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Comment by austincheney | Hacker News Reader

Inflation. https://en.wikipedia.org/wiki/Inflation

Dirt poor people being slightly less dirt poor and not having to worry about where their next meal is going to come from will not inflate basic goods that much.

We've seen this with higher minimum wages. The amount of inflation is much lower than than the wage increase, and poor people end up with more buying power.

A serious distinction is that increased minimum wages incur a burden on employers which they pass around to their customers and business partners. The increase of burden is directly proportional to the amount of work of an hourly employee. UBI does not come from an employer and is not tied to an effort. There is no direct market burden, but yet an increase of cash is available none the less.

It should also be noted that inflation is not immediately present following a cash stimulus. It takes time for inflation to set in as a response to market conditions and as such inflation is measured as an adjustable change over a given period of time. That said specific single time examples of UBI not adjusting inflation only demonstrates a faulty understanding of economics.

https://en.wikipedia.org/wiki/Inflation#Issues_in_measuring

>> UBI does not come from an employer and is not tied to an effort

Where do you think government's money come from? Financing UBI will require raising taxes.

For my thoughts on taxes please see my comment further down: https://news.ycombinator.com/item?id=24005134

Money at the government level is not a zero-sum game, so thinking it's as simple as raising taxes is an oversimplification, and while unchecked printing of money is problematic leading to inflation, how the monetary base grows would need to be part of a well-considered implementation plan.

the theoretical reasons for not increasing minimum wage is not inflation. it's a decrease in employment.

empirically, however, things are sticky and so we have not observed concomitant decreases in employment with (small to moderate) increases in the minimum wage. my other guess (not sure if this is supported by the literature) this can also be because not only is the market sticky, but because workers were being paid a lower wage than their employer could have afforded.

Sure, if UBI is implemented without a matching increase in government revenue, or reallocation of existing government revenue. Every serious proposal for UBI does one, the other, or both of those.

There is plenty of literature that contradicts your assertion. Here are a few links...

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

https://www.peoplespolicyproject.org/2020/03/18/understandin...

https://ubi.earth/basic-income-doesnt-cause-inflation

And time and time again, things that by conventional wisdom would increase inflation somehow don't. Macroeconomics isn't that simple, and posting a wikipedia article isn't an argument.

You'd think that employers would be all over UBI then because it means that they can instantly cut the wages of their workers by the amount of the UBI and that more people will have money to purchase their goods and services.

Companies that depend on underpaid workers will fight this tooth and nail.

Why? It means that they can pay less than they do now and still retain workers. How is it not a positive benefit for them? It potentially means that people working for them actually want to work and aren’t doing it just to survive.

Because the jobs they're offering are shitty, demeaning and menial, and most people who take them are doing so because they need to survive. Absent the survival need, the companies will have to dramatically improve working conditions to maintain the sheer quantity of labor they require.

Perhaps, but the reduced wages (since total income is now UBI + wage instead of 0 + wages) sounds like it will more than make up for whatever increased costs they may have to make the working environment less shitty.

Just saying “inflation” is both condescending and lazy. Billions of people have been lifted out of abject poverty over the past few decades while also dealing with inflation. We know it’s a concept and it has relevance to the discussion, so merely saying the word brings literally nothing to the table.

Discarding the term merely for its presense is by argument equally lazy. I didn't provide only a word, but also provided qualifying source material.

What the other replies have failed to consider is that UBI is just injection of cash. It isn't a voucher for a specific class of goods, such as rent. It is just cash that can be used for absolutely anything. If that means burning cash on a $5000 handbag then so be it. Inflation is literaly the injection of cash into a market.

The problem with inflation is lost value. Cash is an abstraction of value to conduct an exchange. The real world worth of that abstraction is variable. When the availability of that abstraction increases disproportionately to a real world value it will be able to purchase less. The most common reason is that prices increase to follow the increased availibility of cash, but there are other reasons as well.

When everybody equally has uniformly increased purchasing power the natural counter-reaction is to reduce availability of goods and services. That can mean raising prices. It can also mean removing goods from market to make them more exclusive. Any means of restoring value to the prior state will happen to lower disruption to the transfer of goods.

Had you read the wikipedia article it would have addressed everything I just said.

Come on, man. Linking to Wikipedia and expecting people to read a 12,000 word article to magically construct the ~200 word argument you've laid out here is almost a textbook definition of laziness. I stand by what I said.

If you had a more well versed economics background, you might be more privy to how narrow of a view you have regarding inflation.

Australia currently has a program where anyone impacted from the effects of the pandemic, receives $1,500 a fortnight- and yet is experiencing deflation. The very fact of this debunks your argument, as it is a significant portion of the population who is now receiving a cash injection. This money is not exclusively for rent, nor is it tied to food stamps; it is $1,500 to spend as you wish.

Further, The Reserve Bank Of Australia is in favour of these payments. And it's also worth noting, many economies have an inflation target of about 3%, which indicates that inflation is healthy and to so staunchly avoid anything that may affect inflation is a fools errand.

Regardless, please read more than a wikipedia article before holding such a strong opinion. The other commenter called you out for being lazy, and I wholeheartedly agree with them.

Inflation certainly is a curious animal and the Wall Street bailouts and the recent record-setting currency printing has primarily inflated capital markets rather than raw goods necessarily. Consumer price index is perhaps more important to consider than the general macroeconomic inflation figure used. Modern Monetary Theory gets a few things right showing how printing money isn’t necessarily going to result in inflation and that taxes can be used to offset spiking demand.

That the inflationary effect of a cash injection is not sufficient to counteract the deflationary effect of people going out less and buying less debunks nothing.

Australian deflation is false though, as the CPI has been impacted significantly by the free child care. Wait and see what it looks like in ~6 months time when the next figures come out without any influence of free childcare.

The pandemic will deflate most economies. So much so that that attempts to correct for this by injecting cash, controlled intentional inflation, only lightly softens the blow. The US economy is expected to see a contraction of 35% to the GDP this year, which is huge. I believe the great depression only contracted the US economy by around 22%. This great deflation is even after several rounds of economic stimulus, which are largely comprised of giving people money from the government in similar spirit to a UBI.

In this case the goal of stimulus is inflation and it isn't enough to repair the economic disruption.

Despite the sharp and historic deflation this is not unusual though. Pandemics are historically known for economic deflation. Europe experienced a devastating pandemic about once a century for more than 10 centuries in a row yielding plenty of economic evidence to this.

The most important thing to learn from this is that a sudden economic deflation hurts poor people and corrections insufficiently help poor people. Wealthy people are not directly impacted, at all. Attempting to correct for that difference with an economic stimulus, such as giving poor people cash, does not at all balance that disparity.

If anything this current pandemic illustrates that a UBI is an insufficient control for balance. Instead of focusing on what to do about poor people if the goal is to balance the disparities of wealthy people against poor people then wonder what to do about wealthy people. Tax the shit out of wealthy people and use that increased government revenue to grow the economy directly in ways only business can: increased infrastructure (there is more to that than just roads and telephone poles).

As for taxing wealth I am a huge fan of a complete estate tax and not a huge fan of income taxes. Take everything greater than $10 million of estate value when a wealthy patron dies.

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