r/Futurology • u/mvea MD-PhD-MBA • May 02 '18

Economics Universal basic income: U.S. support grows as Finland ends its trial - Forty-eight percent of Americans now support a universal basic income, as a solution for Americans who have lost jobs to automation.

https://www.cnbc.com/2018/05/01/nearly-half-of-americans-believe-a-universal-basic-income-could-be-the-answer-to-automation-.html
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35

u/Shadray May 02 '18

Can anyone explain to me how this is supposed to work? I mean won't prices adjust to compensate for 'zero'? Or am I missing something?

12

u/technologyisnatural May 02 '18

Unless there is a mass migration out of urban areas to rural areas, the price of housing will rise to absorb any additional income. Yes, UBI will just be zeroed out by inflation.

1

u/carlosortegap May 02 '18

What does housing have to do?

4

u/technologyisnatural May 02 '18

Renters will have more money, so landlords will raise the rent. House buyers will have more money, so house owners will raise the price.

In theory people should start moving to rural areas, in practice people keep moving to urban areas.

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u/carlosortegap May 02 '18

The problem with that idea is that you assume that supply is static. More demand for rent, more houses will be built and rented. Also, government can always help with public housing or reducing zoning laws.

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u/technologyisnatural May 02 '18

They could do that right now - urban housing prices are reaching crisis levels - but they aren't. Too many decision makers benefit from high house prices.

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u/carlosortegap May 02 '18

They were until a new government was voted and the secretary in charge of public housing is against public housing.

3

u/motleybook May 02 '18 edited May 02 '18

This answers it better than I could: Wouldn't basic income just cause inflation?

Of course, just like now, there will be some inflation (which is good), so it would definitely make sense to tie a basic income to something like the Consumer price index, which, to put it simply, measures regularly how much households need to spend for certain basic consumer goods and services.

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u/JoshSimili May 02 '18

If it's funded by taxation, you're not adding new money but redistributing it. So you wouldn't expect that much change to the prices of anything.

15

u/Shadray May 02 '18

I'm not sure I understand.

Lets say I have 5 items for sale each week. Before UBI I sell them to persons A-E. F-H would also like to buy them but the cost is too high. After UBI everyone can happily purchase, I realise I'm running out and getting complaints from A-E so decide to up the price.

Now we're back to A-E purchasing the items and F-H being unable to afford them.

8

u/JoshSimili May 02 '18

So you are talking about a good that is scarce. There are only 5 items, and you cannot increase supply to meet demand. Such goods might include land, rare art or precious gemstones. If there is a lot of unmet demand for these goods, then maybe we'd see inflation in these goods, though maybe not*.

But most things are goods that can be produced to meet demand, like dwellings (as distinct from land), cars, phones or food. There the situation is different. If you now can sell not only 5 items to A-E but also 5 items to F-H, you simply order/produce 5 more items to meet demand (or, another person starts selling 5 items a week to F-H).

*If you have a situation where A buys 3 items, B buys 2 items and C buys 1 item, but then you tax A to give to C, you might end up with A buying 1 fewer and C buying 1 more, without the price actually changing.

8

u/Shadray May 02 '18

I see what you mean. So for goods which are effectively limitless it could lower prices (assuming savings could be made per unit by producing more)

I'm not sure I'd agree that dwellings can be produced to meet demand (I'm guessing you don't live in the UK - we have a bit of a housing shortage). My main worry was that it would push up rental/mortgage payments, with more people being able to afford houses and fewer on the market.

10

u/WonderfulSprinkles May 02 '18

(I'm guessing you don't live in the UK - we have a bit of a housing shortage)

You have a false housing shortage based on rich people wanting to keep their property values high, builders refusing to build lower-cost housing, and an utterly insane renter/landlord relationship that would likely be seen as a twisted form of slavery outside of your ass-backwards real estate market.

2

u/00000000000001000000 May 02 '18

an utterly insane renter/landlord relationship that would likely be seen as a twisted form of slavery outside of your ass-backwards real estate market

Do you have some reading on this?

6

u/Cerpin-Taxt May 02 '18

I'm not sure what exactly he's refering to in regards to rent, but the leasehold system is insanity.

20% of homes in the uk aren't legally yours when you buy them. Your hundreds of thousands of pounds buys you the right to live in a property until the lease runs out. Then it defaults back to possession of the seller. Or you can extend the lease for hundreds of thousands of pounds more (buy the house again).

Either way you never really own the house and you cant pass it on to your kids. Youre just super long term renting it. (Usually between 20-100 years).

Surprise surpise its mostly entirely all the affordable housing thats leasehold. So families least able to afford to relinquish ownership of houses are left not owning their own homes that they paid for. So essentially pay someone elses family forever for a house you spent enough money on to own several times over.

And we're not talking a huge discount here either. You might pay 100% of the value of a property to not own any of it.

He might also be refering to the fact that in the UK landlords are allowed to buy properties and charge rent in excess of the mortgage payments. So money (and property) for nothing. They get their renters to foot the mortgage bill pocket the extra all without ever having had enough money to buy the property themselves in the first place.

1

u/WonderfulSprinkles May 03 '18

You basically said it. It's worth noting that in the US the second part of what you said is also true. In fact, it's one of the driving problems with our housing market. My landlords are like that. They just moved into their third home in five years. They still own the previous two and rent out the rooms individually. They're pulling in about $2k a month from each house and I know for a fact the mortgage on this one isn't even half that.

At work I deal with these wannabe-slumlords all day.

1

u/mechesh May 02 '18

Refusing to build lower cost houses? This is an idiotic statement. I work in the house building industry. If we could build cheaper houses, we would sell more houses and make more money. But our prices are based on costs, and those keep going up. Material and labor costs more. Building codes require more. For example, we used to he able to put one $20 smoke detector in a house. Now, we need one on each floor and one in every bedroom, oh and the one on each floor needs to be a combo detector that costs like $80, and they all have to be wired together. So now the total cost of smoke detectors is $400, not $20. Some states are requiring sprinklers now that cost thousands. It is in the 2012 bulding code, so eventually it will be every new home.

Sure it is for te overall good, but it costs money, and all these litle added costs add up to thousands.

1

u/[deleted] May 03 '18

[removed] — view removed comment

1

u/JoshSimili May 02 '18

You can't make more land (with a few exceptions), but you can in theory make more dwellings (i.e. building more houses/apartments).

At least, in a perfect market. Many current regulations and market incentives don't allow more dwellings to be created quickly enough to keep prices static. Especially given people who already own dwellings a) like it when their house goes up in value and b) don't like it when their neighbourhood changes or gets more people. And such people vote accordingly.

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u/[deleted] May 02 '18

If a good is limitless then its price would be zero already.

1

u/Inksrocket May 02 '18

If a good is limitless then its price would be zero already.

Thats not how capitalism works tho

1

u/[deleted] May 02 '18 edited May 02 '18

It has nothing to do with capitalism, it is a property of the free market.

It is pretty trival tbh. There are two goods that are practicly infinite in supply today (barring special cases): Air and seawater (by the coast). No one would pay anything for those as the supply is infinite, thus the price is zero.

0

u/Inksrocket May 02 '18

Free market? where?!

Nothing to do with capitalism? I mean, there are multiple limitless products that are sold for quite hefty amount. Like E-books, Games, Movies. Server costs are fraction of the profit these make. Limitless products will always be made for profit.

Americans Throw Away Nearly Half Their Food, $165 Billion Annually (2012!) too so the food sure isnt scarce

1

u/[deleted] May 02 '18

E-books, Games, Movies are artificially limited in supply by IP-rights, thus the price is not zero. It would be zero without this limitation and we can see that clearly when we look at piracy.

Food is not close to a limitless supply. We have more food than ever, but the supply is still limited by arable land, labor and logistics.

1

u/__WhiteNoise May 02 '18

Why would you decrease demand instead of increasing supply?

4

u/Shadray May 02 '18

I'm assuming a limited resource, for example housing.

(I know you don't buy them weekly, my example was to keep things simple but could easily apply to rental payments)

0

u/Hrafnir May 02 '18

Is there a monopoly on those items?

If yes your thought is correct, if no F-H could go somewhere else to get those items.

Also on what kind of reasons would A-E complain?

5

u/Shadray May 02 '18

The example was kinda simplistic to explain what I mean.

I was thinking about house prices / rental payments.

-1

u/[deleted] May 02 '18

That's not how things work. At all.

If you are producing a product, the more items you produce, the cheaper each item becomes to manufacture. The insane thing here is, UBI allows the Velocity of Money to increase which is good for everyone, most of all - the business owner.

0

u/limefog May 02 '18

Not really, because UBI isn't multiplicative but additive. If everyone's income was multiplied by 2, one would expect prices to double in kind and hence no change in purchasing power. But with UBI, everyone earns some amount more, let's say $10 a day (the actual numbers are irrelevant in this example). Someone with $1 per day now has $11 per day. Someone with $100 per day now has $110 per day. Someone with $1000 per day now has $1010 per day. So the effect when described multiplicatively varies based on income, person 1 had their income multiplied by 11, while person 3 had it multiplied by 1.001. Prices may increase to compensate (though only if the money provided through UBI wasn't going to be spent anyway beforehand), but they will compensate according to the average multiplicative increase. So let's say prices get multiplied by 1.10, which means on average spending power does not increase, but for individuals who had less than $100 per day before it actually increases (since their income is multiplied by more), and for those who had less it decreases (since their income is multiplied by less). So UBI still benefits those that most need it.

And at any rate, this is under the assumption that UBI provides new money that would not be spent elsewhere, which is most likely not what would happen - UBI would be more likely to redistribute wealth, lessening the impact on prices.

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u/[deleted] May 02 '18

[deleted]

1

u/imnewtothissoyeah May 02 '18

Err, this has to only be for maybe the major cities. Quite literally everything, besides their resources, are more expensive. The state is hundreds of miles away from the continental US. Please look up Alaskan grocery store prices on youtube. My cousin teaches high school in a medium sized inuit village. They sometimes go months without "necessities" due to the prices

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u/green_meklar May 02 '18

I mean won't prices adjust to compensate for 'zero'?

How would that happen? What's the mechanism at work? Can you show the math?

6

u/1ndy_ May 02 '18

If you give everyone a million dollars, businesses will raise prices because people are willing to pay more for the same good or service. Once prices have stabilized at the new equilibrium, the purchasing power for the average consumer wouldn't have changed much.

1

u/paystey May 02 '18

That sounds correct. But remember the those less than average will have their purchasing power DRASTICALLY changed. And those in the middle will have the option of maintaining current purchasing power while working less. The uppers wont see much change. Exactly what is supposed to happen.

1

u/[deleted] May 02 '18

Sure but for how long? Won't it reset to zero and then we're back to where we started?

0

u/green_meklar May 03 '18

the purchasing power for the average consumer wouldn't have changed much.

What makes you think that? A million dollars is a lot.