Comment by 2noame | Hacker News Reader

Comment by 2noame | Hacker News Reader

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I'm the author of this piece for the WEF, and have written an entire separate piece specifically about inflation and rising cost concerns.

Link: https://medium.com/basic-income/wouldnt-unconditional-basic-...

Basically, more and more money only chases the same amount of goods if the UBI does not exist as a transfer of existing money from top to bottom and middle as described in this piece, and instead exists as continual expansion of the monetary supply through newly created money.

Additionally, UBI does not eliminate forces of market competition. In fact, I argue it will even increase competition through increased entrepreneurship. It would be really stupid to raise your prices in a competitive market where your competitor does not raise prices, or even lowers them.

As a quick example, every year when Alaskans get their dividend checks, there are a lot of sales as businesses compete for that money. It would be a really stupid business in Alaska that increases its prices every time the dividend is distributed, in the knowledge people have more money to spend.

You may also find this argument interesting as well in regards to concerns of technological deflation: https://medium.com/emergent-culture/an-exciting-new-idea-in-...

Your argument that rent won't rise to absorb most of any additional income relies on low-income people moving out of high demand areas to super-affordable "Google Homes" in remote ex-burbs and formerly rural towns. I think you're fighting history, culture and even human nature on this one.

If the Great Basic Income Migration doesn't occur, and if basic income is indexed to inflation, or worse, to a local 'cost of living', then you are deliberately engineering a hyper-inflationary spiral that will make Venezuela's seem tame by comparison.

As has been said before on HN, a land value tax could solve this problem with a basic income.

Landlords will just raise the rent to compensate for the tax. It guarantees the post-UBI rent increase, because landlords will feel justified. If the tax is somehow indexed to rent, once again you are engineering an inflationary spiral.

What's the reasoning that a land value tax could be helpful?

Edit: after some reading, the apparent intent of the land value tax is to encourage landlords to build denser housing to share the burden of the new tax among more renters. But this is like proposing a Slow Driver Tax while ignoring that the speed limit has been set at 15 mph everywhere in the city. Landlords already want to build multiple housing units, but they are prevented by zoning laws. Attempts to change zoning laws are some of the most vicious political battles in existence. Everyone knows that more density/supply is needed to make housing more affordable, but it just hasn't happened (at least in the US).

Well, first, there are a few different versions of land value taxes, and a few different rationales for them. I'm not an expert on this but do find it interesting and important.

In the version that I was thinking of, a land value tax would pay for the basic income. If the land value tax provided all of the funds for the basic income, then there would presumably be no excess for landlords to siphon off, except maybe as one region gained in popularity at the expense of another, etc.

The eventual goal would be to have all or almost all income from rents within a country be distributed to the citizenry. Land owners would also receive the income.

The reason why a Basic Income paid out from a LVT is a good idea, is because it reduces costs by leveling the field for all participants in the immovable property market. So that market can then allocate resources at optimal efficiency.

A UBI paid out of taxes on produced factors (income,capital) distorts resource allocation, so we all end up poorer.

Rents would go up, but then so would the LVT and then the UBI until an equilibrium point is reached.

In the US, without any other changes to your tax/welfare system the LVT/UBI would result in every man,woman and child getting around $4000 each. That would rise as rents went up.

That would go up even further if other taxes and benefits were reduced.

Very interesting, thanks.

As I'm sure you've been thinking, it seems important because of the looming threat of human labor becoming an obsolete means for the satisfactory distribution of wealth and necessities throughout society.

Do you have any other thoughts about how to address this problem?

I don't think humans adding value with their time, and selling it on the market will ever stop. This has been a misplaced fear for thousands of years, yet we work just as hard as ever. Technology just makes us more productive. So will robots.

The argument for the LVT/BI is that it is not a benefit or a welfare payment, but should be view as a basic human property right. Without which, we are not free.

The LVT really only means we would all be equal share landlords of the value derived from scarce resources supplied for free by nature/god. Basic Income/Public spending is that equal share.

Without that, humans cannot share this Earth as equals, thus will not have taken the final step from being savages to truly civilized beings.

Yes, it really is that big a deal;)

No. Landlords will not just raise their rents. They are already charging the maximum the market will bear. However the result of LVT would increase the disposable incomes of those that rent, from which they will apportion some of on purchasing more/better location, the rest of more goods and services.

Rents will rise for this reason, and so will the amount an LVT can collect. But this isn't an infinite spiral. There will reach an equilibrium, as there is now, where renters apportion are certain % of their income on valuable locations. Which is collected by the landlord and taxed away by the LVT.

The LVT would not make landlords build denser housing, they have exactly the same incentive anyway. It would how ever reduced vacancy and under occupation among owner occupiers, and would increase the average size of dwellings, even if that meant they were more densely clustered by building upwards.

> No. Landlords will not just raise their rents. They are already charging the maximum the market will bear. However the result of LVT would increase the disposable incomes of those that rent, from which they will apportion some of on purchasing more/better location, the rest of more goods and services.

The day after the BI-increase, the housing supply and demand will be exactly the same, but renters will have a greater capacity to pay. The maximum amount that the market will bear will have risen exactly by the extent of the increase. It is hopelessly optimistic to think that landlords won't increase rents to claim almost all of it.

Until zoning laws permit greater density/supply (building upwards is great but often prohibited by local laws), the situation won't change, and a tax linked to rent will just cause an inflationary spiral.

I won't even go into the difficulties of separating land value from building value, since it's clear that objective land value isn't intended to be a factor in setting the tax level.

No, a tax on the rental value of land would move the demand curve over to the left. This would reduce both rental incomes and selling prices. ie a reduction in demand. So the rise in rents would be cancelled out by the fall in selling prices. ie No inflation.

Landlords do not currently claim most of peoples disposable incomes. That ratio hasn't, nor would it change because renters get more income via the BI.

Landlords would in fact be keeping a lot less of peoples income once equilibrium has been reached.

There are no difficulties in separating the value of location from that of the buildings. Easy to do. Besides as far as LVT is concerned, its the structure rather than value taxed that is important. But I'd need to write more than I've got time for here to explain why that is.

Net rental income will remain steady, since landlords will raise the rent to pass along the tax. They may even list it on the lease: "Rent $1000 + UBI tax $400." Everyone will have more money and be able to pay the higher total. The only way the rents can be prevented from rising is instituting price controls.

The percentage of income claimed by landlords will increase slightly ...

before the BI-increase: say $12k rent of $36k income = 33%

after the BI-increase: $17k rent of $41k income = 41%

The only way rents drop is that zoning laws change to allow massive increase in rental space supply, or demand for rental space drops because people are enticed by low rents elsewhere and move. Since zoning laws will change only glacially, if at all, rents less than $(pre-BI rent + new disposal income) will require the Great Universal Basic Income Migration (GUBIM) from urban to exurban and rural areas. The GUBIM is possible, I just think it is vanishingly unlikely.

Let me suggest you read the history of the Irish Potato Famine.

In a nutshell: During the initial part of the crisis, landlords let people live for free in units when they couldn't pay their rent. Then the government decided to tax the landlord on occupied units, even if they weren't getting any rent. The landlords could not afford this, so they began throwing families out into the street wholesale.

Most people did not actually starve to death during the Potato Famine. Most died of disease due to eating raw food in desperation and already being weakened from malnourishment. The families that took it the hardest were those with less than X amount of land who also had many children because you can nearly live on potatoes alone, so such families exclusively grew potatoes and nothing else. They were wiped out by the potato blight and had nothing to eat. Families with fewer kids and/or larger plots of land had other crops too, not just potatoes. They were hurt, but muddled through.

Farms under a certain size essentially disappeared due to the Potato Famine.

Famine was widespread during that time. Most countries were hoarding food and trying to buy it. Ireland was on a short list of countries selling food to make a buck during the crisis. This is part of why Ireland was hit so very hard.

Magicking up money does not solve the problems of the lower classes. They need access to affordable housing that genuinely works for them. They need rights. They need access to paid work that fits their crappy lives.

The UBI provides none of that. It is a disaster waiting to happen.

That's very interesting indeed. Hopefully a basic income entirely paid for by a land value tax (which would presumably be extremely low in cheaper farming areas) would have helped the guests/squatters.

have you read the debate on federal Job Guarantee vs UBI? https://modernmoneyaesthetics.wordpress.com/2017/01/20/re-fc...

also Pavlina Tcherneva on the debate: https://www.youtube.com/watch?v=S_-CRquE_bU&feature=youtu.be...

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