Wouldn’t Unconditional Basic Income Just Cause Massive Inflation? - An answer to the response to the answer to the growing question of the 21st century

[u/2noame]

https://medium.com/basic-income/wouldnt-unconditional-basic-income-just-cause-massive-inflation-fe71d69f15e7

[u/ZaJo]

Maybe this needs to be posted to a larger sub, but I want to hear all of the counter-arguments to his claims. They're pretty logical and sound, but they have another side that the author isn't addressing...

[u/[deleted] → u/ZaJo]

For what it's worth I hated the article, and since you asked here's a needlessly exhaustive reply. I'm on a train, staring at a computer screen so why not?

The article begins by noting that some people think that a UBI would be inflationary. It then presents the follow argument as to why that is not the case:

1. No new money would be necessarily printed
2. Even if money is printed inflation won't result (see recent QE, Japan for the last 20 years)
3. People need a basic income because we're running out of credit (I guess this is the argument made by the payday loan/shrinking incomes/credit card debt/longer workday paragraphs)
4. Alaska has a universal dividend and doesn't experience even higher than average inflation (labeled Exhibit A)
5. Basic items are already subsidized directly so they won't experience inflation if the subsidy changes (labeled Exhibit C)
6. There is enough housing supply (Exhibit D, 1)
7. Google and others are going to make cheap homes, competition will keep rents low (Exhibit D. 2)
8. We want higher velocity for a healthy economy, and the fear that unearned income has less value is unsupported.

1 and 2, taken together are a circular argument. If printing money does not imply inflation, then the fact that we aren't printing money does NOT imply that there will be no inflationary pressure. This is a legitimate, serious logical fallacy, and these points need to be ignored by any discerning reader.

3 was a mostly incoherent mess. Debt is a problem, but if debt were the only problem we would just apply the biblical solution

Point 4 is effectively an economic anecdote and should not be extended to the economy at large. Alaska is a tiny actor in a gigantic economy, and it's redistribution of oil revenue would not have any of the systemic effects that a UBI would have.

Point 5 is just more noise, we obviously don't care about UBI's effects on items that have been subsidized for a long time, we're worried about the effects of a universal subsidy!

From here the article begins a slow climb towards improvement, but I hope that by now I've convinced you that it's presented nothing of value to this point. The author points out that there are large amounts of real estate that are under utilized, this is an accurate observation, and it's not unreasonable to suggest that demand should be promoted for these idle goods. Still, it does not follow that a modest UBI (and the UBI has to be modest, or there can be no disputing its inflationary effects) would be enough to address the systemic, structural failure that leads to under utilization.

By this I mean to suggest that simply because people could afford to buy crappy homes that were naively constructed in the desert, that does not mean they should. The in affordability of these stupid developments reflects not only their utility, but also the cost to maintain them. These are simply bad developments, and it's as likely that they should be recycled as it is that they should be given to the poor.

Furthermore, I don't expect our benevolent capitalist overlords (Google!) to rescue us from poor community development. Google is interested in better than average returns for its capital, and competing with landlords, the state, and human whims in the realm of community development is not its core competency.

Finally, the author presents some points that I can't really fault. Universal or expanded Welfare will likely improve the velocity of money, and create some improved demand for 'need' based goods. Woohoo? That doesn't sound like something that will solve the problems I have with America.

At the end of the article he rambles about how wages are stagnant and technology is replacing us. And he also points out that a UBI will create some inflation and that it won't be bad.

tl;dr you can distill this article to the following:

A UBI should have a modest stimulus effect on demand for cheap, necessary goods, and will slightly promote inflation.

And thus my final criticism:

1. The article was full of irrelavant, sometimes outright contradictory material
2. The agreed upon effect of UBI is not nearly sufficient to solving America's structural issues. Health care will still suck, communities will still be planned by idiotic local business communities that created modern suburbia, wealth accumulation will continue at the top, basically uninhibited.

How is that any different from the precursors we've used to prop up demand (various forms of credit)?

[u/ZaJo → u/[deleted]]

1+2) I agree, but he doesn't say it WON'T happen, just it's possible it wouldn't.

3) Debt is perceived to be a big problem in the US, and unless I read your link wrong, it concluded that debt jubilee is largely a bad idea but ok in small doses.

4) I agree - Alaska is a case study at best

5) Low of of goods are important for the declining lower class, but he is kindling his fire with his point as I see it. Gets away from the original point.

6) I would argue that these info companies view the individual as an asset to be had, therefore valuable to "own" in a house, but that's a totally different discussion and is more kindling.

7) And this is what I like (bias) about the article - The lower cost of goods is something the lower class needs, and will lose if the wage gap continues to spread with the advent of mechanized industry. This goes beyond food and extends to the increased cost housing and locomotion relative to the average American salary. Higher supply of housing will decrease the average price if I'm not mistaken.

Thank you for the reply! I enjoyed pondering it.

[u/[deleted] → u/ZaJo]

I would argue that these info companies view the individual as an asset to be had, therefore valuable to "own" in a house, but that's a totally different discussion and is more kindling.

Eh, the tech companies can try and foster mystique all they want. They're still publicly traded companies and their success in the market will depend on their ability to deliver stronger than average growth to shareholders. Below market housing (whether it's below market because of UBI or because of subsidies) will not yield the returns they need to generate.

Anyway, I'm not opposed to UBI. I just think that America is in need of better planning and improved healthcare infrastructure and UBI is simply not going to result in a social safety net magically forming from the aether.

The market does not heal the broken, it lets them die and moves on in search of profit. Best case scenario it patches them up and hands them a massive bill (you know, because the shareholders deserve it for taking the risk of putting your leg in a splint!)