Hacker News Reader

Comment by chipperyman573 | Hacker News Reader

I see a lot of similarities between this and YC's attempt at UBI[0], one thing that was pointed out a few times in the YC launch thread was that if you give a small subset of people $500/mo, then yeah of course they'll experience immediate relief, because nobody else they're competing with also got $500/mo. But if everyone gets $500/mo at the same time, we can't be sure the same will happen. The market might respond differently and suddenly rice will cost $50/lb (or it might not, I don't know, but this study doesn't prove it won't)

Overall this is a cool idea, I'm glad that 125 people got the help they desperately (according to the article, anyway) needed, but I don't think this really indicates anything broader.

[0]: https://basicincome.ycr.org/

View on HN

The idea that UBI would cause inflation seems intuitive but it's shown to be a small effect at most:

https://www.vox.com/policy-and-politics/2017/9/20/16256240/m...

That study does not show much at all. They gave a small amount, $20, and prices went up 0.2%. Even if prices went up or down, a small amount of a specific item, food, doesn’t really equate to what UBI is trying to accomplish. Giving a more significant amount of cash to large groups would drive up prices and increase inflation.

There's an easy solution to this. Integrate some sort of tax on rent increase. Have a threshold to allow competition but if someone is gouging then their entire tax bracket moves up a notch and they spend a lot more than the money they make via upping their prices.

E.g. Say they sell rice at $3/lb, because of UBI they think they can sell it at $5/lb, gov't says 10% markup seems normal, but you've marked it up 200%, so you'll now pay 20% more taxes across the board --say the markup divided by 10.

Of course that takes a large amount effort behind the scenes...maybe an easier method would be say to Walmart: If you forbid sales of products where they raise prices in relation to GBI we'll give you a 10% discount in taxes.

Most small retailers and distributors do NOT want to lose good grace w/ walmart so they keep prices stable. Since walmart and other big retailers cover a lot of territory government only needs to make the deal with a few partners : Amazon, Walmart, Target, etc...

Your solution to government overreach of UBI is.. government mandated price controls? Fixing one problem with a bigger one. I'm going to go out on a limb here and say that's never worked anywhere.

Why does it "seem intuitive?" It's never seemed intuitive to me. It doesn't make sense to me that McDonald's is only charging me $4 for a meal because there are people in the world with zero money, and that if suddenly those people had greater than zero money, McDonald's would suddenly start charging me more than $4.

overall, McDonald's is probably not a good example of the sort of inflation that might occur under UBI. the supply of McDonald's meals is not really constrained. they can basically make as much food as people will buy, so the mere fact that people can afford more happy meals probably doesn't move the price. stuff like housing tends to be a lot more constrained, so you would expect rent/mortgages to go up roughly in proportion to how much extra money people have to bid them up.

now a large part of why McDonald's can sell you a meal for $4 is that they can pay people through the whole supply chain very little money to do mostly undesirable work. if you start just giving these people money, they might be less willing to do these jobs for the same pay. so McDonald's would either have to pay them more or invest in more automation. either way, some of the cost increase gets passed on to the consumer. the works get paid more, which is cool, but they also probably see the cost of most goods and services rise as well, which is less cool.

to be clear, I'm not actually arguing this is what would happen. I'm just explaining the naive econ 101 perspective on why UBI would cause inflation. even if it did cause inflation, it would still probably decrease inequality more efficiently than the current byzantine web of welfare, as long as it was funded by some sort of progressive tax(es).

With a high enough UBI they don't 'suddenly start charging you more than $4'; their cost of goods increases beyond $4 and they are forced to either do that or stop doing business.

As a trivial example - imagine that the UBI is set at the McD's full time wage.

Some nonzero number of people will stop working there, forcing McD to increase wages to maintain staff levels.

For those that do continue to work there, even if the McD wage remains constant, more money will be sloshing about in the local economy because they're suddenly earning twice as much. Anything scarce will increase in price (e.g. rental housing), as a first order effect at least, because at the bottom end of the market pricing is basically about allocation of scarcity.

FWIW I think this is a _good thing_. A business that relies on forms of indirect indentured servitude (e.g. the entire class of jobs that people work in order to eat as opposed to actively choosing them in some form) should only exist for as long as we need it to. If we can make an economy work without it, let's do it.

For food especially, it is unlikely to cause inflation since we already heavily subsidize food and grow much more than we can consume.

Housing is another story.

You'd probably expect a short-term price shock if it was introduced all-at-once (probably a bad idea, it would be better to phase it in).

But long-term, surely the expected outcome would be for the change in wealth distribution to affect supply, such that our economy actually moves to produce fewer luxury goods and more basic goods and services.

The difference would all go to landlords. Competitive commodities like rice have downward price pressure, because all it takes is one supplier selling for a penny less than all the other $50/lb price gougers, and the market will be theirs until the next penny defector, until you reach the commodity price.

With housing it's the opposite. Low teaser price to get you to sign a lease, and then you're guaranteed large rent increases until you move out because the landlord knows how much moving sucks.

UBI would increase people's mobility, allowing them to move to cheaper areas where employment opportunities are not quite as strong.

People often are already able to do that but don't, because surprisingly to some, most people find the idea of leaving everything and everyone you know just to find a better job absolutely dreadful.

We need to remember that we're talking about humans, and not some particle which can simply find a shorter path to wealth.

Edit: To be clear I'm not necessarily opposed to UBI, but I find this 'people are but cogs in the machine' view of economics especially appalling.

> I find this 'people are but cogs in the machine' view of economics especially appalling

I resent your implication that I think people are just cogs in a economic machine.

People move location all the time for a variety of reasons. Sometimes economic, sometimes for lifestyle, sometimes for the weather.

I suggested UBI would give people more options, more choice, more power in their lives and you suggest I hold an appalling view and think people are nothing more than wealth seeking particles? Thanks very much.

I wasn't trying to say you specifically feel that way, but when we're talking about predatory behavior of landlords, giving those who are being taken advantage of the ability to leave town seems like a second rate solution.

Just implement a rental price freeze at the same time you implement UBI.

This seems like an oversimplification. If the landlord issue like you describe is really a core problem, then they can pass a law like they did in California, capping rent increases at 5-10%/year. That problem doesn't seem tied to UBI at all.

Rice would also likely increase in price due to higher taxes needed to pay for the UBI.

I see the "UBI will just go to landlords" argument everywhere, and it is a very bad one.

Literally any policy that gives more money to the poor will increase demand for goods/services that low income people want (eg housing), and thus cause similar price pressure. Increasing purchasing demand from the poor is literally what redistribution is!

If you're opposed to UBI on this basis, you equally ought to give up on anything redistributive (or maybe you were just right wing all along).

The correct response to landlords sucking up money from the poor is to note:

- You can easily solve that via land taxes and wealth taxes more generally

- Even if the gains are swallowed up in aggregate, a UBI still has benefits in terms of equalizing demand (lowering housing inequality) and increasing income predictability.

> If you're opposed to UBI on this basis, you equally ought to give up on anything redistributive (or maybe you were just right wing all along).

I never said I was opposed to UBI.

I'm simply highlighting an aspect of the housing market that makes it behave less like the libertarian ideal of a perfectly efficient market with perfect mobility and perfect information flow. In my experience, the right wingers are the ones who want to continue pretending that an obviously tilted market is somehow still acceptably efficient when it clearly isn't.

Do you disagree with my assertion that moving is more difficult than buying rice from the next vendor over? That's really the only claim I made, and this is what leads me to believe that landlords are more powerful than rice vendors.

Lots of people proposing "if you're worried about landlords, then you can simply do X" in this thread... I don't think the fix for this problem is going to be simple.

You made another claim that djrobstep was responding to:

> The difference would all go to landlords.

Do you think prices will increase if the overall money supply does not increase - i.e. the UBI is taken from the tax revenues?

Yes, because people with more money than they need will easily absorb the higher prices even if they have slightly less more money than they need.

Surely that's only true in the short term while supply of the good stays constant. Long term you'd expect supply of the now in-demand good to increase, bringing prices back down.

In the context of rice...We already produce more rice than people can eat, so there's no driving force for supply to increase. Increasing supply would only make more rice go unsold. It's not like just because you have more money now you biologically need to eat more volume too.

Well if people already have enough rice, then presumably they would spend the extra money on other goods that they don't have enough of.

Unless the price of rice goes up. If they're buying rice now instead of something else with limited funds, that suggests that they need the rice more. Goods aren't all perfectly exchangeable. If you need shoes, a shirt won't protect your feet.

The market should converge at the point where the supply and demand curves intersect. The only goods that we'd expect to see a change in price are those where suddenly there was more demand. It's hard to imagine this for products like rice.

Trade is a thing, too. The local price of rice can't go up to $50/lb if you can import it for far less.

There's a lot of scary speculation going around about UBI right now. It does not seem likely that the sky will fall.

Reply on news.ycombinator.com