I haven't researched this too much, but I haven't found a plain explanation for my question either:
Isn't giving everyone $1,000 just like giving nobody $1,000?
It would improve the lives of the homeless dramatically I'm sure. But wouldn't rent/food just inflate at the same time?
If apartment supply remains constant, but now the market of renters increases substantially, prices rise right?
Edit: I like these answers. So if I gave a quick overview, this isn't printing money, its a basic redistribution which gives those with less money much more purchasing power. So prices don't rise because of this.
Things like leases and rent are generally fixed over a period of time. So you aren't getting a sudden increase in cost. You are getting the ability to do things like pay off your credit cards, student loans, and catch up on other payments.
Now you are (hopefully) not in debt and living paycheck to paycheck. Maybe you don't have to work a second job to make interest payments, and you can invest in education or something along those lines.
No, it's not the same. If you have 11 people, one of them has 10 units of money, the rest have 1, then there's 20 units of money ($) in the system. Let's also assume you have 100 units of resources (R) that people can buy. So $1 is convertible to 5R. Now you print money and give everyone $1. There is now $31 in the system, so $1 can buy 3.22R. However, the purchasing power of the people who had $1 now increased from 5R to 6.44R. The purchasing power of the 'rich' guy decreases from 50R to 35R.
Or you can take money away from the 'rich' and redistribute it. That also has some effect on prices because of other reasons (changes the consumer baskets). But as you can see, money printing is basically tax on cash reserves.
What happens if what you have isn't 100R, but a company that hires one contractor part-time to build houses and make food at a flat 1$ upstream resource cost using machines that currently have 90% idle time? Wouldn't this situation mean that giving everyone that second 1$ let everyone have a home and food and solve the problem entirely? The company is also happier due to more profits and higher efficiency.
We aren't short of housing for people. We are short of fancy housing for everyone, but almost everyone already has a home. What they need is breathing room. My wife wants to go to Law school, and has been offered a partial scholarship, but we can't afford the difference. That would be enough to just cover it.
Many people would like to have enough surplus to live comfortably, without fear. Buy medical insurance; go to school; replace/repair their car; pay off debts, etc. My personal doubts on Basic Income is that people would use the money any more effectively than they do their present money. But the fact that it wold stop companies such as Walmart from profiteering on the backs of the present welfare system trumps all to me.
> My personal doubts on Basic Income is that people would use the money any more effectively than they do their present money
I am not so sure your statements here are accurate. There are roughly 600,000 people in the US who are homeless on any given night (the number who are homeless at some point in the year is much higher). That doesn't include the huge number (probably several times as big) who are "couch surfing": staying with family or friends because they have no housing. And a huge portion of these are children; I doubt these children have sufficient income for a home.
As for your second statement, I cannot point to specific statistics, but all of the information I have seen suggests that most poor people are actually extremely efficient with their money -- that the problem is mostly one of not having enough income, not one of poor spending choices.
And it is because of these that a basic income program (or "citizens' dividend") would, indeed, make a difference. It would actually change the income distribution by setting a floor on the minimum amount of income any particular person can have.
It's important to make a distinction between the chronically homeless (who frequently have addiction issues or mental health problems) and the short-term homeless when talking about these sorts of issues, IMHO.
Chronic homeless make up ~15% of the national population (stat from http://www.endhomelessness.org/pages/chronic_homelessness which cites 2014 version of the HUD report you do, but their link is broken, in full disclosure) For those folks, what's needed is guaranteed housing with wraparound services (healthcare/counseling/meals, etc), not more income as that's not the driving force for most.
The short-term homeless would also benefit from some of that but many would also be able to safely use basic income.
In any case, I think it's important to make the above distinction explicitly as different people have different notions of "homelessness" and we end up talking past each other if we don't make it explicit.
Oh yeah, that's the spirit. Who cares about more than half a million people?! I mean, Wyoming has less than that, just ignore them too! There are like three dozen of cities with population larger than that, so anyone who has less, should just be ignored too, who cares about their problems. I love you people with all your ignorant relativism, but if you were one of those, I am fairly sure that the likelihood of you changing your views is quite high. Maybe not "99.8%", but high.
Since the OP was an analogy, I'll attempt one as well.
Say we both operate hot dog stands on opposite corners of the street, each charging $1 per hot dog. Basic Income goes into effect and suddenly 2X as many people can afford hot dogs. You raise your price to $2 in response. If I have any sense, I'll keep my price at $1 or maybe lower it slightly. More people will buy from me, significantly increasing the amount of money I make despite the fact that I haven't raised my prices.
This concept applies to most sectors of the market. People will still be price conscious, and businesses will benefit as much from more customers as they will from higher prices. Even with housing. If more people can afford apartments, more people will decide to convert existing real estate or rent out rooms which will hopefully increase the price competition. This all assumes that there isn't open collusion between market participants of course, which there very well could be. But the general idea is that prices won't rise uniformly in every sector of the economy at once.
When basic income goes into effect, a few more guys quit their hell jobs and buy food carts with the last of their meager savings. In addition to the hot dog guy on the opposite corner, there's now a tacos and tamales guy on the 3rd corner, and a gyro guy on the 4th. A barbecued pork and corn-on-the-cob guy takes the spot next to you on "your" corner.
People still want a good deal. If you raise your prices now, customers just walk 5 paces to your left. It doesn't matter if the pulled pork and corn costs $5 and your hot dog costs $2. People know that your markup is higher, and they don't want to feel like chumps. Or they can walk a little further and get a hot dog that still costs $1.
The basic income lowers the barriers to entry, particularly for low-capital businesses.
What happened was increased commoditization of the food cart business. Your pricing power evaporated. You can only charge based on the marginal cost of serving one more customer, rather than what the market will bear. Charge too much over your marginal cost, or allow that cost to rise too high, and another vendor appears to eat your lunch (literally). But the good news is that your marginal cost is now lower than a multi-cart company with vendor employees. You don't need to pay yourself; you just need to pay the costs of operating the cart. You can definitely undercut anyone who still has to be paid to work the cart.
But you probably still want to pay yourself a little bit. The smart thing for you to do is to work out a coordination plan (or an actual cartel) with the other owner-vendors at your intersection, to establish some ground rules. Foremost would probably be an agreement to not charge less than a minimum markup over marginal costs. That doesn't really have anything to do with basic income, though.
That's what you want. The hell job has less leverage when I can start up my own food cart. The hell job must be improved to the point where someone wants it. There is no impetus right now to improve the hell job.
I feel like the more general concern for what you are trying to address is that we may have cultural or systemic problems that funnel money away from the people who we hope to benefit, and basic income seems to do little to change this.
What's to stop my landlord from increasing rent by $1000? What's to stop all of the landlords in town from doing the same?
Well, there's the fact that, if my landlord did this, I would start looking to move, and probably look into buying a house. Assuming the housing costs didn't also increase at the same rate.
I just doesn't feel like there's anything to prevent this. I already have to pay what my landlord asks or spend weeks trying to find a suitable alternative, and it feels like the fact that my landlord thinks their time is more valuable than mine is the only thing actually stopping that. If they knew their renters could bear such a rate increase...
Me. I'd stop them. If basic income ever became a reality, my first startup business would be factory-manufactured housing units that fit inside intermodal shipping containers.
The per-area costs of site-built homes are nearly double those for factory-built homes. Making additional concessions for trans-pacific transport and re-shipment from low-occupancy sites to low-vacancy sites should approach the minimum marginal cost for housing one additional person in any place that a regular shipping truck can reach.
Then I ship the first units to the city with the highest low-end housing costs.
It's really too bad that I can't afford to fail even once...
Inflation is a function of the quantity of money in the system.
Basic income money doesn’t come from “printing” more money but from taxes, so, it’s a redistribution scheme. You could expect to see some price changes but not general inflation.
That's far from a foregone conclusion. Printing new money could be an excellent way to create a BI while leveling the economic inequalities present in the present economic system. I.e. reducing the hoarded wealth of the 1%.
Those sorts of prices generally scale up, not increase by a fixed amount. Generally you would be right if everyone all of a sudden had 20% more money. Effectively by giving everyone a fixed amount we give poor people X>50% more money and we give rich people X<10% more money. Which is in principle similar to a progressive tax, except for those who have no money, who now can survive to learn to increase their economic output.
As the author of OP's link, you may be interested in reading what I've written about this question as well, this idea of inflation eroding everything, or what I call "The New Zero Argument":
Yes, it's not a printing of new money, but a transfer of existing income towards an economically and socially healthier distribution less tilted towards the incredible extremes we have now.
Demand won't go up much. There aren't that many homeless people, nor that many starving people.
What will change is how people get a place to live and food to eat. A lot of people who go begging for it now will be able to buy it for themselves (for values of "for themselves" that include being given $1,000/month). They were eating before, and thus somebody was buying that food before, it's just happening more efficiently and less stressfully now.
The main systemic effect of zeroing out back office workers is they're going to be really pissed off and all of them will be unemployed. They all vote for one political party, BTW, as a block, so guess which party likes this idea and which hates it?
Another way to look at it is if you had a magic oracle to make sure only the "right" people were being helped, you could safely fire all those back office people and cut taxes for everyone by $1000 by relying on the magic oracle to save a grand of back office dough per year. Well, lacking that magical oracle, why not just fire the whole back office and mail out $1K reimbursement checks to everyone? I mean, fundamentally, if the back office isn't providing $1K per resident of value per year, is there any inherent value in keeping them employed other than buying votes or something? So fire them and give the money back to the citizens it was stolen from, by writing a check...
For positional goods, like spots in elite colleges or homes in upper-class neighborhoods, the price is determined more by demand than supply.
But for things like basic housing, food, and water, our society has gotten efficient and competitive enough that those things are supplied nearly at cost.
The minor rise in inflation wont equal anywhere near the $1000 handed out. Sure, there will be more people that can spend a little, but that all is minute compared with general additional income of the vast majority.
Indeed it's more likely to boost the economy since people living on basic income would almost certainly spend ever penny such money would flow instantly into the economy.
Also it could actually create new business opportunities. If there are large numbers of people who currently have zero purchasing power (eg the homeless) who suddenly have some cash, they will likely want different products than middle class people at a different price.
This is a clumsy analogy that maps poorly to his intent. He'd have been better served making his point directly; skipping any analogy. Say that it's harder and more expensive to figure out who is "truly" needy than to give it to everyone, then illustrate how. Those points would be sound on their own.
a) I totally agree. b) It can't be that difficult to compare our current costs of welfare redistribution to the amount of welfare we redistribute, right? So what is everybody still talking about?
Its easy. The American welfare system distributes 40% of every dollar allocated (it rates as a C or D in the charity world). The rest goes to administration, which is another kind of welfare I guess.
Maybe we are talking about different things but I don't think the basic income proposal goes as far as calling for abolition of police, defence, diplomacy, regulators and consumer protection, state sponsored science ...
Depending on your state and district (insert many weasel words here) once the percentage of grade school kids getting free lunch exceeds X% where X is a ridiculously low number (something like 5%), it becomes systemically cheaper to give every kid at the school a free lunch rather than to go all "free lunch cop" on the kids. I kid you not.
So my kids attend a school where everyone who asks for it gets the standard free lunch because its the cheapest overall way to provide service.
It makes mathematical economic sense due to inefficiency. If you figure a meal is like $2 and 100 lunch per semester thats $200 max possible cost. Assuming you go hard core authoritarian bureaucracy you need to verify eligibility each semester, the most you can possibly save the taxpayer by starving a kid is $200. But the total cost of social worker might approach $20/hr (they aren't paid well..) and it takes ten hours to help parents fill out request paperwork, schedule a formal meeting with the parents to discuss eligibility, meet the pediatrician to verify the kids getting proper nutrition, file the paperwork with the state to get funding, then handle acceptance or rejection by either meeting the parents again or otherwise informing them plus or minus appeals process and then submit the approval and funding to the district. Meanwhile the social worker has a boss and a bosses boss etc and office space and travel expenses at 50 cents per mile. Then the school has to hire a cashier to make sure the kids walking away with trays of meatloaf are either paying cash or "on the list". And you can't just hire one person you need a district wide pool to handle sick days or a backup plan. And cash handling ain't cheap despite two dozen smartphone online payment startups claiming it is cheap. And you can't have someone handle cash without at least some minimal oversight so they need a boss. And when the district gets paperwork from the social worker showing the state approved funding, someone needs to distribute that data to the school and handle kids moving to other schools in and out of the district and feed back kids leaving the district to the state so they're not fraudulently claiming a benefit for a kid no longer attending school. And you need to account for every penny for the taxpayer so a kid out sick has to be debited from the state reimbursement account but don't forget kids with tummy aches or at off site class field trips. And all this paperwork and/or web forms aren't going to fill themselves out instantly LOL.
I bet it costs the taxpayer as a whole over $2000 per semester to authorize a kid to eat $200 worth of free lunches. And its complicated as all heck and a failure it utterly disastrous, do you have any idea what the total lifetime cost to society of a starving child is? It aint cheap. And thats before the parents get a lawyer paid a fraction of the benefit to sue for starving their precious snowflake because they're poor or minorities or whatever. And being a giant complicated system its incredibly brittle and prone to failure and accident. Some social worker says F this and quits and ten kids starve. Some cashier steals from the till and now how do you pay for next weeks food shipment if the money isn't there? Another kid got beat up for his lunch money and now the parents are suing the school for creating an unsafe environment.
Its a staggering hell of a lot cheaper to just dump X kids times $200 into the food svcs account per semester and announce "free hot lunches for all". You could spend a lot more trying to make sure only the "correct" people are helped, but why waste taxpayer dollars that way?
Another aspect that helps is frankly meatloaf sucks, so 80% or so of the kids who can afford it, prefer mom's homemade sandwich over the hot lunch anyway, so in practice your food expenses don't really increase much, just the (larger) back office expenses go to zero.
Another good example is it would be possible to contract out for private police and private fire protection, but the paper shuffle would be idiotically expensive to administer, so its cheaper just to give everyone in the city boundaries police and fire protection.
This is a true story BTW. My kids elementary school exceeded some low threshold "around" 5% a couple years ago and they no longer account for hot lunch. You want hot lunch you walk up and eat it no questions asked. Generally my wife packs them a lunch because the kids hate hot lunch and theres some medically diagnosed food allergy issues etc. Also I have "free" "basic income" style police and fire protection when in city boundaries. Someday medical will work the same way.
You are comparing apples and oranges. There is huge disparity between the cost proportion of preparing fresh hot meal and the meal's ingredients and between distributing welfare and the amount of welfare.
How about the cost of national defense? That's about the same order of magnitude of expense per citizen per year, and it turns out to be infinitely cheaper to defend an entire nation, in whole, "for free", than to defend an audited listed curated defined collection of specific acres of land that are more deserving of protection than other acres of land that pay for their own private security forces.
I can just imagine an "army" of social workers descending on my city to evaluate the financial records and security posture of every land parcel, and then offer customized packages of military defense to those having issues with the ability to pay. So the building I work in has an unarmed part time security guard but the company has plenty of money, whereas the office down the road without any money might get 24x7 M1A1 tank patrol because they qualify for free military defense services due to poverty. Imagine how many accountants and social workers we could employ if we treated all areas of society this way.
Do these people "deserve" free EPA service to protect their river, or do they only "deserve" it if poor people swim there often enough? We could spend millions and employ dozens.
The TLDR of the whole discussion is we've designed fabulously complicated and baroque systems to save pennies while being pound foolish.
Well that's a poorly written and terrible analogy.
"You want to even give basic income to the rich?! That doesn't make any sense at all because they don't need it, it'll cost more, and you'll be taxing them only to give it back to them."
He doesn't even address his own premise. His example is entirely inadequate because it doesn't address economics at all (inflation? redistribution? recurring costs? administrative costs?).
It's an effective answer to a question he didn't ask (why is it less fuss and more effective?).
The simplest clear answer to "why give it to the rich?" is: you're giving back part of what you taxed, that's a fairly cheap no-op, it only went through two levels of bureaucracy (tax, distribute).
Really it only looks like generosity to the rich if you ignore tax; otherwise, simply subtract it from their nominal tax bill to get their actual tax bill.
What reacts against giving money to the rich is ape-mind fairness instinct; humans should be able to do basic arithmetic and rise above this.
He does somewhat address his own premise. He is basically saying that figuring out who to exclude is simply not worth it. Maintaining a system for deciding "who is worthy of help" is more costy than just giving everybody help.
He says that the current system is handing out Oculus Rifts and water-jetpacks to everyone. Which means... any number of things.
I understand why people are supportive of the idea of basic income. But I dunno how to interpret his description of the current system. Is the current system wasteful? What is the analogy to Oculus Rifts actually mean? Are we really trying to teach people how to swim with virtual reality headsets?
Maybe if we stopped handing out Oculus Rifts and Water Jetpacks, we'd have a good system? Is his argument that we should improve our current welfare system?
Somehow, I don't think so. By the end of the blog post, it becomes clear that he's a supporter of basic income. But it takes _far_ too long to get to that point. His thesis needs to be earlier, and he needs fewer analogies and more facts.
Anyway, I think it is clear we need to reform our welfare system. But the blog post is almost the perfect textbook example of how to NOT make an argument. So much analogy, so little substance...
I think the point of the Oculus Rifts and Water Jetpack and Martian Terrorist Proofing is that once you've said, "oh, we'll try to help out only those people who need it," you've invited a political process into the system. That's dangerous because the politicians who are making the decision are not, in fact, experts in the matter. (See also: NASA explosions. They happen when the people who make decisions are managers, not the engineers who know the most about the systems.)
Politicians will divert tons of your funds to programs which address "related problems" that are not actually current problems (Martian terrorists), monolithic solutions that are not known to work (jetpacks), and to other programs which get nerfed.
A good example of a program getting nerfed: there's a nice free-and-reduced-cost lunch program for kids in the US: poor kids should be able to get a good meal at school. Unfortunately, this program has completely lost its ability to provide poor kids with a high-calorie meal, because of Mrs. Obama's crusade against obesity. It's not that the First Lady's plan is unilaterally bad, but rather that it is bad if this meal is the only substantial meal that you're going to get, so that fighting malnutrition is the same as providing lots of calories.
The analogy is somewhat clumsy but he really gets to the point eventually. His words:
"Does it make more sense to spend a lot of time and resources making sure that only those that absolutely require help get it? Or does it make more sense to just guarantee everyone gets help and make adjustments after the fact?
What's more efficient? All the interviewers, interview equipment, calculations, personal judgments, and spending of resources on stuff we don't even need? Or is it more efficient to just skip all of that, and cover everyone, no questions asked?"
Again, more verbose than the post you're replying to but the point is the same.
I don't know? Do you have any facts or data that actually compares the cost of those two?
And the answer is: no, he doesn't. He just has a broken analogy. I've posted an article in a post (somewhere else...) which actually details _real_ costs and _real_ expenses of some welfare programs, and then compares it with a basic income. But the blog-post linked does not.
Interesting, you wrote both the blog post and the medium.com article. I really do think you did a good job in the article, but your blog post is just... not very good honestly.
Its a common fallacy to make arguments from analogy. And honestly, it weakens your argument significantly compared to the article you wrote elsewhere.
Arguments by analogy "feel" good because it sounds like you're getting the point across in fewer words. But really... you're preaching to the choir at best. An argument from analogy is only as strong as the connection between your analogy and reality.
Unfortunately, talking about water jetpacks and occulus rifts break your analogy wide open. It is clear that you aren't talking about reality anymore, and the analogies barely serve their point when they're so disjointed to the reality on the ground.
If you do take this argument form again in the future, please stick to something more real.
There is no hard data for the "invisible hand of the market" but people still promote it. It's just how things work, people have ideals, and they push them into the spotlight to be discussed and talked about, which leads to studies being made and people finding pros and cons.
There is hard data out there for this very subject. Its called look at the costs. Our government is relatively transparent, we know the costs of food stamps. We know the cost of every single social worker on the government. We know their pay, their salary, their qualifications (these sorts of things are standardized upon the GS-levels)
This assumes that giving everyone a basic income is a life preserver. If giving people in poverty money was the fix, we would be done. People have to want to get out of poverty. Really want it. The system right now incentivizes people to stay in poverty. The "cliff effect", where government benefits decrease faster than gains in earnings, keeps many people from getting out. Trying to address that problem first would be better than just giving everyone money.
That's actually one of the arguments for the universal basic income. If everyone gets the basic income, as you make more money, it doesn't decrease your benefits.
Means testing (i.e. reducing benefits as you make more money) is what creates the really high effective marginal tax rate that you describe. The opposite of means testing is giving it to everyone.
No one is claiming we should hand out an amount that is larger than the average salary in the country.
The current welfare system does incentivize staying poor and having more children, because those increase your benefits, and moving out of that level of income directly correlates to a decrease in benefits.
With basic income, there would be no punishment for climbing out of poverty, your yearly income at no point declines because you were paid more money. This incentivizes people to earn as much as possible, because there is no downside to earning another dollar.
The kids thing is the trickier issue. I've seen people promote the idea that people under 18 should also get a monthly stipend that is a percentage of the adult rate. I think that this will still incentivize people to have more children, since they can capture the extra income from it.
I have heard others say that children should not receive a basic income, and that the income should not be increased ro changed for parents over non-parents. This makes it so that every person over 18 receives the same amount and does not incentivize having more children. The problem here is that childcare costs can be high, so it seems to disincentivize people from having children at all.
I'm not sure which is the preferred outcome, or if there are other possible solutions, but its an interesting question to think about for sure.
> If giving people in poverty money was the fix, we would be done.
No, we wouldn't, because we don't do that.
> The system right now incentivizes people to stay in poverty. The "cliff effect", where government benefits decrease faster than gains in earnings, keeps many people from getting out.
>No, we wouldn't, because we don't do that.
Yes we do. What do you consider EIC to be?
>Basic income avoids this utterly.
Not quite. If you give it to everyone the individual amount will be lower. $1k a month won't even make a dent. It would need to be closer to $3k a month to get close to the combined benefits people can get. That's around $900B a year.
EIC is the mother of "strings attached", you have to have a job in order to earn that money. Poor people don't have jobs and if they do they're afraid they'll lose them at a moment's notice.
>It would need to be closer to $3k a month to get close to the combined benefits people can get.
For $1k you can buy a house in the middle of nowhere and not work, anything more than that is just "luxury". I'm an adult living in a city (buying insanely priced food) and I don't spend much more than that (other than rent).
You don't have to have a job, you have to earn money. Those are two different things. Begging is a form of income. I think your view of "luxury" is somewhat different than most people. Most people in poverty live in cities with high cost of living. Relying on them to make the most of that money by moving out of cities isn't likely to happen. They could already do that today and don't.
They don't because they need to earn money, and to earn money you have to go where jobs are - cities. With basic income you wouldn't so people would be incentivised to move to lower cost areas.
There is no cliff effect with basic income. You get $1000 because you're alive. If you get a job and are paid $1100 for it, you make a $2100 total. Without basic income your job would be worth only an extra $100 and I understand that it might not be worth the effort. Probably you'd be losing money because of travelling from and back to home.
By the way, the cost for whoever pays those $1000 of basic income is lower because they get back part of them by collecting taxes.
One might assume/hope that we would rethink and eliminate some of the programs/incentives you mention, should basic income become a reality.
For example, perhaps welfare could be reduced or eliminated. Perhaps certain tax credits to the poor could be eliminated. Perhaps charities and programs could focus more where there is a true need (e.g. drug addicts, or the severely disabled).
One of the benefits of a basic income program is that it doesn't cause a cliff effect. Same with universal health care. Universal benefit programs don't cause cliff effects; the more you try to narrowly distribute benefits to the 'deserving' needy, the more likely you are to cause such an effect.
When I hear people ask for basic income, it reminds me of the scene in the Matrix where Neo asks for his phone call, and the Agent replies, “What good is a phone call if you have no mouth?”
What good is basic income if you can't afford to survive on it?
So what good is basic income of $1000 if a burger costs $100 or rent costs $3000. Basic income is garbage, pump in free money into the economy and price of everything will rise relatively. Then the question begs, instead of basic income, how about basic survival needs. Free housing, free food, free water. Well, how about education, legal system, health care, should those who don't wish to work earn all the privileges payed for those that do all the work?
I haven't thought much about this, but strong intuition leads me to believe that neuroeconomics and game theory can prove that this will not work.
If you gave everyone an amount of money proportional to how much money they already had (or proportional to how much income they had) then it would, indeed, make no difference because it would not change the wealth distribution, just the denomination of notes. Like a stock split.
But most basic income proposals (aka "citizens' dividend") suggest giving the same amount of money to all people (possibly with less for young children). This would actually change the income distribution. It would not necessarily require the government to print more money or even to increase taxes since (most of) the proposals also suggest eliminating existing spending on food stamps, welfare, social security, and other such expenses.
"pump in free money into the economy and price of everything will rise relatively"
This makes no sense. Runaway inflation is always a worry in any economy, but "free money" does not cause inflation. The government distributes plenty of "free money" as it is right now, and we're not seeing runaway inflation.
Those who support basic income argue that implementing the policy would more likely lead to the so-called "virtuous cycle" where, because people have money to spend, the economy improves etc. and because you're cutting out the current safety net and bureaucracy that surrounds it, you can afford to give people an income that will provide for their basic survival needs.
>but strong intuition leads me to believe that neuroeconomics and game theory can prove that this will not work
Strong intuition and game theory can probably prove that theoretically nobody will want to buy an Apple watch edition ... humans are not rational, not at all. Humans are way more complex than our models currently can describe. Preferences can be modelled but how correct are they?
Even though it might not be feasible, I think it's a goal we should strive for. I feel that if every basic need of a human is taken care of. That we can progress as a human race, as one unit. Am I more important because of the decisions my parents made to raise me well and to focus me on my studies? Am I 'worth more' than some kid in Africa who does not have the privilege to go to school, to have a 'normal' life? Would homeless people pick themselves up if they we're given the chance? How much of the homeless would pick themselves up given the chance. How many 'regular people' would 'drop down', 'just quit' if they had the chance?
I feel like basic income (or some sort) should be a moral goal of humanity as a whole.
Okay, stop with this. Just stop for a moment and define rationality: chosing the best course of action based on the agent's available information (let's call information data evaulated according to the agent's preferences, maybe even mention utility function). Now, if people value shinyness over solving poverty, you get a lot of Apple customers.
Lo and behold, that's what's happening. People's utility functions are not simple money, time, iPhone, Nexus 6, what should I buy!? It also includes the whole spectra of every walk of life, spending 1000 USD on a shiny iWhatever is not just a device for iWhatevering, but also has the value you gain by having a nice device that your peers will want to look at. (Or maybe having a non-iWhatever will have a negative value because you'll feel left out, peer pressure, embarrasement! People are rational social agents.)
Yes, models usually don't deal with these stuff, but that's changing, mostly because now we have ways to quantify it (from twitter mentions to FB likes and easy sentiment analysis and DIY machine learning/NLP/etc.).
Just think about the discussion regarding healthcare. From an economics standpoint the continous situation for the past decade is a clusterfuck, a government mandate in such a well-developed state such as the USA would solve the problem, in a few years. Done. Cheap, effective, healthy, pick three. Oh wait, you can't because politics, because social status, because discrepancies in how people view the world. And even though you can model politics itself, there's not much point in it, because the actors/agents/dickwads are either too simplistic (so some kind of personal agenda driven) or too influenced by invested parties (healthcare providers) to care about your models, or your models about them not caring about your models.
And that's (one) full circle, but of course we could go on.
It just doesn't work that way. Price competition is still a thing. Businesses will be just as happy to have more customers at their current prices. Money from those extra customers will find it's way back into the economy, to lawyers and accountants and programmers. Economists are far from certain as to whether rising wages drive price increases, or rising prices drive wage increases. There's no reason to assume that prices will rise linearly.
Multiple studies have shown that it's better to give people money and let them decide how to use it than it is to create layer upon layer of social programs. We can figure out how much 'basic' housing, food, medical and child care cost and give everyone that amount. They can figure out how best to use it to suit their individual needs.
I agree with your argument. Basic income will never work in our society if we are giving it out in the form of spendable money. Basic income in the form of a free amount of utilities provided by the government such as X amount of water and electricity every month I think could work in our capitalist society. Even 'universal' healthcare falls prey to the same flaws as the $1000/month since the quality of the free healthcare will be reduced and the wait times will increase. The best doctors will continue to have private practices that will charge rates that only the richest can afford. As long as capitalism is an integral part of our society, I do not foresee basic income being a good solution to any of our social issues.
Producing apartments or food or water remains a competitive industry. If the people purchasing them gain more income, I could in theory see the existing suppliers deciding "we will just increase prices," but a new supplier could enter the market using the old players' old model and steal all their market share.
(If the basic income is done just by giving everyone a check, then I could see costs rising, because people refuse to work for current wages. The more sensible way to implement a BI is with a wage subsidy so people still work.)
If there are millions of people trying to live on $1000 per month, then there is huge opportunity in pricing a package of goods that fit within that budget.
>So what good is basic income of $1000 if a burger costs $100 or rent costs $3000.
Basic income would only become a reality when the costs to produce goods significantly decreases due to automation. If the price of a hamburger is $100, then the price for a machine to automate production is going to be insane, at which point hiring people would be cheaper, meaning there would be jobs and no need for basic income.
We already have free healthcare and education in Italy. Wouldn't be much of a stretch to think of free food and housing either, no? I agree that perhaps giving money to people isn't the best way to do this, but "being forced to work" is a type of slavery we don't need in a healthy and ethical society.
If it doesn't cover the cost of food, clothing, shelter, health care, and education, then by definition the thing you're criticizing is something other than a basic income proposal.
If you had ever worked in or near government, you would have been disappointed that the analogy was not ridiculous enough.
The aqua-hoverboard is essentially a powerful water pump attached to a fire hose. The single rider stays above water by spraying all the other people in the face with his jet stream.
Actual government is dumber. I didn't see anywhere in the analogy a requirement that some swimmers be required to carry 20-lb rocks. No one had their life jacket taken away because it was either carcinogenic or insufficiently fire-retardant. No one was given a bucket, with which to move the water from one corner of the room to the other. No one was fined for indecency after converting their own pants into a flotation device. None of the life jackets were nailed to the floor, for use by the people who have already drowned and sunk to the bottom.
But on the other side of the coin, no one hired a swim instructor for $20/hr for 10 hours, either. The thing about government is that it simultaneously does useful and efficient things, and also incredibly stupid and wasteful things. That almost makes it worse, to see the one little thing that shows how it could be, and compare that to the way it actually is.
The simpler an idea is, the less likely it is that adding government to it will screw it up. That's why basic income is so simple. Every additional detail is just an additional opportunity for someone to get it wrong, whether that is accidental, due to incompetence, or intentional, for profit.
His analogy is flawed. In his analogy, some people will share their life vests because they can already swim, and because they'll never need life vests, live vests has no value for them, and thus sharing it means no loss to them.
Money doesn't work like that, it has value, and giving it away to more needy people does mean you are losing money which you might need later on.
Would not a life vest have great value to them in that they can trade it to the person who doesn't have one for something the swimmer does want? At the end of the day, a dollar bill does nothing for me. Its only value is in that I can trade it (well I could burn a pile to start warm for a short while, but that is a value below rounding error).
What the hell does Oculus Rift headsets have to do with any of this?
How the hell does money that is earmarked for Foodstamps get diverted into the Defense Fund?
The "medium.com" article that describes our broken system was _exceptional_. This blog post is horrible. Filled with logic holes, false analogies and confusing metaphors. I really don't know what scottsantens is complaining about! I honestly don't. His analogies are lazy, his debate skills are horrible.
I suggest just ignoring this particular blog post, and instead reading the above article. (Which is presumably what the scottsantens's blog post was based on).
I think basic income is a really interesting topic, but this analogy is terrible and the article is just babbling nonsense and odd Oculus name dropping.
The problem is that we live in a world in which the natural resources required for life, such as land, are owned.
And for good reason, but it creates a paradox, whereby virtually all social improvements result in higher rents.
These rents raise the cost of living. Thus, if you hand out everyone a basic income, landlords will notice that they are able to charge higher rents. Because we all need land, but they aren't making more of it.
To solve this problem, and complete the circle, it would make sense that the basic income is funded out of rent. That is the idea behind the Citizen's Dividend.
Oh this old tired argument. No, land is not the source of all wealth and justice. Its just dirt. What's on land is far, far more valuable worldwide (improvements, industry).
I agree that the stuff on top is more important. That is precisely why we shouldn't tax it, and only tax land.
The point is that the gatekeepers who restrict access to both nature and improvements are huge factors in why wages are lower than they should be, and why we aren't prospering as much as we ought to be.
Tax people for hindering production, not for laboring or producing.
i think the "poorly written terrible analogy" has been upvoted to rank #3 (as i see it now) because it points out a paradoxical logic. The key point of the article is when he points out that the rich wouldn't care to keep their $1000. When the reader first sees the tagline, they are intrigued because it makes no sense to give bill gates $1000. Through the analogy, one can see though, why it does. I think the purpose of the analogy is exactly that point--and not one to try and match the real-world dilemma. Also... to the comment about going to law-school and no shortage of good housing-- you are not understanding what "poor" truly means.
>Everyone can and should be forced to learn how to swim, right?
Is this such a controversial idea? I mean not literally everyone, there are people with disabilities who need help. But is it asking too much that if someone wants food, housing, and necessities from society that they put in effort, in some way, to contribute back? If someone values their lives so little they they would rather not work and die, why should we spend resources on them?
In reality, this doesn't work because we aren't going to have 100% employment and not everyone is able to work. But it doesn't seem to be asking too much that those who can work (and need support) should work.
Do you really think people who get $12,000 a year aren't going to work? It's not about replacing income. It's about supplementing it. Everyone will still work. They'll just have $12,000 more with which to buy food, clothing, pay their car payment and rent, etc.
From an ethical/moral point of view, a UBI makes total sense; if someone doesn't want to work, why should they be forced to? Problem is we still haven't seen a single country implement UBI. Why is that? Wouldn't people favor "not being forced to work" and vote for it? I'm not an economist but perhaps the math doesn't add up. It might be that "being forced to work" makes the overall economy healthier.
For instance, if you're a professional athlete, you have to put in the hard work no matter what, if you want to perform the best, sometimes even against your own will. If you look at a country's economy as a pro-athlete, it also has to put in hard work to stay at the top.
I'm not saying that should be the way we should live our lives. In fact, most people are perfectly happy not being pro-athletes and not having to put in the hard work.
There's also the argument that if you have a whole country willing to decide what they want to do (UBI), there could be a boost in innovation. That's certainly possible, but again, any boost in innovation requires hard work. And certainly the ones forced to do the hard work would outperform the others. But then again, that's a form of slavery.
"Forced to work" isn't an option any more. There aren't enough things to do (due to automation and worker efficiency). Making people do pointless jobs isn't any kind of a solution.
So how does basic income work with children? What about the inherent unfairness in reproduction ability between the genders? What about illegal immigrants and their children?
It is easy to create fairness in distribution when we are considering giving every adult who controls their own income an equal amount. But how are children paid for? Do we do like current, where each child gets you less than the previous to incentivize smaller families? Does each child get the same amount? What if an illegal immigrant has children that are US citizens?
Also, as poor single individuals, if we pay for children, we greatly improve a woman's ability to have a child without much improving a man's (it is far easier to find someone to have unprotected sex with than to find someone who is willing have unprotected sex and to gestate a fetus for ~9 months).
For basic income to become a reality, there needs to be enough groups in a coalition supporting it. This seems one area that could end up fracturing potential allies of a potential coalition.
Many European countries already have a form of basic income for children: you get $X per child, unconditionally (or with very few strings). Yes, there are people that complain about welfare moms and immigrants having children just to get the benefit, but the vast majority of Europeans would agree that child benefits are a good idea.
Another proposal is that the BI for children should partially go towards that child's education.
A good question, which needs some good discussion. But far from a condemnation of the BI. More money for families is far from a problem for children; they would benefit first (unemployed parents; homeless families).
>In the analogy, people with children would be heavier and need another life vest (if they couldn't find another means to float).
We reach the breakdown point of the analogy because people trying to not drown are spontaneously sprouting new individuals.
>If a woman has a child, a man had one too.
To have a child requires the sperm from a man but requires the womb from a woman. Only the latter option requires the person to be fully attached and involved for the entire pregnancy.
Thus, for a woman to get a man to participate in the required part for her to have a child is much much cheaper than for a man to get a woman to participate. So great is the difference the sperm banks exist where the man is about as removed from the equation as possible.
I think that if instead of QE, the fed just sent every US citizen, no questions asked a check for 1/300 000 000 of the total value of the programs, the economy would have been in better shape right now and we would have healthy levels of inflation.
That concept is called "helicopter money", and there is an interesting debate about whether or not it would have worked better than QE. I think it would have, but I also think that it is unreasonable to think that it would be the topline QE number divided by number of citizens.
The QE money wasn't spent directly. It influences interest rates, and interest rates are extremely low right now. You have pretty terrible leverage, so it takes a huge topline number to sway anything.
The problem with QE was that banks did not lend the money. When you give money to people in the 99% they get injected into the economy immediately. They buy instantly goods and services. Although vouchers would have worked better though instead of cash. So people are forced to spend the money.
Another analysis-free justification. Here, lets give every person $100. Assume some people are pure consumers and some are providers. Every dollar a consumer spends is going to be taken away in tax, because it has to be given back to the consumers again next year. The part I've neglected is that the providers are also consumers so the money will circulate among them under some circumstances. That means the tax rate could be less than 100 percent. I have yet to see anyone do a proper analysis of this to see if and how it can even work. The stupid analogies and hand waving have to stop though.
this is sloppy, and while I don't feel like putting in the effort, I'm sure I can make an equally (in)effective analogy to prove any point I want by similarly pulling an unrealistic scenario from thin air.
>Why giving basic income to even the richest makes sense and a blog post explaining it very poorly. OCULUS RIFT.
It think that basic income is something we should strive for. It will be incredibly difficult to implement but I think we should make baby steps toward it. Oculus Rift. It needs to be researched more. However, this analogy does a really shitty job at explaining it. So bad it's almost satire.
I don't think anyone argues against the notion that substituting a basic income in place of complicated payment/handout/welfare schemes is more efficient.
I think people do sometimes poorly raise the efficiency point though, confusing efficiency with cost, and then you get huge digressions where people point out the obvious, that limited programs have a smaller total cost than universal ones.
(of course better efficiency does mean lower administrative costs, but any program should aim to have benefit spending swamp administrative costs)
Let's assume we do give everybody $35K per year in the USA, to pick a country.
At 320MM people in USA, we would be distributing $11T per year, if distributed to every man/woman/child.
If we exclude people under 20 years of age (probably a good idea), we lose 80MM people, giving us an annual distribution of $8.4T
Is $8.4T per year a lot? It seems like it.
In fiscal year 2015, the US federal government is projected to spend around $3.9 trillion.
Let's say that 50% of that is spent on providing financial safety nets. I have no idea if that's true, but let's say it is. Those safety nets would no longer be required, and we could offset some of our new cost by eliminating them.
That means we'd go from a $3.9T federal budget to $3.9T/2 + 8.4T = $10.35T
So we would need to multiply tax revenue by 2.6x to pay for this.
The median household income in the USA is $51K. Those families are taxed at a rate of 13.2%. (they are in a 15% tax bracket, but first $18K is only taxed at 10%)
So, the median income of $51K takes home $44K after taxes. The government gets $7K
Let's inflate their income by $35K, to $86K per year, because of the $35K disbursement.
Now, let's tax them 13.2% x 2.6 = 34%. We're taxing them at a higher rate because the government needs 2.6x money to meet extra budget required by the $35K disbursement program.
So, our median income family now has an income of $86K and are taxed at a rate of 34%, allowing them to take home $57K after taxes.
So, for them, it works out rather nicely, moving from $44K to $57K per year, after taxes, even with the higher tax rate.
However, most of the taxes in the US are paid by the higher tax bracket individuals.
Those individuals would see their tax rate rise from 33% to 86%, dropping their take home pay from $186K - 33% = 125K to (186K + 35K) - 86% = $30K after taxes.
Obviously we would have to rework our tax system, as that can't fly, but even with reworking it somehow, I guess I don't see a way to inflate the federal budget by 2.6x
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OK, obviously $35K is way too much. Let's do it so a man and wife get $34K combined, so $17K per person.
Now we're at $4.1T for this program, to give $17K to every adult of 20 or older.
Again, deducting 50% of our current $3.9T budget and adding $4.1T, we're at a new federal budget of $6.05T
That's 1.55x greater than our current budget, so we need to raise tax revenue by 1.55x to compensate.
Perhaps this becomes possible, assuming 50% of our current federal budget can really be eliminated as redundant.
Social Security alone is 23% of the federal budget, and could probably be replaced by this program. Just 27% to go!
someone above suggested the welfare aka safety net amounts to 40% of total expenditures, not 50%. Also once you exclude the under 20 population from your basic income you should exclude their welfare aka safety net costs. But in general your calculation has nothing to do with the cost of distributing welfare - the main driver behind basic income - instead you simply want to tax the rich and redistribute the money to the poor. I am not saying it is not a good idea, all I am saying is it has nothing to do with basic income.
Isn't giving everyone $1,000 just like giving nobody $1,000?
It would improve the lives of the homeless dramatically I'm sure. But wouldn't rent/food just inflate at the same time?
If apartment supply remains constant, but now the market of renters increases substantially, prices rise right?
Edit: I like these answers. So if I gave a quick overview, this isn't printing money, its a basic redistribution which gives those with less money much more purchasing power. So prices don't rise because of this.
Things like leases and rent are generally fixed over a period of time. So you aren't getting a sudden increase in cost. You are getting the ability to do things like pay off your credit cards, student loans, and catch up on other payments.
Now you are (hopefully) not in debt and living paycheck to paycheck. Maybe you don't have to work a second job to make interest payments, and you can invest in education or something along those lines.