> prices will rise in an attempt to capture some of that known financial excess
The assumes financial excess. The reason for UBI is that there isn't excess. If 78% of Americans are living paycheck to paycheck, then that's not excess. If 63% of Americans can't afford an unexpected $500 bill, that's not excess.
You're right that inflation happens when there is excess, but given these stats, I don't buy that part of the argument. Even if these stats could be explained away from being financially irresponsible (I don't believe this is the common case), it still wouldn't be excess because people are still spending. If we don't assume excess then this argument becomes as silly as saying that giving people jobs with an income will cause inflation.
So where could this money be captured? A person that couldn't afford a car can now. I person with a $1k beater car can now buy a $5k car. Someone that was living paycheck to paycheck can now take a breath, buy a TV and a Netflix subscription. Someone that was unable to invest before could use that money to invest. The money affects everyone in different ways, but supporters of UBI think it is clear that there are already avenues to "capture" this money without inflation and that different income groups will spend the money differently. Studies have also shown that when there isn't full market capture cash injection doesn't cause meaningful rises in inflation.
> A person that couldn't afford a car can now. I person with a $1k beater car can now buy a $5k car.
Wouldn't car dealers raise their prices some value up to $1k because they know anyone coming in that month to buy a car also just received a $1k check from the government?
> Someone that was living paycheck to paycheck can now take a breath, buy a TV and a Netflix subscription.
Netflix may raise their prices knowing everyone has a little extra cash to spend, and that people would rather pay a dollar or two more than cancel.
If your streaming subscriptions, phone bill, and everything else goes up incrementally because companies begin to factor UBI income into their pricing, then without making any lifestyle changes, you'll see that overtime you're spending an extra $1k a month due to higher prices (of course it won't work out exactly like that, but the point is that some portion of your $1k UBI will go toward paying for things you were already buying, but that are now more expensive as a result of UBI-aware pricing.)
If you believe that companies won't act that way or that other market forces (such as increased competition) will renormalize prices, I can see the argument, but I don't buy it personally.
> Wouldn't car dealers raise their prices some value up to $1k because they know anyone coming in that month to buy a car also just received a $1k check from the government?
Why would they. They just got more customers. They already have a surplus of supply. In fact, you could make the argument that they could reduce car prices because with more customers you can operate on smaller margins. This is literally operating at scale. But it is hard to say, I'm just pointing out that the exact opposite could happen.
> Netflix may raise their prices knowing everyone has a little extra cash to spend, and that people would rather pay a dollar or two more than cancel.
Or look at Netflix's strategy. It is to corner the market. The classic Silicon Valley strategy. Corner the market, hemorrhage money, and then make a profit. More customers works into their plan perfectly without raising prices. In fact, now they have more competition. If every streaming service raises prices then people will have less of them and pirate more (this is already starting to happen). Even a lot of companies outside SV run a loss in the beginning, until they reach scale.
TLDR: More customers doesn't mean prices go up. Frequently it means the opposite. Scale.
For people who can afford cars today -- Why wouldn't they?
I'm not convinced economy of scale applies the same way in this case. Cars (and mattresses, etc) are large and infrequent purchases dominated by preference. Dealerships make most of their money through sketchy financing and tricks.
There's a large class of financially illiterate people who routinely make massive mistakes like monthly income spend planning. Given an extra thousand per month, two hundred more on a car is both feasible and justifiable. Lifestyle creep.
I would agree if the topic was commodities like eggs or rice -- sure, I purchase by efficiency. And I'm not sure about the SV strat and dealerships. It could work in theory, but as of today dealerships are basically fungible and signal the same way as each other. I have no idea how a dealership could signal their lower marginal costs, especially survive in an industry with insane scaling costs.
Because you're only applying economy of scale to a single market. What I tried to illustrate is that different classes would spend the money differently. So it isn't just everyone buying cars. Come on, that's idiotic and unreasonable. But what I'm saying is that new people are entering MANY markets. Not a single one. That there are so many markets and that we are no where near full market capture (this is the important part) that thinking just rent would go up is also an unreasonable assumption.
I too think naive models are the most accurate. Linear fits for everything.
But seriously, no. I literally gave you examples of this strategy happening. Here's some more companies doing it: Venmo, Move Pass, YouTube, Google, Amazon (store), Facebook, Robinhood, Vanguard, need I continue?
Simple models are great to get the basics, but if they worked for most things in the world everything would have a O1 solution. Frankly the world is more complex and can't be explained in a 10 minute lecture. That's why we have experts in subjects and why basic knowledge is drastically different than expertise knowledge.
> Wouldn't car dealers raise their prices some value up to $1k because they know anyone coming in that month to buy a car also just received a $1k check from the government?
There is still competition between car dealers, so I doubt this would happen.
It would absolutely happen. When I was in the military, the town I lived in had to pass laws preventing landlords from changing your rent based on your rank because everyone's pay information was public. It's naive to think dealerships would try to undercut each other instead of colluding to all get more money.
Charging rent based on rank would be a form of discrimination... also this is anti-competitive behavior. It is pretty well understood that regulation should exist. It is just a question of how much and how to regulate.
In America, this is the problem that has to be addressed before we can consider rolling out projects like UBI. I agree with you that regulations have to exist for this to work, and we simply don't have the regulations in place right now to enable it widely.
I was suggesting that regulations have to exist in general. Over the entire market. But what you said just flat out confuses me. That we shouldn't implement something because we currently don't have regulations for it? Why would we? We haven't implemented it. I mean with that kind of attitude we can't get anything done.
Do I expect hiccups and bumps in the road? Yeah, why wouldn't I? Humans aren't perfect. Never have been, never will be. But just because there are speedbumps in my neighborhood doesn't mean I should never go to the store. I still need to eat at the end of the day.
> That we shouldn't implement something because we currently don't have regulations for it? Why would we? We haven't implemented it. I mean with that kind of attitude we can't get anything done.
I think before implementing UBI, we have to address the broader issue of anticompetitive behavior in American business, due largely to decades of ill-advised deregulation, coupled with regulatory bodies who refuse to prevent anticompetitive mergers. Once we have undone the damage of deregulation, then I believe it's prudent to start putting UBI proposals on the table, but not before. Otherwise we risk making the situation worse for consumers and better for rent seekers.
I mentioned something similar in another comment. But I'm confused why everything is becoming an "or" conversation. We're a pretty rich nation, we can have more than one cake. There's lots of talk about regulation, we don't have to focus on only one topic at a time.
I agree with you generally, but believe this is a case where the two events have to occur one after the other.
Putting UBI on the table today without already having a reformed regulatory framework in place from day one will result in a failed project, IMO. Opponents of UBI will use this to say that UBI is broken, instead of pointing to the real problem, that regulation is broken.
Colluding to prevent competition is and should be illegal in a market economy. We can't say we can't implement a viable and beneficial social policy because people will break the law. We should enact the policy and ensure the culture, norms and laws are in place to make it effective.
>The assumes financial excess. The reason for UBI is that there isn't excess. If 78% of Americans are living paycheck to paycheck, then that's not excess. If 63% of Americans can't afford an unexpected $500 bill, that's not excess.
But if the core problem is that everyone is bidding away all their financial slack on rent, then they will still take any such windfall and do the same with it, pushing themselves right back to the same (low) level of slack they have today.
Earlier advocates for poverty alleviation noted this effect early on. Winston Churchill told of a time when they got the tolls on a bridge removed, and then rents advanced by the cost of using the bridge twice a day.
This is what bothers me most about arguments against UBI. They seem to have baked into them an assumption that any reduction of inequality will be eaten by rents. Then it follows that the only thing is to balance concentrated private economic power with concentrated public economic power. But what I want to see is more people with more control for themselves not planned for them by a program or economic happenstance.
So you're saying the argument must be wrong because it would imply things are hopeless? That's a textbook fallacy of appeal to consequences. You're not actually addressing whether it's true.
The point is that the UBI isn't going to fix things until you first fix the dynamic that's responsible for gobbling up all the economic slack, so that should be the priority.
They are saying you are wrong because there are other things in the market besides housing. If you inverse your logic it means lowering wages provides cheaper rent. And that just sounds ludicrous.
>They are saying you are wrong because there are other things in the market besides housing
They said nothing like that; that might be what you think, and I'd be glad to address that, but it doesn't help the discussion when you invent arguments that were never made and expect me to have already answered them.
Real estate, unlike cars or food, can't be brought on the market to rapidly respond to demand, and people don't keep raising bids to the point where they leave a certain amount of slack in their budget.
There are ways to get around this (like with faster building and scaling up of transportation infra) but it would need to be address before throwing on a UBI, which was my point.
>If you inverse your logic it means lowering wages provides cheaper rent.
I am obviously not addressing whether it's true or saying the argument must be wrong. I'm pointing out there's some circular reasoning here that's unexamined in most online discussions about UBI.
I am pointing out there is an assumed and implied argument that 1) inequality is a problem and must be corrected, but 2) straight redistribution of some wealth with UBI will fail because-inflation/rents, but 3) we should have less inequality though even if we did that would put us in the similar position as with UBI where costs rebalance.
And at the end I ask, rhetorically but still, what's to be done. So here you also assume it's true without addressing it and offer no answer to how to address the gobbling up of the economic slack.
>I am pointing out there is an assumed and implied argument that 1) inequality is a problem and must be corrected, but 2) straight redistribution of some wealth with UBI will fail because-inflation/rents, but 3) we should have less inequality though even if we did that would put us in the similar position as with UBI where costs rebalance.
I wasn't making anything like that argument. I was saying that, if you don't address the dynamics that gobble up household economic slack, then a UBI won't produce the additional slack you're trying to produce. Three's nothing circular about that.
>And at the end I ask, rhetorically but still, what's to be done. So here you also assume it's true without addressing it and offer no answer to how to address the gobbling up of the economic slack.
In fact, the link I gave was from (the aptly named) landvaluetax.org and is from an organization that has one theory and solution for how land rents eat up slack and a solution.
And even if I didn't, it's still a valid point that the primary problem is "things that extract household slack", and needs to be address before any UBI is piled on.
Hey, you're right :) I was talking past you because I didn't realize you were the OP that prompted my thought. Also I was thinking about a more general trend in points and not yours specifically. You've got a great point about land too. I'm in Texas so I hadn't considered some places don't have a land tax because while it has it's challenges (disagreements between state and citizen on land value) it's kind of backwards not to have one.
I'm not saying the argument fails because there is a circular loop. I am saying there is something more to the system and we shouldn't drop consideration for UBI based on the argument that inflation will gobble up all of the increase because that argument holds true equally if we improve equality to everyone gets a wage increase.
Which really makes your point even more important. Particularly the one about land having the strongest growth pressure.
I have a modest proposal of how to fix the rent issue. If poor people just sold their children as food, then they would have enough money for rent. And then they wouldn't need jobs, which would lower the rent! Clearly more money more problems. If we take away the their jobs then the market will respond by lowering rent.
Disclaimer: I live in a relatively prosperous community. My perspective is skewed accordingly.
Your numbers seem fictitious to me. 78% of Americans living paycheck to paycheck? Look at what they are spending their paycheck on. One car per person. 2.1 people per house. 3.2 game consoles per person. A new laptop every 15 months. A new car every 36 months. A new $800 smartphone every 11 months.
Every low-income 10 year old I see is carrying around $1000+ of electronics and treating them like they're disposable. But our school district offers free breakfast to 100% of the students. We have student parking lots for 16 year old kids.
We're all living paycheck to paycheck, but I claim there is still huge excess. Giant houses for average families, computers, ATVs, boats, cars, TVs, 2 movies every night, 4 Amazon deliveries a week, direct access to Chinese suppliers, personal juice presses, occasional cruises.
Air-bnb and uber are not luxuries for 1%ers. These are basic human rights chiseled into the constitution.
There are, of course, truly poor people in the population. But our definition of poor sure has changed a lot in 50 years.
Show me any random collection of 10,000 Americans and I will show you $2 million/year of disposable income without sacrificing a single smartphone or smart TV.
Your view of people's buying patterns is not accurate. I own a home care agency with 500 employees that live on low income (the government sets the Medicaid reimbursement rate so we have no ability to raise wages). NO ONE is buying a new car, let alone every 36 months. Half our employees don't own a smart phone. We pay $10hr, in rural North Carolina, so lots of people live on even less. Please research this issue and go and meet people in this income bracket, you will see a different picture. I also encourage you to read Nickel and Dimed: On (Not) Getting By in America by Barbara Ehrenreich.
The truth is most American's wages have gone to Health Insurance, College, and Housing.
By definition, you're the one with a narrow perspective -- your employees are all low-income workers in a rural town. The parent never said NOBODY is poor -- in fact, he specifically acknowledged that there are poor people. His claim was that he doubted that 78% of the American population is. Additionally, many (many, not ALL) who technically are "poor", still find money to purchase expensive electronics.
1) It doesn't matter if you're rich and living paycheck to paycheck. This is argument actually supports the idea that UBI won't cause inflation because clearly there is still inefficiencies in market capture if people are rich AND living paycheck to paycheck. (like I said above, inflation doesn't really happen when you don't have full market capture).
2) Selection bias is a thing. While there are rich Americans living paycheck to paycheck, most of the people in this situation are not rich.
3) I'm not sure I'd consider a smartphone an expensive electronic. You can get one for under $100 and a plan that is <$20/mo. This isn't exactly breaking the bank...
4) I also wouldn't call a cell phone a luxury item in today's society. Even a smart phone. You can't get a job without a phone number, which now usually means texting included. A smart phone just means you have a single device that can also get you on the internet. Again, we're talking about a purchase that is well under $1k, has high utility, and is being held onto for years.
Sure, this isn't poor like poor in Africa, but does that really matter? We don't live in Africa. We live in a rich society, I'd like to live in a wealthy society. One where our poorest can get shelter and food. If our definition of poor becomes having constant access to housing, food, health care, and are able to do so on 40hrs/wk, and nothing more, I'd call that a success. But we're clearly not there yet. If we have that, I don't care if someone has a trillion dollars and can buy rocket ships because we're in a post scarcity society (maybe not world, but society).
Except that my narrow perspective is a sample size of the large group at issue and is more accurate. Its the sample size that matters.
I also gave recommendations for a much broader sample size in the book that spans multiple industries and geographies.
Finally, I posited a specific theory as to why 78% of Americans are living pay check to pay check...the basic social mechanisms of survival, Health, Education and Housing, have risen at a rate far exceeding inflation and have actually exceeded average income levels. These rises are due to governmental policy and not some failing of individual citizen consumers.
I would argue that if a person can't afford basics like Health, Education and Housing, the are poor. In fact, they report feeling poor; their bodies and minds exhibit the stress and anxiety of being poor. We can and should create companies and governmental policies to work to reduce this reality, rather than blaming people for their condition.
If we as a society determine that it is necessary to have a car or cell phone to contribute in a productive manner we should ensure that as many people as possible have the tools to be productive. That's just a rational policy to boost GDP, the tax base, the total size of the Market for goods and services, and trade with other countries. You know, capitalism.
> my narrow perspective is a sample size of the large group at issue and is more accurate
You stated 1/2 your employees don't own a smart phone. That is simply not representative of the general US adult population. Additionally, all your employees earn $10/hour. Again, not representative.
Again, nobody is arguing there aren't poor people in dire situations. supportlocal4h's argument was that godelski's stats were exaggerated.
> Show me any random collection of 10,000 Americans and I will show you $2 million/year of disposable income without sacrificing a single smartphone or smart TV.
That's $200/year on average. Not exactly a compelling argument.
The assumes financial excess. The reason for UBI is that there isn't excess. If 78% of Americans are living paycheck to paycheck, then that's not excess. If 63% of Americans can't afford an unexpected $500 bill, that's not excess.
You're right that inflation happens when there is excess, but given these stats, I don't buy that part of the argument. Even if these stats could be explained away from being financially irresponsible (I don't believe this is the common case), it still wouldn't be excess because people are still spending. If we don't assume excess then this argument becomes as silly as saying that giving people jobs with an income will cause inflation.
So where could this money be captured? A person that couldn't afford a car can now. I person with a $1k beater car can now buy a $5k car. Someone that was living paycheck to paycheck can now take a breath, buy a TV and a Netflix subscription. Someone that was unable to invest before could use that money to invest. The money affects everyone in different ways, but supporters of UBI think it is clear that there are already avenues to "capture" this money without inflation and that different income groups will spend the money differently. Studies have also shown that when there isn't full market capture cash injection doesn't cause meaningful rises in inflation.
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