Comment by freeflight | Hacker News Reader

Comment by freeflight | Hacker News Reader

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> The reality is that if you want to cover everyone's basic needs with $12K, you need to radically reduce the cost of goods and services. How ? That's the conversation we should be having.

Why even insist on that $12K number in the first place, isn't that like approaching the problem from the wrong end?

It's something that always puzzled me about economic policymaking, regardless of which country; Changes seem to happen at a pace of years and only with static values, which makes reacting to our modern volatile and interconnected markets, in any useful way, impossible.

Case in point the basic income: Ideally the amount of money people get could be linked to the general living costs, adjusted to their area of residence, and some national economic index.

Sure the first one could be abused by people registering in more expensive areas while living in cheaper ones, but in the long run, and economic big picture this would only lead to rising prices (and basic income) in the cheaper areas, generated through the spending by the "cheaters".

Imho something really underestimated is how much of an economic boost a basic income would be, it'd be like the government directly subsidizing general purchasing power, and lot's of that will come back to the government in the form of taxes. It's like the opposite end version of corporate bailouts and tax giveaways.

Looking at a number like 7 trillion from that side, suddenly makes it way less intimidating and way more appealing. It's not like money is some finite resource that has to be mined in deep and dangerous caves; When it's about saving banks, Big Whatever or waging wars, against something or somebody, there always seems to be more than enough of it?

It would be even easier if a 'basic living standard' could be established. Something measured in terms like quantity of food & size of housing.

Money & markets are a fantastic system for taking the limited resources we have as a society and splitting them up. We haven't found a system that is more effective at increasing the average living standard.

Basic income screws around with some fundamental structures of the markets. It would be easier to reason about if we knew what resources were being guaranteed by the government back in the real world. It happens that physics cannot be legislated into existence; so we will need some planning to be done to make sure that the spirit of the law can be identified and met practically.

If you make $7tn from thin air and inject it into the economy, consumer price inflation will drastically rise, which for the most part ends up being a transfer of wealth from the poor and middle class to the owners of capital. All you will have done is make the rich richer as the cost of living rises by about $12k/person.

If you look up "Quantitative Easing" you'll see that making trillions from thin air is exactly what the world's central banks do. But instead of giving it to people, they buy securities from banks, who are, as a result, the primary beneficiaries. QE-scale market activities aside, this general method is also standard monetary policy and the means by which new money is created.

Seen in that light, BI provides the opportunity for a whole new economic policy lever, by channeling new money to people rather than banks.

"If you look up "Quantitative Easing" you'll see that making trillions from thin air is exactly what the world's central banks do. But instead of giving it to people, they buy securities from banks, who are, as a result, the primary beneficiaries."

This is not an apples-to-apples comparison since QE (so far) has been "sterilized" so as not to increase the money supply in the same way as you are suggesting BI would:

"Also, the Federal Reserve has mostly "sterilized" its bond purchases by paying interest to banks for reserve deposits. This removes money from circulation previously added by the Fed's bond purchases. The net effect is to raise bond prices, lowering borrowing rates for mortgages and other loans, without an inflationary increase in the money supply"[1]

[1] https://en.wikipedia.org/wiki/Quantitative_easing

Yes, the useful message here is that we can indeed inject trillions into economies without overheating them, if the right conditions and structures are used.

They will be different for BI, naturally.

A lot of economists are freaked out about the effect quantitative easing might have on our economy going forward. But even the highest, recklessly dangerous levels of QE3, that only amounted to about $1,500/yr for each US citizen. BI people are advocating for 10x that, for the smallest proposals under consideration.

It's not the mechanism, it's the scale of it.

> consumer price inflation will drastically rise

Excuse me being naive but why? It would be a unique situation and as such any predictions of what's gonna happen are purely hypothetical.

Your last point is kind of moot as it could be used to argue against any kind of wage or income increase for poor and middle class "They just all gonna spend it paying their landlords".

If the basic income accounts for "average living costs" then ideally the average rent should be calculated too and factored into it, so landlords can't just jack up rents and expect their tenants to "reach through" their UBI.

A UBI would give the poor and middle class at least some bargaining power with employers, that's already progress. The whole situation about affordable living space becoming rarer and protection of tenants are valid concerns, but you can't expect a UBI to fix everything, different issues need different approaches and solutions.

That's kind of flawed thinking though. If you link UBI to the 'average living cost' - it means landlords can raise prices ad infinitum.

But that's not an issue with UBI but rather with landlords having such free reigns over the rents they are charging.

Rent control and protection of tenant rights are ongoing issues, especially in countries where renting is the prevalent mode of living, as such many countries governments are trying plenty of approaches.

The issue with the US being that it's a rather touchy subject to discuss, but its nonetheless relevant because more U.S. households are renting than at any point in the previous 50 years [0]

So a discussion about that particular topic is most certainly needed, but you can't expect UBI to fix every single problem on its own, no solution is ever as simple as that.

[0] http://www.pewresearch.org/fact-tank/2017/07/19/more-u-s-hou...

Yes, that’s my point. The BI proposal is flawed as it leads to hyperinflation.

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