Economics

[Raul Duke]

Does anyone (I’m looking at you, Pimpski) have any thoughts on universal basic income?

Given my picture-book knowledge of economics, it seems to be a promising idea. By minimising benefits spending and giving money directly to citizens, it has potential to mitigate government waste and inefficiency, while maximising individual mobility and entrepreneurship.

What am I missing?

 

[brehme1989]

Free money is always a bad idea.

 

[firmino]

Does anyone (I’m looking at you, Pimpski) have any thoughts on universal basic income?

Given my picture-book knowledge of economics, it seems to be a promising idea. By minimising benefits spending and giving money directly to citizens, it has potential to mitigate government waste and inefficiency, while maximising individual mobility and entrepreneurship.

What am I missing?

you are missing that with universal basic income some employers could not take advantage of people desperate enough to work for any wage. blivious:

 

[Raul Duke]

Free money is always a bad idea.

Obviously careless government spending is a catastrophe. I’m not discussing extra spending, just replacing certain benefits and subsidies with a UBI.

 

[Pimpin]

Does anyone (I’m looking at you, Pimpski) have any thoughts on universal basic income?

Given my picture-book knowledge of economics, it seems to be a promising idea. By minimising benefits spending and giving money directly to citizens, it has potential to mitigate government waste and inefficiency, while maximising individual mobility and entrepreneurship.

What am I missing?

the jury is still out on it. Basically there's 4 ways one can spend money.

1. His own money on his own self (whereby he looks for the best value and the highest utility)
2. His own money on other people (whereby one looks for the best value but not necessarily highest utility)
3. Someone elses money on himself (whereby one does not care for value but for the highest utility)
4. Someone else's money is spent on a third party (whereby one does not care for value nor utility)

Governmental spending by defaulf falls on the fourth one, which is why almost all governmental projects are colossal failures. There are a few preconditions (underlying conditions) for the third one to work. It can be in form of vouchers ( say instead of free school, a voucher for school.. or for food, which has been the norm for years). The other form is like a bridge money between structural changes in the economy, the time that is needed to get a new skill and get a job. The most radical one is the universal basic income. Basically the underlying argument is that instead of having this colossal public sector, why not just transfer money for everything. Like everything in economics it could work (through not accepting dog shit jobs and instead focusing on inventing or better qualified jobs) but it could also backfire spectacularly if people had no greed and just became couch potatoes. HOWEVER, this is where the plot twist comes/

In the future, with ai doing all work, I think we will have universal basic income, and we will let ai come up with creative ways to entertain us and get our money, until they get sick of it revolt and push the human race to extinction, or they just enslave us.

 

[Fapuccino]

Money is just an abstract number. What matters is purchasing power i.e. the amount of shit you can buy. 1 penny could buy you a loaf of bread 100 years ago, and now it's useless. UBI will have disastrous consequences since the inflation it will cause will destroy purchasing power across the board. Capitalism can't handle these levels of instability.

Capitalism is the game of 20th century. Monetary systems will be rendered obsolete because of AI's pace of growth. I don't quite think some grasp how disastrously fast AI will ramp up. On an exponential graph like this, we are the 7-8 and don't realize the exponential bump that is about to come because of past history.

Spoiler

Watch in 4-5 years you're going to have another dot com-like bubble but because of AI. Everyone and their mother will have some "deep learning", "machine learning", "artificial intelligence" company.

 

[Wobblz]

We are nowhere near AGI, we have no idea really how the brain works let alone replicating it in a machine. Don't get fooled by the seeming "advance" of AI, the fact that we can throw massive amounts of data into a pit and then mystically receive some very narrow use software isn't indicative of how we're on an exponential path to the "singularity" where AI will solve all our problems.

 

[brehme1989]

Universal Basic Income is a bad idea. Anything that involves state donations to people is a bad idea. It just promotes a culture of complacency and dependancy.

With that being said, no one should be against state (monetary) provision for those who really need it.

A state should:
- Cover medical and hospital expenses for anyone who cannot afford to. That does not equate to 'universal health care' btw. I'm in the middle in that regard as it has been proven very inefficient in every country it appears, but when 90% of the population cannot afford these stuff it is considered a necessity. It's one of the few worthwhile destinations of tax money, but as it is inefficient, it requires amends.

- Provide temporary housing for those who cannot afford it. That does not mean free homes, but a state can work on deals with private contractors to build land so that they rent it out for these people. Could be a 30 year deal, private contractor keeps the land, is not taxed on it and then he can tear it apart and build something new, sell it to the tenants, sell it piece by piece somewhere and generally do whatever they want with it. But that x year deal will provide a steady cash flow to cover the expenses of the project + profit. It also helps the spending power of the citizens as it helps limit housing prices. It's not like this will affect the entire country, this would probably apply for 1 in 100-5,000 families, depending on location and situation.

- Promote employment of unskilled labour. This is a main economic issue that is left untackled in the European Union in particular. The term of homelessness is not defined throughout the EU so statistics are misleading, but there's a significant number, especially in large cities. These people cannot find jobs in urban centers as those are reserved for skilled personnel and the unskilled ones usually go to migrants because they are the only ones willing to do them. The governments in Europe just provide some shelter and an ocassional meal for these people, who often refuse it and prefer to stick to the streets and get whatever scraps people give them out of pity/generosity/charity. It would be more advisable to seek for agreements with private companies that need manual, unskilled labour, to train these people for those "minimum wage" jobs whilst the state provides housing as described in the point above.

- of course there are more things that a state should do, but let's keep it simple and basic around some of the economy stuff.

There's no need to hand away money. Other than dependency and complacency, this may cause inflation in the near future which will lead to catastrophic consequences for the whole economy.

The main political obstacle in achieving universal satisfaction, which imo is the most important economic goal, is that there's a bunch of people promising free money and free stuff. It's never free, but no one really cares as long as it says free on the package. And that wins votes, which in turn means someone is getting the political power to enforce an economic policy that leads to bad results that affect everyone. And then we end up talking about how the Economy is screwing everyone and mostly the little guy...

So long story short, free money is bad. The promise of its existence makes it and the way the world is run just makes it harder for economic theory to become practice.

 

[dax21]

I will keep my opinion about UBI to myself but I just want to say that universal health care should be something that every modern, capable country should strive towards and I fail to see logical reasoning why would anyone be against it.

I might come from a biased angle because eastern european medical facilities are ran by butchers but the principle stands.

 

[brehme1989]

The only reason I'm not totally in favour with it, in practice of course because I agree with it in theory, is because whenever government is involved in anything money related, it is at least, inefficient.

I don't trust the government to know what the best medicine is, who the most efficient importer of these medicine and equipment is, who the right doctors are etc. I don't want my doctor to be a public servant, I want someone who can manage on his own rather than typically use an acquintance at a political party to gain a job at a hospital near his place and so on.

I'd even say that about schools. Everyone should go to school, but I don't want to pay for the teachers. Let private institutions pay their staff and if they charge more than children can afford then they can use their endowment to finance that themselves or in extreme cases, the government provides for that necessity. I'm not okay with paying every teacher out there but I'm more than happy to contribute to a child whose family cannot afford basic education. There's a huge difference.

I'm completely against a standardised school system and I don't want to pay for something I completely disagree with. At the end of the day, that's exactly what public spending is. Spending other people's money for things they usually do not need, frequently for the needs of a minority. And the rate of inflowutflow towards the government is not efficient. Had the governments been using tax money efficiently, I'd be more in favor of them doing all that spending and heck, I'd like to see them take initiatives as well. But I do not trust governments to know what's best for the people. Decentralization is key and less tax is for the best.

You may ask where you draw the line and you'd be right. If I keep ranting I may end up privatizing the whole world. But there obviously is a line which there's no need to discuss as we'll be derailed and go full on into politics, but let's not forget that no one ever privatized everything so we do not know how that works, but we have seen everything be nationalized and we have seen the terrible results it brought, yet we have more people advocating nationalizations than privatizations.

Let's just leave it at the fact that a government cannot put in practice even the most basic economic theories. We have some nice examples of Singapore, Estonia and a few others where they pretty much let people do whatever they wanted and I think it's fair to say that their citizens are now enjoying those liberties.

 

[dax21]

That's a well presented opinion and I agree with most of what you said, especially school systems. However I don't necessarily see how would that kind of system affect the quality of medical care compared to current individual standards, plus it definitely wouldn't put private facilities out of business. Everyone will always choose privatized higher-quality care if they can afford it, universal free health care wouldn't affect that.

And while reality has more than fair share of it, it's kind of fundamentally moot to discuss idealistic systems to begin with if we go into it with the "government is bad and shit at allocating resources" mentality.

 

[Pimpin]

these claims that UBI will lead to inflation are complete nonsense, i ll write in evening why a tad more in detail

 

[brehme1989]

What I mean is that government should not have its own institutions. It should regulate them only. As that applies with monetary institutions, it should also apply with healthcare and education. Government should never be in a competition against private institutions. Pimpin's 4 points express this very well as this falls into #4. But it could regulate it so that people who cannot afford these basic need services can achieve it by a subsidy. Not an ongoing one as it is costly and unneccesary, but as an 'on demand' service.

e.g If 5 children in every 100 need full funding for their basic education then the government shouldn't be forced to create a school for those 5 children and force another 95 to join it. It should just make it possible for those 5 children to follow the rest.
Same applies for doctors and hospitals.


This may sound unfair on paper, but is it? You're already paying for the schools, but instead of paying for 1 school, you're indirectly paying for all of them! And your kid may even go to a private institution that never received any of those services. Communal solidarity is good, but at least do it right. This could come as a sort of council tax. You want to live in this neighbourhood, then you will have to ensure that everyone else in this council gets basic needs so that neighbourhoods do not develop into poor ghettos. It helps because 1) you still do the trick, send the kid to school or the doctor 2) you give incentive to someone to want to pay for someone else as it will affect your life in the medium and long term. a) Your land will devalue if your council has low employment, homeless people, teen street gangs and all that and b) you will be feel rather unsafe.

Government's method is to follow the lowest denominator. This usually drains the economy. Instead there should be a quest to improve everything instead of dragging everyone to the bottom. School is this way, you get randomly selected using your area code to be part of a classroom with people of differing abilities and learning styles and at the end of the day you have a factory of similar people instead of thinking individuals that know what they are good at and will look to develop that.

Taxation and all these benefits need to be incentivized in a way that people want to pay for them despite not gaining from the services. Universal healthcare is even trickier, but everytime someone sees someone sick get some treatment, or not, they will always develop a need to have this kind of security.

There is no place on earth where the Economy thrived with a strong government involvement. When the government tells you that you have to be taxed on an already taxed income, you just stop spending or you move to other places with less interfering governments. That's 21st century unwritten law of humanity and the EU is a great example of how everyone moves away from heavily taxed countries to less taxed countries. At the same time, we see a flux of people who are not willing to work but want the perks that some of these governments are handing out, leading to more complacency and a breed of generations that don't really want to work and come to their senses in their early 30s when they realize that they should have had families, a home and a steady income flow from their employment by now.

these claims that UBI will lead to inflation are complete nonsense, i ll write in evening why a tad more in detail

I didn't say UBI will lead to inflation, I said handing out money will. There is a correlation of course, but I was speaking in general and as a consequence of such a policy over generations. People would expect government to bail them out all the time and if that's the policy, they will print more money to keep it going leading to inflation. Not because it's an UBI side effect but because it's normal bad government procedure.

I'm curious to see your reply on this of course.

 

[Adriano@10]

Well how much inflation did we see since 2008? I m pretty sure after the crisis every major economy threw more money in the markets then a ubi ever would jet inflation remained relatively low especially when compared to the amount of money in circulation.

On top of that it s not like a ubi would take away the power to influence interest rates by the central banks. So saving rates and so on can still be manipulated or influenced by the central banks through interest rates.
Also depending on how an UBI would be paid it most likely would only influence M1, M2 and M3 would not be affected by a UBI so again the central banks would have enough play room to not have a inflation problem.

The role of the central bank would slightly change but to assume that it s instruments would not be effective anymore to fight inflation is very weird in my books.


Anyways to me it does not make sense to argue that a UBI would lead to huge inflation we basically gave free money to corporations since the last crisis and it had very little effect on inflation i fail to see how it would be different if the "free" money goes to citensens instead of corporation how we d have an inflation problem especially if the amount of money is less.

 

[brehme1989]

Fair point.

But a corporation is not a consumer. Those banks just continued with their operations to a large extent. What happens is that bond prices go down and all that shit that normal people don't care about (but they should, if they understood its impact).

If I have a shop and I see more people able to afford my products and there's a demand, I will increase my prices, no? That's what leads to real life inflation, not policy makers. Because a policy maker adjusting IR to inflation means that everyone would or should react to it. But if prices just go up because there's more money, prices will just go up. The policy will then just try to tackle this.

Policy does not dictate housing prices, supply and demand does. Same way the price of a sandwich is not affected by CB policy. Those are mostly affected indirectly or directly by other government policies such as taxation (VAT) or trade agreements (eg tariffs and quotas) and I think it's rare to see a Central Bank react with an Interest Rate policy just in time to avoid a recession or a negative outcome for the general public due to policy.

It's a general rule that the more of something becomes available the less value it has.

Maybe it's just me, but this UBI thing is just another welfare trap wrapped around something shiny.

P.S: How do you define how much UBI will be? What happens when a family on UBI earns more net cash than a working family?

 

[Raul Duke]

P.S: How do you define how much UBI will be? What happens when a family on UBI earns more net cash than a working family?

There’s a lot I’ll get around to commenting at a less hellish hour, but the whole point of UBI is that millionaires and the unemployed would get the same amount, hence the universal.

 

[brehme1989]

There’s a lot I’ll get around to commenting at a less hellish hour, but the whole point of UBI is that millionaires and the unemployed would get the same amount, hence the universal.

I know that, but most people who want to implement it say that it is going to be given to those who wish to have it, not everyone. If it is handed over to everyone, we're back to the inflation problem. No matter what supporters of this say, there is a likelihood of increased inflation. Any research made on this has proven that there is inflation. Might be marginal, but it's still there. The research is made on a small sample, we cannot ignore the possibility of this extrapolating if we apply it universally. Which is the most probable outcome.

And that begs the question. Is this going to be a taxable income? Say this amount pushes me over to a higher tax income ladder, do I really have an incentive to go for it?

 

[Adriano@10]

Fair point.

But a corporation is not a consumer. Those banks just continued with their operations to a large extent. What happens is that bond prices go down and all that shit that normal people don't care about (but they should, if they understood its impact).

If I have a shop and I see more people able to afford my products and there's a demand, I will increase my prices, no? That's what leads to real life inflation, not policy makers. Because a policy maker adjusting IR to inflation means that everyone would or should react to it. But if prices just go up because there's more money, prices will just go up. The policy will then just try to tackle this.

Policy does not dictate housing prices, supply and demand does. Same way the price of a sandwich is not affected by CB policy. Those are mostly affected indirectly or directly by other government policies such as taxation (VAT) or trade agreements (eg tariffs and quotas) and I think it's rare to see a Central Bank react with an Interest Rate policy just in time to avoid a recession or a negative outcome for the general public due to policy.

It's a general rule that the more of something becomes available the less value it has.

Maybe it's just me, but this UBI thing is just another welfare trap wrapped around something shiny.

P.S: How do you define how much UBI will be? What happens when a family on UBI earns more net cash than a working family?

Not sure but in most western economics there something like a price watchdog which should hinder price increase out of nowhere.
Now i m not saying that you are wrong cause in theory what you are saying is absolutely true i just dont think IRL it s effects will be as big as they claim they could be in Theory.

Look at how many more rounds of QE were needed to get the economy back on track than what was predicted in models and look how little inflation came of the massive money we pumped into markets and economies since the last crisis.
SOme might even argue that giving the money directly to the consumers has a better effect on the economy as in it will lead to a bigger growth than simply doing it over low interest rates.

I mean look at todays stock market it is so clearly overinflated because of the cheap money that is around that even a expected rate hick sent market into a huge downward trend last october.

Also people tend to neglect that with a UBI many other subventions would not be provided by the government any more so the cost quite often gets overestimated or lets say the amount of additional money that will be floated to the markets.

Anyways my point is not that it could or would not lead to inflation, my point is that the inflation problem imho is way overstated with some economists even saying that the whole effect of the extra 1000$ would be gone after a couple of years due to inflation and thats BS imho.

ALso to really discuss this we d have to dig way deeper into actual figures and i dont really have the motivation to do so lets see how much effort pimp puts in.

 

[Pimpin]

Im so drunk yet so tempted to explain how we are in the biggest credit expansion in the history of mankind and we still have low to non existent inflation.

also alot of you have a misunderstanding of what UBI is and when it should be available

 

[brehme1989]

I'm really anticipating your input here. If you need more drinks just say the word

But just wanted to add to the inflation question that everything that these big banks touch, directly or indirectly, gets inflated.

You have inflated housing/property prices, inflated share prices and so on. They do not affect the CPI of course to a large extent because they are not spending the excess in consumer products.
So yeah, I really wanna see how inflation is not going to be triggered by "free money" given to everyone. It seems to me like "increasing the minimum wage" will help the economy argumentation.