Ask HN: What would happen if someone gave every American $1 million | Hacker News Reader

Ask HN: What would happen if someone gave every American $1 million

7 pointsbyoung213 comments

This question came up at lunch with my wife. We were talking about the redistribution of wealth, and she wondered aloud what would happen if someone were to give every American $1 million. I'm not sure if there is even that amount of money available in the entire economy, but if it were possible, I figured that a few would save it, a few would pay off debt, but the vast majority would go on a spending spree. With the median salary being $50,000, that is enough money for most people to quit their jobs for the next 20 years, at least in theory. Then, they would have plenty of time to spend their newfound wealth acquiring things. However, with so much money floating around in the economy, inflation would get out of control, so prices would rise to consume that money as fast as people could spend it. At the same time, salaries would have to rise because with everyone having, in effect, FU money, no one would want to do most jobs unless they paid very well or provided some other sense of satisfaction (I can't picture janitors or dishwashers wanting to work if they didn't have to). Eventually, however, with inflation having eaten up most of the value of all that easy money, people would have to go back to work (even at the higher salaries) to pay for everything (at the higher prices). I think in the end, after a period of chaos, we'd be back where we started. How do you think things would play out?

You've basically nailed it.

Money is just an information-carrying mechanism. A lot of people fetishize it because they see the immediate effect of "If I had money, I could buy things." Ultimately, though, the economy is built on goods and services: if nobody produces those goods and services, then nobody will be able to buy them. Giving everyone money doesn't change this, it just changes the measuring stick.

The same dynamic plays out with demographics and retirement. If you have a smaller fraction of the population producing things, then standards of living will necessarily fall (barring productivity increases), regardless of what sort of financial trickery you use to redistribute wealth. Social security, individual retirement accounts, pensions - it all doesn't matter. If you replace social security with investment-based IRAs, then you'll just see steadily rising asset prices as a demographic bulge goes through working age, and then steadily falling asset prices as that demographic bulge retires. The relevant factors are the fraction of the population working at any one time, and their productivity rates. If you can't change these, you can't change standard of living.

There are solutions for the lack of local labor force.Importing workers, products and services(IT, call centers and others ) is one solution - in saudi arabia 50% of workers are immigrant workers. Automation is the other one - given lack of workers there are many things that could be automated with a decent quality.

So the economy could adjust.

But i think the redistribution method you offer is too fast and extreme and that what will cause it to fail.

But there are other ways to redistribute wealth, that could gradually lead to a stable economy. Free healthcare, basic income and subsidized housing and the general welfare state had been tried before , and they work pretty well in some countries.

But would they be able to scale to make jobs optional ?

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350 million million is 350 trillion. Seven times the world GDP.

350 trillion is a lot. I doubt there are many people on earth whose wealth is 6 times the GDP of the entire world.

Interesting. I guess for every individual, a percentage of their productive efforts is due to necessity, and the remaining percentage is due to something else (pride, greed, generosity, competitiveness, creativity, boredom, vanity). We could call this ratio the Capitalization Index, CI.

What I'd like is to see the CI for a large cross-section of society. Of course, you'd need to come up with some sort of test to reliably measure it. Like giving them a million dollars and seeing how much work they continue to put in...

There's a book for that:

http://www.amazon.com/Our-Hands-Replace-Welfare-State/dp/084...

Well, this book is actually about the idea of giving government payments (annual "welfare") to ALL Americans, and what that might involve. The author points out that the total cost of all transfer payments in the United States economy is coming closer and closer to providing basic subsistence to every American.

Does that account for the economic distortion of subsidies? As more money becomes available for a given good, the price of that good will rise.

You see that a lot with student loans: they don't actually make college more affordable, they just let colleges charge higher prices. And with agricultural subsidies: they don't actually help poor small farmers, they just let Monsanto charge higher prices. The way to work out affordability issues is to fix the underlying supply & demand problems, eg. finding new ways of manufacturing a good or delivering a service that don't consume as much labor or resources, and then open up competition in that market so everyone has an incentive to adopt these new ways.

The author takes into account those issues, pointing out that some Americans are already subsidized by transfer payments today.

Some more information on Wikipedia:

http://en.wikipedia.org/wiki/Basic_income_guarantee

It wouldn't work because of inflation.

Is that a good argument for artificially maintaining poverty and enacting policy which specifically advantages the ultra-rich to the detriment of people who are having trouble getting by?

I agree, we'd be back where we started.

inflation

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