additional resources?

The world isn't static.

I'll try by best not to sound like a raging sociopath here.

In pure economic terms, curing cancer has little benefit to society. Cancer is not any one specific disease. It's a class of diseases, of which there are thousands (or more) of variants.

We may stumble on some amazingly technologically advanced cure to some forms of cancer but the more rare the form, the less likely there will ever be a treatment.

Most people get upset when you talk about humans as assets because we're indoctrinated at a very young age to value human life above all else.

If you can, in fact, speak about humans in economic terms of supply/demand. We have an overabundance of people, and nothing useful to give them jobs to do.

It's like the current oil market. Oil was highly valued due to the inelasticity of supply. Now that there is a glut of over supply and inelasticity greatly reduced, the value has dropped dramatically.

The supply of humans capable of doing useful work used to be somewhat constrained. Now, we have more people than can be reasonably assigned to do useful work without essentially paying them to warm a chair. Yet, like the oil market nothing is stopping people from having more kids and increasing the supply. The government even directly subsidizes people for the number of children they have due the persistent belief that GDP is directly dependent on population.

People can increase their value proposition by earning many degrees and racking up huge amounts of debt but, unless you're going to work in the industries that are thriving, it's a buyers market for employers.

Business owners have their choice pick of the herd. They can keep wages as low as possible and skim more cream off the top because there's a line out the door of people waiting the replace a worker who quits.

Who knows, maybe this is just the supply limit (ie in environmental science terms) as it applies to the human population. Poverty and misery is the expected result of making too many people before we can come up with enough useful reasons to sustain them.

I've been thinking along similar lines recently.

One counter to this argument is that as this process of overpopulation (relative to useful jobs) begins to happen, standard of living decreases.* As standard of living decreases on average, people start to have less children. So the imbalance is somewhat self-correcting, it's just that human lives are getting to be longer while the time between inventions that obviate the need for human labor seems to be getting shorter.

Longer average lifespans (with the same legal retirement age for social security, medical benefits) exacerbate this problem.

But there is always one industry that can be fueled by human lives and that looks great on an economic balance sheet - war. It decreases surplus labor, increases nationalism and social cohesion (if people generally see the necessity of the war), and injects a huge stimulus of demand into the economy through gov spending on all sorts of goods for the war effort, as well as investments in R&D that adds to the country's infrastructure base.

If the latency between idle/restless/poor/disenfranchised population and meaningful/useful jobs gets to be too large, then all it takes is a spark to start a protest, rebellion, or war as people have nothing else to really live for.

* I would use GDP/capita to have a more quantifiable benchmark, but I find GDP to be almost completely useless when accounting for things that matter to actual human beings such as quality of social cohesion, potential social mobility, amount of pollution, etc.

> As standard of living decreases on average, people start to have less children

That seems counter to all actual evidence doesn't it? The places with the poorest standards of living have the most children and visa verse.

I think he's talking about people who are at a decent standard of living that becomes reduced, thus the potential parents not "wanting to bring a child into this troubled world."

I believe I fit squarely in to that category. I'm just old enough to have seen the fall of 'corporations who hire for life' in to 'everyone for themselves' employment. It is a disheartening drop in live stability.

You may find that the relationship between birth rate and standard of living is the opposite of what you described.

We actually have some pretty good existing examples to draw from to conclude this. Japan has arguably the highest standard of living, but also a decreaseing birth rate.

Women in Australia and America are having children later in life, and having fewer of them as well.

Meanwhile in developing countries where access to birth control and education are more limited, birth rates are sky high.

"Not sure that I would agree there. What if the "excess" production funds a cure for cancer? What if that cure requires additional resources?"

Production does not fund other things, and disease cures are not something that people willingly buy. Excess production just wastes resources on things people do not want to buy (unsold automobile inventory, etc.) and is enabled by access to too much speculative capital. Redistribution of that capital (in the form of higher taxes) into government-mandated and funded research programs to find cures for cancer is how you find a cure for cancer. Disease research in the United States is not funded by pouring water on your head (http://www.nbcnews.com/health/health-news/ice-bucket-challen...) or Tim Ferriss (https://www.crowdrise.com/timferriss), but by the $30 billion budget of the National Institutes of Health.

It seems like what you're trying to say is more that we're trying to optimize economic and industrial processes that are already more than optimized enough for what we need, rather than we've "run out of demand" as such.

The poor would love to have newer cars, consume more services, have nicer homes, etc. So then how are we producing more than we need?

Just because some people can't afford things doesn't mean those things aren't over-produced. Every year there are a large, large number of brand new cars that don't get sold, and are marked down when the next model year comes in. Likewise there are structures that get built and never sell out. A building of condos near my house never got bought, so they turned them into apartments for far, far cheaper than they were priced as condos. We overproduce clothes so much that there are several nation-wide retail stores specializing in overstock merchandise for very cheap (TJ Maxx for example). All of these things are places where we have more than necessary production, so priced get driven down to where they are more affordable for poorer people.

The person you replied to said "production isn't the problem, distribution is", and you seemed to agree with that in your comment. Getting poor people cars and houses and services isn't a production problem, it's a distribution problem. It's a pricing problem. It's an efficiency problem. Producing more cars isn't going to make them easier for poor people to afford.

That doesn't really make a lot of sense. Demand is pretty predictable for stuff like that, and the producers have no reason to waste resources producing more than is necessary.

And even when they do overestimate demand, like you said, it gets marked down. So it all gets consumed in the end, and the producers might not even take that big of a loss depending on how much it was marked down. And the poor people benefit from that too of course.

Unless people start throwing away new cars then they aren't over producing.

Except there isn't one producer, there's many competing ones, so you have overproduction because everyone hopes to get more market share than they actually have. Over that, there's overproduction in many areas (especially food) for a very silly reason - that people will buy more when there's more stuff around it (aka. no one wants to buy the last few carrots). It doesn't get consumed, and poor people don't benefit from it. It gets thrown away.

About throwing away new things - heard of planned obsolescence? That's what companies now do to cope with falling demand. Yes, your car maker does it too.

Large corporations are not stupid. They have decades of sales data. They can definitely predict demand a year in advance, and they do.

I don't actually think they are overproducing. They make a huge markup on new cars, so having to discount a few that don't sell isn't a loss.

Also factories are pretty much large fixed costs. Overproducing actually doesn't cost that much. The car might only cost $500 worth of raw materials, but the cost of the factories and infrastructure necessary to turn that into a car is massive.

>(aka. no one wants to buy the last few carrots)

Which is literally only true for vegetables, not the economy in general. And you only need to sacrifice a handful of vegetables to for it, so it's a fixed cost.

Look at the Cash for Clunkers program a few years back. People were paid to bring in their old, but still functioning cars, and buy new ones. Many of those old cars were still fully functioning, and not that old. We have the production capacity for so much more than we actually make. You're right, they can predict sales so they're not making 1,000,000 units more than they can sell, but they CAN make that many. The thing about overproduction is, like you mentioned, it doesn't last for long. Demand drops, they shut down plants, they close shifts, they fire workers. Believe me, I live in Michigan and have many friends and family workers who work (or worked) in the auto industry. We have the ability to churn out hundreds of millions of more cars every year than we actually do. Like you said, we don't do that because it doesn't make financial sense.

But just because we don't overproduce right now doesn't mean we couldn't if we wanted to. I'm still not seeing where production is the problem. If production was the limiting factor, they would be running the factories 24/7 instead of shutting them down. The only reason to underproduce is to increase demand. But if you lower supply and demand doesn't increase, you've already been overproducing. So if they're closing factories, it means they've been overproducing.

>Look at the Cash for Clunkers program a few years back.

Which was done just after a recession. That's not evidence of overproduction in general, just one year when demand unexpectedly went down.

>But just because we don't overproduce right now doesn't mean we couldn't if we wanted to. I'm still not seeing where production is the problem. If production was the limiting factor, they would be running the factories 24/7 instead of shutting them down.

But if we can produce so many cars, why are cars still expensive? Shouldn't the ability to create massive supply drive the price down a lot?

There are plenty of people that want new cars. And are willing to pay for them. It's not like we have more cars than people actually want. It just costs a lot to make a car. And that cost includes fixed costs like the factory itself. But factories wouldn't be closing down if other costs weren't also very large.

Yes in theory we could make millions more cars than we do. But not for free. It would require buying more materials, hiring more workers, building new production lines, etc. Those costs must be greater than the expected return for selling another car. Otherwise they would already be doing it.

Just because I can't make a product cheaper doesn't mean I can't produce more of it. Why don't we make cheaper and cheaper cars? Because people who can afford new cars would rather spend more money to get nice features and safer cars. People who can't afford new cars would rather buy a used car with nice features and a good safety rating. We've had several sub-$10k on the market. They don't sell well. No one wants to buy a brand new Geo Metro or the original Kia Rio or a Chevy Tracker when they can buy a five year old Ford Taurus that is better equipped for cheaper. The used car market is the reason we don't have cheaper brand new cars, not production. And luckily we have so many used cars because we produce so many new cars every year.

But again, we're talking economics right now. The subject is production. Once again I ask: you said we're limited by our ability to produce, do you have anything to back that up? And no, saying "it costs a lot of money" is not proof of a production bottleneck, it's proof that companies hire accountants.

So at this point I'm going to step away from this conversation because I don't think it's going anywhere. You've made me think a bit about economics, so thanks. Good conversation.

The statement "the US is out of demand" is equivalent with the statement "we are producing more than we need". Don't argue with me, argue with the parent.

What I'm arguing for is on how we should look at universal basic income. Some people see UBI as a way to increase aggregate demand. I see UBI as a way to get rid of poverty, so there would be no such thing as what you call "the poor". The difference is that I don't see a lack of aggregate demand as a problem. If we could rid our society of poverty without making a dent in aggregate demand, I see that as a win.

Another way to think about it is in terms of productivity. Do we really need to make everyone more productive? Do we need to be make the poor maximally productive before lifting them out of poverty? Why can't we just lift them out of poverty?

The poor would love to have newer cars, consume more services, have nicer homes, etc. So then how are we producing more than we need?

People regularly die from starvation, but the world produces more than enough food to feed everyone. It is a problem of distribution.

To say this is merely a problem with distribution is absurd.

There are hundreds of thousands of vacant homes in San Bernardino, there are many thousands of homeless that could easily be transported there. If those homeless were to move into those homes they would soon be evicted or arrested and imprisoned. This is an issue with ownership, not distribution. Much food from local restaurants, cafes, and grocery stores is thrown out every day as it nears expiration. Thousands of hungry would love to enjoy this food rather than waste it. This food could be donated or even left out for people to scavenge, yet it ends up in locked dumpsters. Again, this doesn't sound like a distribution problem but instead a problem with ownership.

We do produce more than we need, if need is conditioned on ability to pay.

That's the exact same thing. If we say wealth is not distributed evenly, that's the same thing as saying that only a few people own most things and many people own hardly anything.

Redistributing wealth means spreading out ownership more.

I misunderstood. To say it is a "distribution problem" read to me as if distribution was a verb: that is to say "everyone could have what they want if only the means to move people and things around were available".

I should have said that "we are providing the maximum that we possibly can". It just seems like there's no marginal benefit to increased productivity right now. There's lots we could do to hurt the human condition: we could always just put a bunch of people to work building weapons, and have those weapons kill a bunch of unemployed people. But if there could exist some grand new way to improve the human condition right now, the money and the jobs just don't seem to be materializing for that. And there's plenty of money and plenty of workers around.

We haven't "made life better" since we learned how to make fire, seems odd to think we'd start now. Making shit and making life better are two distinct things. Economic production and wealth creation are just fun games.

For those people with an excess of capital, with current knowledge of science, no.

For the people with no excess of capital, though, we can improve the situation.

> Where do we get the money from? It doesn't really matter, there's plenty of it sloshing around.<

That's like saying "Restaurants have food, and there are homeless people in the city, so why can't we distribute the food from the restaurant to hungry homeless people in the city?".

If you were to distribute foods from the restaurant to the hungry people in the city, then these restaurants won't produce that food, because they are not a charity, they are in the business.

Similarly, if you don't figure out where this money would come from, you will soon stop seeing all this money you want to give away.

I used to manage a restaurant. All unmarketable but edible waste went to homeless shelters. Remaining inedible but unspoiled food went to pig farmers. Remaining spoiled food went to composting facilities. Our target market loved all of those policies.

I know someone would talk about the wasted food in a restaurant when I am talking about the non-wasted food.

Wasted food includes what didn't sell. And honestly, it didn't occur to me that you were suggesting that restaurants would be expected to donate marketable food. Markets, restaurants, etc often lock waste containers, to prevent theft.

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