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posted by martyb on Thursday January 20, @01:12AM   Printer-friendly
from the of-course-nobody-ever-gets-bored dept.

Study: Basic income would not reduce people's willingness to work:

A basic income would not necessarily mean that people would work less. This is the conclusion of a series of behavioral experiments by cognitive psychologist Fenna Poletiek, social psychologist Erik de Kwaadsteniet and cognitive psychologist Bastiaan Vuyk. They also found indications that people with a basic income are more likely to find a job that suits them better.

The psychologists received a grant from the FNV union to research the behavioral effects of a basic income. They simulated the reward structure of different forms of social security in an experiment. "We got people to do a task on a computer," says De Kwaadsteniet. "In multiple rounds, which represented the months they had to work, they did a boring task in which they had to put points on a bar. The more of these they did, the more money they earned."

The psychologists researched three different conditions: no social security, a conditional benefits system and an unconditional basic income. De Kwaadsteniet: "In the condition without social security, the test participants didn't receive a basic sum. In the benefits condition they received a basic sum, which they lost as soon as they started working. In the basic income condition they received the same basic sum but didn't lose this when they started work."

The basic income did not cause a reduction in the participants' willingness to work and efforts, say the psychologists. Nor did their salary expectations increase. "In the discussion on a basic income, it's sometimes said that people will sit around doing nothing if you give them free money," says Poletiek, who saw no indications of such a behavioral effect.

What would you do if you were to receive a basic income?


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  • (Score: 1, Insightful) by Anonymous Coward on Thursday January 20, @02:49AM (21 children)

    by Anonymous Coward on Thursday January 20, @02:49AM (#1214038)

    That's ....not capitalism.

    Capitalism is based in individual control of capital. "Surplus" "value" (depending on definition) gets created and spread around by all sorts of people in all sorts of systems. That is not unique to, or a particularly defining criterion of capitalism.

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  • (Score: 4, Informative) by Thexalon on Thursday January 20, @04:14AM (20 children)

    by Thexalon (636) on Thursday January 20, @04:14AM (#1214059)

    GP's assessment of the situation is very much part of the description of capitalism put forward by the guy who came up with the terms "capitalism" and "surplus value".

    His question was pretty straightforward: Imagine a widget-making business where you have an owner who hires widget makers for $10 an hour. Each widget-maker uses $15 worth of materials and depreciation of equipment each hour, and those widgets wholesale for $75. To simplify things, we'll assume any taxes, transportation costs, and sales and marketing expenses get added in on top of the $75. When the transaction is completed, the person / organization paying the widget maker and providing the materials makes a tidy $50, but where did that $50 come from and why is it going to people who didn't make any widgets, any parts of widgets, or any of the widget-making tools currently in use?

    His conclusion, right or wrong, was that there's only one place that $50 worth of value could have come from: The work of the widget-maker. And thus he labelled the $50 that worker's "surplus value". The owner who collected the $50 in profit, gets it because they controlled the widget-making factory and the equipment therein, which he termed "capital", and thus making the factory owner a "capitalist", and this system of making things "capitalism".

    And that's the very short and over-simplified summary of the first volume of Karl Marx's "Capital", which coined all those terms when it came out in the 1870's. (Volumes 2 and 3 focus more on the stuff I just left out to simplify things, like transportation, retail, and technological developments.) For a more modern take, Thomas Piketty's Capital in the 21st Century [wikipedia.org] is motivated by many of the same issues Marx was observing during the Industrial Revolution.

    --
    Alcohol makes the world go round ... and round and round.
    • (Score: 2) by coolgopher on Thursday January 20, @06:43AM (17 children)

      by coolgopher (1157) Subscriber Badge on Thursday January 20, @06:43AM (#1214086)

      And on a similar vein - the one thing I have yet to see any single UBI proponent address is why such a thing would simply not lead to an inflation by $UBI amount (spread across the essentials). The market can obviously bear it, so isn't it inevitable that it will be forced to do so?

      • (Score: 5, Interesting) by Myfyr on Thursday January 20, @08:56AM (3 children)

        by Myfyr (3654) on Thursday January 20, @08:56AM (#1214098)

        I am not an economist, so this might all be wrong, but this is my layman's understanding. Also, I'm a bit out of it due to illness, so it's probably not well written, and a bit all over the place. So take it with a massive grain of salt. :P

        Prices are determined by supply and demand, and set so as to maximise profits. The reason sellers don't just rise prices right now is that, were they to do so, a competitor would be able to undercut them and steal market share. Prices are set to the highest point they can be, without losing more in market share losses than you would gain due to the price increase. The only time things don't work this way (according to traditional economic theory) is market failures such as monopolies or market collusion, which is why those things are (in theory, if not in practice) regulated.

        So, if people suddenly have more to spend, there is no actual drive there for a change in market prices. Any price rise would result in exactly the same outcome: loss of market share to competitors, who can still afford to not increase prices (assuming no market collusion, and no increase in supply costs).

        To put it another way, the fear that UBI will cause inflation is driven by the assumption that the thing that stops a seller increasing prices is concern that a price increase will cause people to choose not to buy a product, and thus prices can be safely increased if the buyer has more disposable income. In actuality, the thing that stops a seller increasing prices is concern that a price increase will cause people to choose to buy the product _somewhere else_. If all sellers *ahem* "coincidentally" decide to raise their prices, that theoretically just provides space for a new competitor to enter the market at the vacated price point and take all their customers. In short, customers having more money doesn't insulate you from competitors.

        However, just talking about the price of essentials, there are some provisos. Stable prices assumes people are currently buying (i.e. can afford) as much of the "essentials" as they need/want. If the increase in income results in people buying _more_ essentials then demand can outstrip supply, which depletes inventories, driving up input costs and resulting in price increases, at least temporarily. Whether prices settle at a higher point, how high that point is, and how long it takes to settle, depends on the elasticity of the underlying supply inputs. See, for example, the current semi-conductor situation.

        So, looking at the current situation in the US, a UBI might cause a short term increase in prices as more people are able to actually afford to buy things like food, but this should level off as suppliers increase their inventories to keep up with the increased demand. I guess labor shortages (one of those possible supply elasticity problems) might throw a spanner in the works right now. Water shortages might also be a problem for increasing food supplies, I guess. I don't know how close to the margins the American food supply is running.
        In any case, there might be temporary prices increases as the economy grows to handle to the increased demand, but things should settle at a similar price level. Unless the market is unable to supply the increased demand, at which point you've got bigger problems.

        In general, inflation is traditionally considered to by driven primarily by an overall increase in the money supply i.e. creation of new money via QE etc, or a decrease in goods supply (usually as a result of a disaster of some sort) . Assuming it is funded by a redistribution of current government funding rather than QE, a UBI is not an increase in money supply, just a redistribution. This should have no impact on average pricing in a well functioning market.
        I have no idea how Modern Monetary Theory interacts with all this though. That's all currently above my head.

        • (Score: 0) by Anonymous Coward on Thursday January 20, @03:35PM

          by Anonymous Coward on Thursday January 20, @03:35PM (#1214184)

          Kinda sucks that all the local independent grocery stores had to shut down 'cause of pandemic restrictions and all of the big chain stores within driving distance are owned by Albertsons.

        • (Score: 4, Interesting) by JoeMerchant on Thursday January 20, @08:23PM

          by JoeMerchant (3937) on Thursday January 20, @08:23PM (#1214324)

          Like most global economic models: it depends. It depends on so many real world variables, with so many feedback loops, that simplified models break down when you make massive changes. This, more than anything, I believe is holding back UBI. It's a sufficiently large and fundamental shift that it makes the future unpredictable. Anybody who says they "know exactly" what will happen is either intentionally lying (usually to drive an agenda) or wildly overconfident (lying to themselves).

          I feel that the best way to get to UBI is to roll it out incrementally. We did a little of this during the pandemic, but you can't draw much - if any - conclusions from that due to the radical differences between pandemic stimulus and true reliable UBI.

          Start at something like $100 per month per person and increase it slowly. Re-evaluate annually, but if it's really going to be UBI it has to be RELIABLE, so changes should also be small, incremental, non-shocking. When we get to the point that people have basic rent and food in low cost areas covered by UBI, that may be the point at which to stop.

          Personally, I think the reliable availability of $400 to $600 per month per person might just lead to a certain amount of deflation: market prices dropping to provide affordable, yet still profitable, services to the known supply of people who have at least UBI. As things are today people tend to either have plenty of money, or not nearly enough - often zero. You can't make profit serving people who have nothing to give, but you can make profit providing safe room and board at $10 per night per person.

          --
          Україна не входить до складу Росії.
        • (Score: 0) by Anonymous Coward on Friday January 21, @04:51PM

          by Anonymous Coward on Friday January 21, @04:51PM (#1214527)

          I am not an economist, so this might all be wrong, but this is my layman's understanding. Also, I'm a bit out of it due to illness, so it's probably not well written, and a bit all over the place. So take it with a massive grain of salt. :P

          Salt taken. Take your fluids and vitamins.

          Prices are determined by supply and demand, and set so as to maximise profits. The reason sellers don't just rise prices right now is that, were they to do so, a competitor would be able to undercut them and steal market share. Prices are set to the highest point they can be, without losing more in market share losses than you would gain due to the price increase. The only time things don't work this way (according to traditional economic theory) is market failures such as monopolies or market collusion, which is why those things are (in theory, if not in practice) regulated.

          Prices are determined by supply and demand, set to ... ok, slow down because you're already in some deep water. Prices are determined by supply and demand, but that includes the supply and demand for money as opposed to alternative means of payment ("I'll trade you this trailer of alfalfa pellets for that-there broken-down tractor and six bricks of 30-30.") Also, the goal isn't necessarily to maximise profits as such. It's to optimise an intended outcome, and when the sole measure of that outcome is cash on the barrelhead, so be it. But it's not the only measure. There are many examples of that being subverted, from Veblen goods, to loss leaders, or even people buying jewelry so that they could walk onto an airplane wearing it, and then resell it at a loss some other place they'd rather be. The outcome of a trade can be a trader in a marketplace not wanting to pack so much crap back up for the trip home. Price theory is not that simple, and hasn't been for a long time.

          So, if people suddenly have more to spend, there is no actual drive there for a change in market prices. Any price rise would result in exactly the same outcome: loss of market share to competitors, who can still afford to not increase prices (assuming no market collusion, and no increase in supply costs).

          Wrong. Flatly wrong. If people have more to spend any transaction that is based in competition between buyers (ever been involved in real estate? Or auctions?) immediately swings the price of settlement higher simply because of the altered supply/demand dynamic of your currency. Given that this underpins everything from commodity markets to the liquidity preference element of investment decisions in less volatile securities, a cash dump is a massively disruptive event.

          To put it another way, the fear that UBI will cause inflation is driven by the assumption that the thing that stops a seller increasing prices is concern that a price increase will cause people to choose not to buy a product, and thus prices can be safely increased if the buyer has more disposable income. In actuality, the thing that stops a seller increasing prices is concern that a price increase will cause people to choose to buy the product _somewhere else_. If all sellers *ahem* "coincidentally" decide to raise their prices, that theoretically just provides space for a new competitor to enter the market at the vacated price point and take all their customers. In short, customers having more money doesn't insulate you from competitors.

          You're already off the rails because you're assuming a perfect market with uniform preferences and customers as pure price takers. Even in "traditional economic theory" that isn't true.

          However, just talking about the price of essentials, there are some provisos. Stable prices assumes people are currently buying (i.e. can afford) as much of the "essentials" as they need/want. If the increase in income results in people buying _more_ essentials then demand can outstrip supply, which depletes inventories, driving up input costs and resulting in price increases, at least temporarily. Whether prices settle at a higher point, how high that point is, and how long it takes to settle, depends on the elasticity of the underlying supply inputs. See, for example, the current semi-conductor situation.

          Sure, that's a factor as well. Increases in virtual liquid assets supporting trade will increase perceived demand, thereby increasing strain on the supply, thus boosting supply while also boosting price. Standard price/demand analysis.

          So, looking at the current situation in the US, a UBI might cause a short term increase in prices as more people are able to actually afford to buy things like food, but this should level off as suppliers increase their inventories to keep up with the increased demand. I guess labor shortages (one of those possible supply elasticity problems) might throw a spanner in the works right now. Water shortages might also be a problem for increasing food supplies, I guess. I don't know how close to the margins the American food supply is running.

          Food demand isn't really that elastic. Some luxury items and prepared foods will get boosts over raw ingredients and bulk staples, but in the USA the general food intake is unlikely to change vastly. UBI would however be massively destabilising in the long run as well, because while the price of racing yachts wouldn't be immediately affected, prices of breadline necessities would jump. The knock-on effect that would affect everything else would be the availability of labour, and the price of same. This depends on the exact implementation of the UBI. For example, if the UBI is just a flat wad of cash handed to all comers, but the minimum wage is repealed (a common suggesting among UBI fans) the net price of articles with high labour inputs may well drop in comparison to the economy at large because now people might take up jobs for which the employers are paying much less than they used to. If the UBI (as is commonly suggested) covers medical expenses as well, the benefits side of payroll could also drop like a rock. This would actually end up with UBI as a massive subsidy to employers. If that's not the goal (which to many UBI proponents it's not) then the common answer is to means test it, and basically have it as a bottom-of-the-barrel all-in-one social benefit scheme which does nothing for employmers, but raises demand for bottom-of-the-market living supplies, thereby pretty much guaranteeing hefty inflation because the UBI, to be meaningful, must keep pace with price shifts.

          So it really depends on what you mean by a UBI.

          In any case, there might be temporary prices increases as the economy grows to handle to the increased demand, but things should settle at a similar price level. Unless the market is unable to supply the increased demand, at which point you've got bigger problems.

          If your price increases are temporary - then UBI adjusts to take them into account - then there are temporary price increases - for which UBI adjusts - resulting in temporary price increases - and .... suddenly, it's not temporary any more.

          And as for bigger problems, you should probably start with other considerations as well, such as inconsistencies in the cost of living across the nation (or are the impoverished of Kansas getting the same number of dollars as the impoverished of San Francisco?) and what the UBI commitment translates to in the government's ability to pay (an annual commitment counted in trillions, if the UBI is supposed to actually support people above starvation).

          In general, inflation is traditionally considered to by driven primarily by an overall increase in the money supply i.e. creation of new money via QE etc, or a decrease in goods supply (usually as a result of a disaster of some sort) . Assuming it is funded by a redistribution of current government funding rather than QE, a UBI is not an increase in money supply, just a redistribution. This should have no impact on average pricing in a well functioning market.

          Wrong. Money supply is driven by factors including things that the government doesn't control at all, such as the influence of public sentiment on the velocity of money. Money supply is affected by things such as investment opportunities, regulatory changes and liquidity preference. Money supply is affected by things like employment rates. Aside from the fact that a redistribution of current funding won't pay for a UBI (who are we kidding, the government is currently running way over budget, and printing money to keep up), the simple redistribution of cash involved in implementing a UBI will have massive effects on prices.

          I have no idea how Modern Monetary Theory interacts with all this though. That's all currently above my head.

          MMT starts with a handicap, in that it's basically a sort of wishful thinking list. In their world, money has value because government says so! (Weimar Germany, Venezuela and Zimbabwe don't count because ... reasons ...). In their world the government moneypresses have no functional relationship to government revenue streams; they're entirely disconnected magical moneystreams and moneypits. Want more money? Print more money! There's no downside! Um, but if you want to reduce the money supply to control prices or something, then you raise taxes and issue bonds, which will never run out of buyers because the bottom never drops out of the government bond market (right, Zimbabwe?), and you'll always find more sucke- I mean, buyers. And because people never, ever find ways of moving their assets away from heavy tax regimes.

          Your understanding is incomplete, but not as incoherent as MMT. Adding sawdust to a half-made cake batter won't make a better cake.

      • (Score: 0) by Anonymous Coward on Friday January 21, @10:59AM (12 children)

        by Anonymous Coward on Friday January 21, @10:59AM (#1214481)

        You might look into the concept called "MMT". It has a sort of solution to this inflation concern. To use an analogy, imagine there is a source of water going into a bath tub and a drain taking the water out of the bath tub. The relative level of water in the tub is the supply of money, while newly printed dollars are the source of water and the drain is taxes. MMT suggests that the solution to making UBI not inflation is by making the UBI numbers "tax neutral". Since the number of dollars is not going up, someone will be spending less on goods relative to others who get extra income via UBI who can now spend more on goods. Now I think you'll note a possible economic flaw, depending on implementation.

        The flaw is who is being taxed relative to the level of consumption they have. Let us imagine there are 525 boxes of cereal produced in the world. Pre UBI there are 95 poor men and 5 rich men who consume those boxes in some unit of time. The rich buy 10 boxes each (50 total) and the poor buy 5 boxes each (475 total). Now UBI exists and the rich are taxed, but they don't feel that much poorer, as they have enough wealth to buy 8 boxes of cereal each (40 total). At the same time the manufacturer can't produce as much because a small reduction of workers, reducing output by 10 boxes. Now the problem is that the poor have no extra boxes, while they have additional money split amongst themselves. So a price war will occur, even though the taxes made the overall amount of cash in the system level. The reason is that the rich do not consume relative to their wealth, the rich invest. When you tax the rich, you may reduce the value of the investments as well as the return, but the amount of income they make on said investments will not change enough to significantly impact consumption of basics like food. The poor who just want to produce art won't consume more basics per-se, but the working poor will expect that they should be able to afford more now that they have sweet UBI income which exceeds the extra taxes which hit the rich more than the poor (e.g. a progressive tax).

        You don't need to assume they want more cereal, but imagine moving from mac and cheese to hamburger. The amount of mac consumption may fall, at the expensive of the beef. However, beef costs 10x more to produce (in a energy sense, not money) per calorie relative to the mac. Meaning in a finite planet, you have more demand for something that we can only produce so much of in a given timeframe. This isn't a labor question but rather a resource question. Or take electric cars, while these are world wide numbers, to get everyone to move to electric cars would take 706 years of current mining speed for the lithium for the batteries (per Massif Capital). If you push demand for these cars up just a bit with UBI the demand could destroy the supply and force prices to go up. In effect UBI will expose places where "get all you want" turns out to be "we are just barely keeping up".

        Forgive me for going a little off topic, but I think you'll find it insightful. Over time, if the UBI was done gradually, we would see more production to take on the extra demand and the poor would also slowly become more middle class and also start investing. As more folks become middle class, the tax base on the UBI would increase. In effect, the UBI would be a transfer between the relatively rich-experienced-old and the poor-ignorant-young and it could be a stable system. This was done in the past via governments paying for college, etc. as college increased long term taxes and those folks would then pay taxes for the next generation to become educated. This can be a stable system if it is built to handle the flows. You can see left-leaning critics of this change over pretty well everywhere, but I think there is a more interesting answer beyond the rich hate the poor. UBI style systems even got the approval of Milton Freeman a rather right leaning economist. Admittedly he wanted a job attached, but near enough for my purpose of showing this isn't just a leftist idea. The fact we don't continue to seriously subsidize education anymore suggests the rich-educated no longer believe it is worth while to subsidizing the poor-ignorant to get educated. One market based reason is that we just don't need that many educated people. You might check out David Graeber's work on BS jobs for more on that. You might also check out https://www.wired.com/2000/04/joy-2/. [wired.com] Lastly, to give some credit to the idea, consider real (inflation adjusted) GDP growth from 1930 to 1950 (e.g. During the great depression) vs 1998 to 2018. In the 30-50s we saw real GDP growth at 4.13%. Compare that to 98-18s real GDP growth of 2.19%. Sure the numbers could be off as I did the calculations myself, so feel free to check them, but a 2% drop in growth means the long term value someone provides is dropping. If the trend continues, eventually we'll have no growth. UBI will just be wealth transfers, with all business being zero-sum games. The closer to zero sum you get, the less people are interested in taking care of each other. While there are other, more cynical answers like if the uneducated are too ignorant to know how the game is setup, the elders could "cheat" by taking the tax breaks while leaving their kids with nothing but debt. The rich elders who would have otherwise been taxed might be motivated to do that just so they could keep more and give that to their children. This gets into ageist politics rather than economics, so I'll stop here.

        - JCD

        • (Score: 1, Interesting) by Anonymous Coward on Friday January 21, @07:32PM (11 children)

          by Anonymous Coward on Friday January 21, @07:32PM (#1214576)

          You might look into the concept called "MMT". It has a sort of solution to this inflation concern. To use an analogy, imagine there is a source of water going into a bath tub and a drain taking the water out of the bath tub. The relative level of water in the tub is the supply of money, while newly printed dollars are the source of water and the drain is taxes. MMT suggests that the solution to making UBI not inflation is by making the UBI numbers "tax neutral". Since the number of dollars is not going up, someone will be spending less on goods relative to others who get extra income via UBI who can now spend more on goods. Now I think you'll note a possible economic flaw, depending on implementation.

          There are some really serious hidden assumptions that screw this up. For example, the notional measure of MMT's purpose is to provide full employment. But what does that involve? Everybody has a job? That's one definition. Everybody who wants a job, has a job? That's another definition. Everybody who wants a specific job has that job, even if there are unemployed people who would totally take other jobs, if they were available? That's yet another definition. Yet, however you slice it, the idea is that MMT would boost economic activity in the service of employment of the nation's labour. Unfortunately, we have a different problem if you try to balance the money supply against inflationary pressures. If you want to suck that amount of money back out of the economy, you have to tax or borrow money from the economy, thereby reducing the money supply.

          This turns into a whole mess. You're either boosting the money supply, opening the inflationary pressures, or you're not - in which case your best argument for boosting employment is some kind of redistribution that will specifically favour employment over other concerns. This sounds perfect! Until you realise that your multiplier effect on the money supply owing to employment means more inflationary pressures, which means you have to take it out .... basically, you end up with a monetary see-saw that you're trying to balance both against domestic sentiment and external economic shocks. It also ends up ignoring that there are factors to the value of cash money that have no bearing on the government's wishlist. For example, the value of cash is strictly linked to public faith in the currency, and future value thereof. If that faith diminishes (owing to, for example, a supply shock) then you can actually have stagflation, regardless of how much the central bankers cry and wring their hands.

          Another factor is that the UBI numbers are so massively huge, even to drag people uniformly out of basic poverty, that they dwarf the government budgets of most countries existing in the world right now. Even allowing for different costs of living, tax numbers would have to rise meteorically in pretty much any country in the world to actually cover this. USA doesn't actually even cover its budget with taxes right now - you can make a case that they issue bonds for the rest, but it's still inflationary because they print (virtual) money to cover those bonds.

          The flaw is who is being taxed relative to the level of consumption they have. Let us imagine there are 525 boxes of cereal produced in the world. Pre UBI there are 95 poor men and 5 rich men who consume those boxes in some unit of time. The rich buy 10 boxes each (50 total) and the poor buy 5 boxes each (475 total). Now UBI exists and the rich are taxed, but they don't feel that much poorer, as they have enough wealth to buy 8 boxes of cereal each (40 total). At the same time the manufacturer can't produce as much because a small reduction of workers, reducing output by 10 boxes. Now the problem is that the poor have no extra boxes, while they have additional money split amongst themselves. So a price war will occur, even though the taxes made the overall amount of cash in the system level. The reason is that the rich do not consume relative to their wealth, the rich invest. When you tax the rich, you may reduce the value of the investments as well as the return, but the amount of income they make on said investments will not change enough to significantly impact consumption of basics like food. The poor who just want to produce art won't consume more basics per-se, but the working poor will expect that they should be able to afford more now that they have sweet UBI income which exceeds the extra taxes which hit the rich more than the poor (e.g. a progressive tax).

          This is the kind of thing which is largely up to details of implementation - do you have a sliding tax scale, do you tax based on income at all, do you have sales taxes, etc. etc. etc. until you figure out what works for your scenario. Compared to the bigger picture problems, this is peanuts. Much bigger problems come from other factors such as simple capital flight, trade imbalances and so on.

          You don't need to assume they want more cereal, but imagine moving from mac and cheese to hamburger. The amount of mac consumption may fall, at the expensive of the beef. However, beef costs 10x more to produce (in a energy sense, not money) per calorie relative to the mac. Meaning in a finite planet, you have more demand for something that we can only produce so much of in a given timeframe. This isn't a labor question but rather a resource question. Or take electric cars, while these are world wide numbers, to get everyone to move to electric cars would take 706 years of current mining speed for the lithium for the batteries (per Massif Capital). If you push demand for these cars up just a bit with UBI the demand could destroy the supply and force prices to go up. In effect UBI will expose places where "get all you want" turns out to be "we are just barely keeping up".

          Again, this will just show up in commodity markets. Substitution has always been a thing. Part of the point of a UBI is delivering it in the sense of cash value precisely so that recipients can make the selections that make sense to them, in their circumstances.

          Forgive me for going a little off topic, but I think you'll find it insightful. Over time, if the UBI was done gradually, we would see more production to take on the extra demand and the poor would also slowly become more middle class and also start investing. As more folks become middle class, the tax base on the UBI would increase. In effect, the UBI would be a transfer between the relatively rich-experienced-old and the poor-ignorant-young and it could be a stable system. This was done in the past via governments paying for college, etc. as college increased long term taxes and those folks would then pay taxes for the next generation to become educated. This can be a stable system if it is built to handle the flows. You can see left-leaning critics of this change over pretty well everywhere, but I think there is a more interesting answer beyond the rich hate the poor. UBI style systems even got the approval of Milton Freeman a rather right leaning economist. Admittedly he wanted a job attached, but near enough for my purpose of showing this isn't just a leftist idea. The fact we don't continue to seriously subsidize education anymore suggests the rich-educated no longer believe it is worth while to subsidizing the poor-ignorant to get educated. One market based reason is that we just don't need that many educated people. You might check out David Graeber's work on BS jobs for more on that. You might also check out https://www.wired.com/2000/04/joy-2/. [wired.com] [wired.com] Lastly, to give some credit to the idea, consider real (inflation adjusted) GDP growth from 1930 to 1950 (e.g. During the great depression) vs 1998 to 2018. In the 30-50s we saw real GDP growth at 4.13%. Compare that to 98-18s real GDP growth of 2.19%. Sure the numbers could be off as I did the calculations myself, so feel free to check them, but a 2% drop in growth means the long term value someone provides is dropping. If the trend continues, eventually we'll have no growth. UBI will just be wealth transfers, with all business being zero-sum games. The closer to zero sum you get, the less people are interested in taking care of each other. While there are other, more cynical answers like if the uneducated are too ignorant to know how the game is setup, the elders could "cheat" by taking the tax breaks while leaving their kids with nothing but debt. The rich elders who would have otherwise been taxed might be motivated to do that just so they could keep more and give that to their children. This gets into ageist politics rather than economics, so I'll stop here.

          Part of the problem is the concept of doing UBI gradually. This makes no sense. It's not a basic income if it doesn't provide for a basic life. $10/month won't even buy a month's supply of ramen. $100/month won't pay the rent for most folks. $1000/month will not cover medical care, and so on. You either flip that switch or you don't. As for elevating people to middle (economic) class by definition it can't do that. Middle economic class is relative to the whole, not some sort of basket of groceries. By mediaeval standards, the current populations of the western world live an insane science fiction lifestyle of ludicrous affluence. Increasing the tax base is very far from a sure thing, especially if you raise taxes and push capital and entrepreneurialism offshore.

          Growth and wealth are a whole different topic, so not getting into that.

          • (Score: 0) by Anonymous Coward on Saturday January 22, @11:48AM (10 children)

            by Anonymous Coward on Saturday January 22, @11:48AM (#1214765)

            The job guarantee idea talked about in MMT is not a MMT mandate but a concept to "prove" unemployment is a political choice. Even if you have straight UBI within a MMT framework, what changes in theory is both the floor and the ceiling regarding income. Like Mario Kart, where even if you play badly, you can catch up because the AI rubber bands--the slowest person never falls too far behind and if you are in first, the fastest AI players become faster because they want to make it feel like a challenge. I'd say UBI basically says everyone gets x amount, inflation adjusted. What it doesn't say is what will be left over for those who want more stuff and are willing to work for it.

            If there is x food and y of that food is used when the poor eat today but y + z when everyone gets UBI, the total food available to the wealthy goes from x-y to z-(y+z). This means in an absolute sense there is less food, regardless of type of food. I know that level of abstraction causes issues ala the substation effect. I tried to address that a bit. The substitution effect does apply, but if we band food around levels of quality or energy density or healthiness, substituting within a category is equal but going down a rank in quality isn't a substation but rather a loss. Economics doesn't really say much on how to band these up, other than Bentham style "utils". My point is that as the poor gain more access to higher utils food the amount of food with the same or better utils decreases, causing general price increases rather than increases in a single item. However it may not cause "inflation" in the sense that the general price of everything increases or as Milt would say, "inflation is always and everywhere a monetary phenomenon." That quote is what I'm really wrestling with as there is no money printing (e.g. taxes are equal to the extra spending) but pricing of higher utils necessities goes up.

            We agree that given inflation risks of printing the money, the solution is heavy taxation. But overall wealth (not currency but stuff) ebbs and flows based upon real economic factors. Stagflation and supply shocks like peak oil, if we ever reach such a state, may be tied at the hip, regardless of monetary policy, but that doesn't seem to relate to the demand shocks I've been discussing. What am I missing?

            Regarding the UBI implementation speed- Consider a theoretical idea for US health care. What if the USA got gov't sponsored healthcare, but only for those who are 26 and below today? It would cost virtually nothing as the young generally don't need healthcare. The healthcare plan would follow those young people to their death and all young people afterwards would also get it. That would basically make a single payer healthcare system occur over a 40ish year timeframe with slow increases in taxes to pay for said spending. Would you say you implemented single payer or not? What year would you make that claim? If you're saying that a UBI starting at 500 a year and doubling every year for 5 years (2^5*500=16k in my example) is not an implementation of UBI until year 5, I simply disagree but do understand your point. Is 5 years too fast? Maybe it really needs 40 years like the health care plan example, I'm no expert. My point is that full on UBI at day 1 would create insane supply shocks, so a slow roll out would allow an orderly increase of the manufacturing of these higher util necessities.

            I completely agree the geese will honk and leave if UBI were seriously tried. Like most systems, it either needs to be universal (as in the entire planet; ha!) or it requires significant controls like capital controls. I have mixed feelings on this and the possible issues it might create, but my point was to describe how UBI could be done without inflation (except on the necessities front), not if the theory was viable. As Bentham roughly said, the highest utils for the highest number might end telling you to have the poor take the crops from the rich, but the rich would burn the crops first before they give them to the poor.

            I think you actually did talk about wealth as you basically said the capitalists wouldn't stick around to be taxed, they'd go elsewhere, which is exactly my point. I talked about this from the perspective of education and the 1970s where we removed all the subsidies, but the point is those who have control over resources will use that control for their interests, not just to make the world a better place for all. That was one reason I brought up wealth and growth, but another reason I brought it up is because UBI is really proposed due to the fact that people don't think there is not enough work worth doing--e.g. Growth is slowing while automation is increasing. You might disagree with that story, but it tells you why people suggest UBI. However the more zero sum the world gets the less interested we are in doing UBI, which means UBI is mostly just an academic idea. That is to say, those who control resources in a high growth period may be generous because it's relatively low cost, but not when growth is slow, when risks of "not having enough" go up. Particularly not when there are no perceived political risks of going communist and taking everything. This is exactly your point. The rich might be willing to give some crops away when they grow more next year, but not when the pie has stopped growing. Alternatively you might say we lack growth because of misallocation of resources or changes in the economic game due to age related factors and thus UBI is not needed. The last story is a mix of the two, where nonsense jobs are created to keep us so we don't try to demand too much from the wealthy. If such puppetry is possible, then obviously UBI isn't possible. I don't see any story given a low growth environment where UBI can be politically viable. Ultimately I think UBI is a lovely idea but a failure.

            - JCD

            • (Score: 0) by Anonymous Coward on Saturday January 22, @05:11PM (9 children)

              by Anonymous Coward on Saturday January 22, @05:11PM (#1214822)

              "The job guarantee idea talked about in MMT is not a MMT mandate but a concept to "prove" unemployment is a political choice."

              No, there are two ideas there and you're talking about a different one. There's the job guarantee idea, and then the idea of monetary policy targeting full employment. Right now, monetary policy is supposed to strike a balance between employment and monetary stability (i.e. inflation management) while under MMT the idea is to shoot for full employment. MMR tries to backpedal that a little, but even so you end up with messy ideas about what constitutes full employment and who gets to decide how much employment is enough. If everybody who wants to get a job mowing road margins can get one, and margin mower jobs are going unfilled, is that full employment? By some definitions, yes. And not by others.

              "Even if you have straight UBI within a MMT framework, what changes in theory is both the floor and the ceiling regarding income."

              Well, sure. So does every other element of a social safety net. Of course, the reality of the matter is that the fiscal drag of a UBI is so monumentally titanic that it's practically out of reach of most, if not all countries in the world and if you're balancing this colossal cash drop with nosebleed taxes (levied at whichever point you choose, or a blend of taxes) then you're either actively discouraging a cash economy (probably not the intended outcome) or you're driving people overseas as fast as they can paddle a canoe. "Hi, buddy, nice career you got there. We'll just yoink three quarters of everything you work for, and if you can't keep working hard enough to pay for all the taxes on the stuff you've managed to accumulate for your household and business, then we'll yoink that too. Uh, but you won't starve, so that's cool amiritebro?" Sounds like a real way to win hearts and minds.

              Regarding Milton Friedman, inflation is always and everywhere a monetary phenomenon if and only if you include the effects, and feedback effects, of sentiment on money supply, and money supply on fiscus and velocity of activity. If you leave those out of your conception of monetary economics, then you will spend a lot of time chasing ghosts.

              - Regarding supply shocks and what you're missing -

              For starters, you're missing the part of MMT that goes beyond taxation to bond markets and other financial instruments to reduce free-floating money supply. Other than that, you're missing the economic aspect of interconnectedness. Hypothetical example for illustration: you implement MMT and a UBI. Immediately, taxes blossom like kudzu, and so does lower-class spending. Your businesses and wealthy are immediately converting their financial assets into anything that looks less likely to be taxed (because duh), move money overseas through loans that end up getting written off (tax break at home!) and dump whatever fixed assets they can at firesale prices in favour of removable chattel. The only part that gets a big boost is bottom-of-the-scale household goods and commodities, things such as toiletries and packages of chicken breasts and TVs. Well, not all the wealthy leave with all the wealth, so you still have the slowpokes to tap like maple trees, but in the mean time investment in new domestic capacity drops like the proverbial rock. Capital intensive industries leave as fast as they can, if they can, while labour intensive can hang on at matchstick wages because their payroll expenses just took a nosedive (ignoring that the taxes they pay made up for that nosedive). You now have a situation where it might actually make sense for a farmer to ditch that old tractor, and instead try to employ workmen by the dozen to harvest the fields because scythes attract less tax than 350hp combines. On the other hand, maybe not because the number of people lining up for back-breaking stoop labour out in the back of beyond for not much more than they'd get sitting back home is going to be very, very low.

              Pretty soon you'll discover that you have supply shocks. Domestic producers of everything from soybeans to spaceships either can't afford to stay in business, or can't afford efficient production practices. Nobody wants to invest in your economy because they know - _know_ - that any assets, any returns and any economic activity will be taxed by an accountant in a grim reaper outfit because you have to balance your MMT books. Your economy isn't growing, because - well, you've just convinced everybody who can count to three and watch TV that this is not a smart place to run a business, and your prices are rising (on certain markets anyway) because now everybody and his brother wants a fat slab of bacon. Or macon, for the pork-refusers.

              You might hand-wave that all these things are theoretical, but I can point to real-life examples. I don't even have to go to the third world, although the most dramatic examples are there. Norway has long had problems finding domestic entrepreneurs for investment of its sovereign oil funds because of risk aversion and low returns. The entire scandinavian bloc has been backpedaling the whole scandinavian social democratic model for decades because people and capital alike were tip-toeing across borders. Places like France which have byzantine business and employment regulations are trying to get them unwound to reduce the burden on businesses - of course, it's fiercely contested, but the result has been two-tier employment, also notably in Spain. It goes on and on.

              Any gradual introduction of a UBI, perhaps on a generational basis, is going to raise a big question: are you balancing the budget? If not, you don't answer the inflationary problems. If you are, you'd better explain to the people you will now be taxing like rented mules why they shouldn't take their toys and go home. For example, if you say that everyone 25 and younger now gets a UBI, but that minimum wage rates no longer apply to them, you've just rendered the vast majority of 26-year-olds utterly unemployable. Why should they not just leave? Like, forever? You have nothing to offer them! They're an instant, permanent underclass. Alternatively, if instead of bracketing it by cohort, you want to boiling-frog it into the population at large, you have a problem because in the twilight zone between actually having a UBI that meets basic needs, and not paying for one, you haven't solved people's actual problems but you sure have introduced a metric butt-load of taxes. Good going there, Tex. Again, you've now given the wealthy fair warning, and they will run to the nearest exit, dragging with them everything that isn't nailed down and leaving behind a few husky individuals with pry-bars to tear up what they can. Case in point: a lot of post-colonial countries, with a wash-rinse-repeat cycle visible in South Africa today (new mine investment is so low they get excited about dead cat bounces).

              "I completely agree the geese will honk and leave if UBI were seriously tried. Like most systems, it either needs to be universal (as in the entire planet; ha!) or it requires significant controls like capital controls. I have mixed feelings on this and the possible issues it might create, but my point was to describe how UBI could be done without inflation (except on the necessities front), not if the theory was viable. As Bentham roughly said, the highest utils for the highest number might end telling you to have the poor take the crops from the rich, but the rich would burn the crops first before they give them to the poor."

              At least you admit that it's not a feasible way of running a country, and with a prisoner's dilemma of 200 nations worldwide, it's a fair bet many countries will refuse to participate, to their individual benefit and to the horror of the UBI participants. However, Bentham's probably wrong about burning the crops. They'll just leave 'em to rot, and take their rakes and mattocks with them when they leave. And you know what? It's rational. Walk up to any mechanic and say: "I'm going to take three quarters off the top of everything you do, tax your house and your shop and your clients and your tools and the oil you use and the oil you recycle and your electricity and your fuel and all the rest of it, but I'll make sure your kids don't starve. What would you do then?" Assuming the answer doesn't start with breaking your nose, it would probably look like locking those rolling carts of tools, putting them on a flatbed along with the wife and kids, and rolling across the nearest sane border. Because even greasy blue-collar workers trying to build a better future for their kids can count to three.

              In your final paragraph you suggest that UBI is an academic idea. Maybe you could tell Yang that? But really, the problem is the delusion that class struggle economics are a good analysis for what's going on here. When every plumber can pack up his van and roll out, when every farmer can leave the fields fallow, slaughter the livestock for meat prices, and find someplace else that values his skills, when every freaking project manager and programmer can cross a border with a laptop and cock a snook at the people who want to turn them into milch cows (live example: California) suddenly it becomes important to remember that the world isn't neatly divided into capitalist vampire squid and bleeding peasants. A healthy economy has to be sufficiently welcoming to all participants, all up and down the scale - and combined MMT and UBI are a guaranteed way of not doing that.

              • (Score: 0) by Anonymous Coward on Sunday January 23, @09:21AM (8 children)

                by Anonymous Coward on Sunday January 23, @09:21AM (#1214968)

                You might enjoy Warren Mosler's commentary on MMT, but the way he describes it, the job guarantee is just a "base case" assumption, but not a requirement. Since he's the father of the idea, I trust his description to basically be accurate. Maybe I'm misunderstanding him but it seems like not a requirement means "optional but obviously [to Warren] good". Thus MMT could apply in a UBI setup or even without any sort of job consideration. See https://youtu.be/W97s3zbFKvc?t=2376 [youtu.be]

                If I translate all of your arguments down, basically they are a human nature set of arguments rather than theoretical economic arguments. That is to say, we could have a 15 hour work week, larger earned income tax credits, UBI or some other such scheme if we had the political will and the wealthy and/or middle class were willing to accept less. From that view, you might find Professor Ian Shapiro's set of arguments around UBI rather interesting: https://www.youtube.com/watch?v=bldeaDRWJYc [youtube.com] In effect he suggests that the declining power base for labor means that there is no reason businesses have to give such a backstop. He also suggests that the work ethic requires people to look like they are working regardless of value being created. This is the point of BS jobs, we create fake structures to make it look like work is being done when it isn't really valuable. Security guards wandering the building when a single company could have an AI look for "useful movement" and alert a guy watching cameras for dozens of facilities, consultants whose suggestions are regularly ignored or who basically repeat what the employees have already suggested, secretaries who take 3 calls a day but exist so the company look like a real company, etc. I have seen all of those, but there are lots of others like lawyers generating excess lawsuits, telemarketers, Walmart greeters, people playing video games to collect loot, NFT makers, home assessors for mortgages (when most of that work is also done by the tax people), etc. The fact that the economy is full of worthless work that society could remove for more important work that has higher profits or more social value but don't because the costs are low enough to accept.

                UBI seems like a dream solution to that sort of world, if nothing else to create pressure to automate more pointless work, but human beings don't want to support it. I think that is where we agree.

                As for say 60% tax rates, Local + California + Federal puts that sort of tax level on employers yet they don't all move to Oklahoma because that is where the skilled labor is and because the income and growth make it worthwhile. When growth slows or income goes down due to competition then the taxes become too high a cost. This is why growth matters so much for a UBI world. The alternative approach some UBI advocates suggest is to defund everything else like SS, Medicare, etc. In such a state UBI could be ~0 cost, but there is no political coalition willing to accept that--they like the sugar they get today and you can't take that away. As Shapiro notes, everyone from labor unions to AARP would not support it. It does not matter if they already pay 60% taxes or only pay 30% taxes nor does it matter if the increase is from 60 to 75% or from 30 to 60%--what matters is the perception.

                My objections to UBI are politics all the way down. From a purely economics point of view, all your points could be dealt with using things like capital controls--going back to a 1950s style economy (Aside: Mark Blythe covers this nicely in his 3 computers analogy). However you're right to call me on it, as it was an unstated assumption, even if I don't find it interesting when relating it to UBI-inflation concerns. UBI is a massive undertaking to inject into society and I was trying to capture just how much risk there is purely on the demand shocks. As for assets being sent overseas, what assets aren't already? I mean seriously the top 10 companies in the US are about 15% of the world economy's market cap and nearly all of them ex Berkshire are asset light. They already shipped everything they can overseas and off balance sheet. Perhaps the doctors and lawyers are local and can't escape, but the mega rich can leave in a second unless you go towards capital controls, ala China. Capital controls are purely a political choice, not an economic one. Even if you agree that could work, I know you'll mention something like US taxes are always around 20% of US GDP. Agreed that increasing taxes that much would be a-historical, but it doesn't seem impossible nor is there a clear objection beyond the rich running. Could it cause all the doctors and lawyers to flee to Canada? Maybe it could.

                Ultimately every tax could be argued to create "a race to the bottom" behavior. I don't know of a UBI style example beyond Norway or study that sorts out when taxes cause rich/upper middle class to run. Communism/socialism examples could apply, but with UBI the gov't isn't deciding where the investments go, the consumers are. Maybe Norway applies, I've not studied it in depth. If you want to expand on that, I'd be interested to hear it. If you have other historic example of that failing, I'm interested. The obvious examples of success are the earned income tax credit and the Alaska wealth fund. Neither has had any major, long lasting inflation effects. As I stated earlier, I don't see the obvious economic issue that creates inflation beyond demand shocks, which was my entire point as that was the question asked.

                If I am reading your point correctly, it's that the current economic system couldn't survive. There would have to be a system reset, ala Bretton Woods or Nixon breaking the gold standard. Agreed, but that isn't an inflation issue and I was purely focused on inflation as that was what the GP was asking about. How UBI could happen is a totally different ball of wax. In a previous comment as well as a few paragraphs above was, I try to address why UBI seems attractive in forcing business to decide what jobs really matter, not if it can succeed politically which is what you appear to be interested in (e.g. Can gov't stop the rich from running with their stuff?). It seems almost certain its politically dead without a crisis and COVID was not it. If anything COVID is likely to kill the idea more dead than before. Oh well. Maybe a better idea will come up to deal with our economic problems. Perhaps we'll have another go at neo-fascism. That's looking like a likely option which will have a very different system reset with a very different likely set of outcomes. I'm basically pro-UBI in the sense that I think many of our alternatives are worse and we'll eventually go with one of the alternatives: communism, fascism, all out war, etc. End of history my left foot!

                Quick aside, I've enjoyed this banter, it's nice to hear someone who knows their economics. I appreciate your restraint to make too political an argument and trying to stick to the economics even if the economics are strongly tied to the politics. If anything I've injected too much politics, but I hope it helps explain the assumptions rather than trying to just persuade you to agree with them. I wish people on the web said they appreciated their fellow writers, particularly those you disagree with, more often. I think it would improve civility. So good chatting with you, your insights were appreciated,

                - JCD

                • (Score: 0) by Anonymous Coward on Sunday January 23, @07:18PM

                  by Anonymous Coward on Sunday January 23, @07:18PM (#1215066)

                  - snip mention of Mosler -

                  There are two different topics at hand here. First is the job guarantee: that a job is available to all people who want one. Second is the goal of monetary policy as full employment: that the money supply is stoked to juice the economy to the point that availability of labour is a limiting factor. Because MMT divorces the concept of the expenditures and revenue streams of the government in a fiat currency world, the idea is that you end up with a monetary policy that, by current standards, is considered to be quite generous, which is why you end up with persistent inflation. MMT's response to this is to withdraw money from the money supply with taxes and financial sinks such as bond issues, but if you juice those so hard that you tame inflation, you end up with a basal degree of unemployment. Now, if you use the MMT concept to boost national expenditures through a UBI that functions as an all-in safety net (covering housing, food, medical care, clothing and other necessities) you have a big, chunky budget spewing money like a firehose all over the economy. The result is that you have to either tax like a lemon juicer, or you have to borrow like a coke fiend, or you have to accept the kind of inflation that will make zimbabweans nostalgic. Remember how everything in an economy is connected? Now you have to determine what constitutes full employment in your UBI-supported community. If you're willing to accept the idea that having a UBI in your bank account is functionally equivalent to employment, you can tune your monetary policy to tame inflation, but then you have monumental tax burdens.

                  To put it another way: in the current system the central bank's job is to target a balance between full employment and inflation, using money supply as their tool. Under MMT proposals the idea is to target full employment by monetary policy, and then have fiscal policy balance inflation, and hand-wave away the inevitable links between monetary and fiscal policy, reducing the central bank to a printing facility for the government.

                  If I translate all of your arguments down, basically they are a human nature set of arguments rather than theoretical economic arguments. That is to say, we could have a 15 hour work week, larger earned income tax credits, UBI or some other such scheme if we had the political will and the wealthy and/or middle class were willing to accept less.

                  Sure, and if we were all robots instead of people things could be extremely different, but they're not. Economics is not just price/demand/supply/cost analysis, but we also have fields including behavioural and political economics. If you ignore the human dimension of how countries run, you're blinding yourself to the question of feasibility. This is squarely in the realm of economic theory, just not economics 101 any more. Again, look at cases such as Veblen goods which make little or no sense until you add the human dimension.

                  - snip commentary on bullshit jobs -

                  The fact that the economy is full of worthless work that society could remove for more important work that has higher profits or more social value but don't because the costs are low enough to accept. UBI seems like a dream solution to that sort of world, if nothing else to create pressure to automate more pointless work, but human beings don't want to support it. I think that is where we agree.

                  Part of the problem that I pointed out earlier was that precisely when you start to tax wealth, that includes assets such as all your automation facilities. At that point, employing people becomes the cheaper option because UBI functions like a monumental subsidy to employment - but it is also a drag on employment because the baseline option lets people be so selective about employment that getting people to do the hard, heavy stuff (I used reaping crops as an example) is not something that most people want to do. Now you have primary industries caught between punishing taxes and a demotivated workforce, thus a reduction in the functional value of the labour subsidy, meaning that the prices of those primary inputs (say, wheat) rise meteorically compared to the UBI, making for a big inflation driver.

                  As for say 60% tax rates, Local + California + Federal puts that sort of tax level on employers yet they don't all move to Oklahoma because that is where the skilled labor is and because the income and growth make it worthwhile. When growth slows or income goes down due to competition then the taxes become too high a cost. This is why growth matters so much for a UBI world. The alternative approach some UBI advocates suggest is to defund everything else like SS, Medicare, etc. In such a state UBI could be ~0 cost, but there is no political coalition willing to accept that--they like the sugar they get today and you can't take that away. As Shapiro notes, everyone from labor unions to AARP would not support it. It does not matter if they already pay 60% taxes or only pay 30% taxes nor does it matter if the increase is from 60 to 75% or from 30 to 60%--what matters is the perception.

                  No. Here your numbers are just wrong. Sure, you're right that not literally everybody has moved from California, but even with the marginal cost structure between California and Oklahoma there has been a lot of movement. For example https://www.postalley.org/2020/08/24/american-migration-where-people-are-moving/ [postalley.org] shows quite clearly that California is driving a lot of people out - a trend that has continued strongly since that article was written, which is part of why NY and CA and MA and NJ authorities are salty about SALT deductions.

                  Bear in mind that all this is covered by the relatively narrow margin in total cost of living between various states, and relatively minor net differences in local taxes, even after the expenses of moving! Multiply that by a whole country going balls-deep on heavy taxes and basically running the bottom of Maslow's Hierarchy as a government programme, and it goes nuts.

                  As for SS/MC defunding paying for UBI, you're completely wrong. With about a third of a billion (actually more) people in the USA, your average payment to each one to meet the basics (ignoring expensive pockets like Manhattan and the Bay Area) is north of $10K/year - more than $20K/year if you're including medical, and all people of all ages from cradle to grave. So we're talking 6 trillion every single year. That's about a third of GDP, and about double the current US tax take - and way over the equivalent social services, even if you throw in Medicare, Medicaid and the VA system.

                  And this is where political economics meets macroeconomics: people wouldn't dislike it just because it's icky and makes them worry about cooties. They'd dislike it because once you start counting on your fingers you realise very quickly that the strain it would put on the economic system is beyond disruptive. You'd need either a lot of fanatics with guns, or a huge coalition of very rich, very committed people to back it to the hilt.

                  ... more to come because of the lameness filter ...

                • (Score: 0) by Anonymous Coward on Sunday January 23, @07:29PM (6 children)

                  by Anonymous Coward on Sunday January 23, @07:29PM (#1215071)

                  ... continued because of lameness filter ...

                  My objections to UBI are politics all the way down. From a purely economics point of view, all your points could be dealt with using things like capital controls--going back to a 1950s style economy (Aside: Mark Blythe covers this nicely in his 3 computers analogy).

                  Again with the separation of politics and economics as if political economics didn't exist ... oh, and capital controls always leaked like a bad sieve. In a post-Bretton-Woods world, they can't even work the same way anyway. You'd have to have closed borders, North Korean style, including stopping people with valuable information and skills in their heads.

                  As for assets being sent overseas, what assets aren't already? I mean seriously the top 10 companies in the US are about 15% of the world economy's market cap and nearly all of them ex Berkshire are asset light. They already shipped everything they can overseas and off balance sheet.

                  You ain't seen nuthin' yet. Go look at what happened in the third world as companies left the post-colonial mess, often dropping machinery but bringing the best and brightest people back with them. Check out what happened to all those fancy prestige project dams and bridges, left to decay.

                  Perhaps the doctors and lawyers are local and can't escape, but the mega rich can leave in a second unless you go towards capital controls, ala China. Capital controls are purely a political choice, not an economic one. Even if you agree that could work, I know you'll mention something like US taxes are always around 20% of US GDP. Agreed that increasing taxes that much would be a-historical, but it doesn't seem impossible nor is there a clear objection beyond the rich running. Could it cause all the doctors and lawyers to flee to Canada? Maybe it could.

                  Doctors already flee countries. In fact, at the moment, doctors flee to the USA because here they can make bank compared to many countries where their incomes are basically constrained by government dictates. Just wait until that turns around ... but the point is also that it's not just assets (hard to export a skyscraper) but the way that mobile assets gain value precisely because they turn into a negotiable means of escape. I forget who it was, but some pretty big guy ended up just buying an oil tanker, filling it with oil, and then riding that nest egg away. On the scale of oil companies, that happens all the time as well (hi, Venezuela!) so that sort of thing is a pretty serious problem.

                  Ultimately every tax could be argued to create "a race to the bottom" behavior. I don't know of a UBI style example beyond Norway or study that sorts out when taxes cause rich/upper middle class to run. Communism/socialism examples could apply, but with UBI the gov't isn't deciding where the investments go, the consumers are. Maybe Norway applies, I've not studied it in depth. If you want to expand on that, I'd be interested to hear it. If you have other historic example of that failing, I'm interested. The obvious examples of success are the earned income tax credit and the Alaska wealth fund. Neither has had any major, long lasting inflation effects. As I stated earlier, I don't see the obvious economic issue that creates inflation beyond demand shocks, which was my entire point as that was the question asked.

                  Alaska's fund is not a hell of a lot of money, and is sucked up by the increased cost of living in Alaska (including the bad consequences of things like the Jones Act, which is why often nationwide chain deals explicitly exclude Alaska and Hawaii). Norway wasn't a problem of people running, but a problem of reduced incentive to take entrepreneurial risks. This is why Norway had particular problems with the big housing/finance crash; they'd developed a lot of exposure to international funds simply because they couldn't find domestic investment targets. This was a consequence of a strong social support set, a high tax level, and strong regulations.

                  If I am reading your point correctly, it's that the current economic system couldn't survive.

                  More like: there is no prospect of an economic system that would survive. The internal contradictions are massive to the point that you'd probably have to end up with cuban-style drafting of people to work fields, or such huge exemptions for primary industries that they'd turn into tax havens. You'd discourage investment to the point that your economy would stagnate, regardless of how you dress it up simply because of the taxes that you'd have to levy just to keep inflation under control - or you'd have runaway inflation in under a decade. And that breaks economies like a woodsplitter. Basically, a lot of UBI would go to survival needs such as food (obviously) but your compensatory taxation would cripple production of those precise basics (including housing construction, farming, logging, medical care, you name it) unless you exempt these UBI-based production sources. This implies that everything else would have to be taxed to make up your 1/3rd of GDP that you'd have to spend to provide your UBI. Even if you pretend that the 20% limitation on tax take that you mentioned above isn't a real thing, it would kneecap other businesses to the point that they'd really have no rational reason not to leave. If I were a CEO and I got wind of that sort of thing, I'd be establishing a bolthole for the whole company in anywhere-but-here.

                  In a sense, you seem to think that I'm arguing about how people wouldn't like it, and seeing that as a political position. It's a political-economic position, pointing out that the reaction of a population to policies placed by governments is a serious factor in policy planning. If you tell people that you are going to bend them over a desk and spank them until they smile for the camera, the vast majority will leave if they possibly can. This erodes your tax base, your skill base, and motivation to engage in investment but also it reduces the faith in the system, which reduces faith in the currency which also motivates the creation of black markets and fosters inflation by itself because a loss of faith in a fiat currency means that the government can work itself into a lather demanding that people care about the currency - but they won't because faith in the system is the only foundation for the currency's valuation. The currency is just funny money at that point. And that fact matters. "I make a trillion zimbabwean dollars a day!" "So what, what can you buy with those?" "Uh ... uh, nothing." "'zackly." This is precisely why the MMT contention that a government can dictate the valuation of a currency is so dangerously wrong.

                  -snip closing remarks and speculations about resets-

                  • (Score: 0) by Anonymous Coward on Monday January 24, @02:51PM (3 children)

                    by Anonymous Coward on Monday January 24, @02:51PM (#1215256)

                    " ....in the current system the central bank's job is to target a balance between full employment and inflation, using money supply as their tool.  ... reducing the central bank to a printing facility for the government."

                    Thanks for clarifying your thoughts.  I do see some differences of view.  Firstly, I don't really believe the federal reserve prints money, rather they enable/prevent banks to print money, which banks choose to do or not do based upon their needs.  The Fed does have some impact on short term interest rates, but can not stimulate growth.  They are pushing on a string.  Barring window guidance (an activity the US does not do AFAIK) I think MMT and the current system both are the same world at least in regards to the federal reserve's impact on both inflation and money supply.

                    "...MMT divorces the concept of the expenditures and revenue streams of the government in a fiat currency world..."

                    I can see how you'd reach the conclusions you do, although in my mind MMT is a theoretical description of the existing system rather than an ideal new place to go.  There is no agenda in the descriptive parts, no politics.  If the description is wrong in a meaningful way then the prescriptive parts are simply invalid.  If the description is right then the prescriptive parts are possible, although not consequence free.

                    You generated a sort of thought experiment which is an interesting take on economic problems of UBI... but it is also a bit off topic.  Last I looked into it, ~2/3rds of the SP500 companies had been founded by foreigners or children of foreigners.  The study I read was a bit old, but I have no reason to doubt it is still approximately true even today.  We know those in extreme poverty generally don't have supportive parents and tend not to move up in the world.  We also know that those in extreme poverty tend not to leave their country as refugees and come to places like the USA.  For one, the US doesn't like having to teach those folks and prefer getting educated people and for two they don't have the resources to leave.  So the middle and upper classes of other societies leave to come to the US and later found most of our valuable companies.  Anecdotally, it seems they are often wildly poor relative to the average citizen when they come to the US. So it isn't like they show up in the US with a million dollars. Instead, they may show up with years of education and experience, but no capital.  In effect, they want to return to their previous class station and find the only way is by taking high risk ventures, some of which work out in the extreme.  UBI, et al. are about allowing poor people to live better so they can care for their kids, so their kids are less of a drain on society, etc. etc.  Well if you don't have a drive to return back to a previous station, if you don't have a culture of "being awesome" then you are unlikely to start such a business. You just don't have the tools and cultural capital, much less the will.  Giving someone opportunity via more resources is thus a waste.  I know you've not told such a tale, your tales have been around the rich choosing to leave because they can go elsewhere.  I'll address that in a minute, but it seems to me that the rich version of the story your telling is incomplete.  I'm not sure if this piece is even in the ballpark of your mental model of assumption in behavior, but I can definitely see how one might arrive at such a view.  Regardless, would you agree if the UBI was used on average for productive purposes, the rich would be more inclined to accept the cost?

                    Going back to the rich not wanting to be taxed and being willing to run to avoid taxes, it seems that is a bit a-historic.  The wealthy have put up with ever higher taxes in the past and have accepted slowly increasing taxes over time.  Not that long ago there was no income tax and before that there was no property taxes.  Why is the UBI tax the straw that breaks the camels back?

                    "...This is squarely in the realm of economic theory, just not economics 101 any more."

                    My story of why it will be rejected is both political and even if the politics allowed for it, growth oriented. If the UBI created growth rather than mal-investment (e.g. a larger pie) I think it would be accepted, but it isn't clear it will. Your story is that the rich don't want to pay too much taxes, where UBI is defined as too much.  In other words, your just arguing something like the tlogic of Laffer curves.  Based upon some simple research, it seems like 70% tax rates are max "reasonable" within the curve: https://en.wikipedia.org/wiki/Laffer_curve#Income_tax_rate_at_which_revenue_is_maximized [wikipedia.org]

                    "As for SS/MC defunding paying for UBI, you're completely wrong. With about a third of a billion (actually more) people in the USA, your average payment to each one to meet the basics (ignoring expensive pockets like Manhattan and the Bay Area) is north of $10K/year - more than $20K/year if you're including medical, and all people of all ages from cradle to grave. So we're talking 6 trillion every single year. That's about a third of GDP, and about double the current US tax take - and way over the equivalent social services, even if you throw in Medicare, Medicaid and the VA system."

                    Given that most would be refunding some of those tax dollars, a possible 60% tax rate doesn't seem impossible.  Is 60% viable?  Here is a quick and dirty tool to examine that question: https://dqydj.com/negative-income-tax-cost-calculator-united-states/ [dqydj.com]  It seems very possible to do so.  Granted there are state taxes, etc.  Probably have to figure out all the things you'd want to change and there are dynamic feedbacks such a tool does not capture, but it certainly would simplify a lot and it would allow the federal gov't to sack a lot of workers and streamline business needs.  That would be the quid for the quo to convince the rich it is worth the change.  

                    Why didn't I dig into any of this?  Well I was responding to a question of can it be done without inflation, not writing a dissertation on UBI and methods for making it feasible.  I don't mind covering it since you've been so thoughtful in your writing, but I don't see how it isn't economically possible given the change could be made revenue neutral today.  I will agree it isn't possible in a political sense, but I've already been over that.  And no, I'm not talking political economy, I mean political.  Ideas, interests and institutions (more on this later).  You can't kill all the institutions at the alter of UBI because they are self-interested for non economic reasons.  HUD, SS, VA, etc. employees won't vote to fire themselves purely because they believe their position is prestigious. They believe in work ethic, even if their work is worthless.  Labor unions have no interest in losing power because all employees now have negotiating power, no need to collective bargain.

                      - filtered too long P1 -
                    - JCD

                    • (Score: 0) by Anonymous Coward on Monday January 24, @05:20PM (2 children)

                      by Anonymous Coward on Monday January 24, @05:20PM (#1215290)

                      Thanks for clarifying your thoughts. I do see some differences of view. Firstly, I don't really believe the federal reserve prints money, rather they enable/prevent banks to print money, which banks choose to do or not do based upon their needs. The Fed does have some impact on short term interest rates, but can not stimulate growth. They are pushing on a string. Barring window guidance (an activity the US does not do AFAIK) I think MMT and the current system both are the same world at least in regards to the federal reserve's impact on both inflation and money supply.

                      The federal reserve does engage in some activities that regulate the money supply fairly directly, as well as enabling banks to affect things indirectly. In practice, they could hardly stop the banks from responding and often the banks don't quite do what the fed had hoped. However, MMT definitely steps away from the current world in a couple of important ways, the first being positive and the second, normative. In the positive sense, MMT regards the fed as basically a source of fiat money to fit the fiscal needs of the government. Need to spend umpteen bajillion imperial credits on a dam and canal system? Spin up the tool to umpteen bajillion, and the fed cranks the lever per orders. Today, the fed is a semi-autonomous system that makes its own decisions based on mandates that are not based in the fiscal decisions of congress. In the normative sense, MMT says that monetary policy should take full employment as the goal, inflation be damned (or more accurately, inflation to be managed by other means, and not really a problem in the first place). The MMR guys try to soft-pedal that part, but they're more or less on the same plane.

                      I can see how you'd reach the conclusions you do, although in my mind MMT is a theoretical description of the existing system rather than an ideal new place to go.

                      Sure. Except that their theoretical description very clearly misses the mark. According to MMT, the government can dictate the value of currency by various means, including ultimately demanding payment in currency and thereby fostering a demand based in fear of the government. If this worked, Zimbabwe would never have had a currency collapse. Instead, it's a so-crazy-you-can't-make-it-up cautionary tale. So right at the ground floor, MMT needs a new theoretical base. It's the economic equivalent of saying that what goes up can stay up until the great sky jellyfish lets it fall. This comes from all angles; from the studies showing that the real world result of substantial government debt is a substantial slowdown (there was a paper that got a correction on this; many people point at the correction and say that it's all wrong and debt doesn't matter when in fact the result was that, rather than a cliff around 90% of GDP, it's a more gradual slowdown that starts earlier - based in an Excel error, as I recall). It comes from the lived experience of watching the fed desperately trying to correct for consumer sentiment in the US (something about which MMR is largely silent). It comes from the very muddled description of what full employment is, and to whom. It comes from assumptions about the elasticity, and rate of response of various elements of the market that the fiscal controls are supposed to handle. In short: MMT fails before it starts because it doesn't even address the reality that it purports to describe.

                      There is no agenda in the descriptive parts, no politics. If the description is wrong in a meaningful way then the prescriptive parts are simply invalid. If the description is right then the prescriptive parts are possible, although not consequence free.

                      ... and yup, here we are. The prescriptive parts are as invalid as someone telling you: "Unicorn farts are pure methane, so we could run your car off them. We can make cars run on methane - where did I leave my unicorn flatulence device?" while you try to find where he might have a unicorn.

                      - snip bit about immigrant entrepreneurs and cultural influences -

                      Regardless, would you agree if the UBI was used on average for productive purposes, the rich would be more inclined to accept the cost?

                      Productive to whom? If there were some plausible evidence leading people to believe that the UBI would lead to a massive bonanza of economic growth and the proverbial tide raising all boats, on a par with technological advances, then sure, people would stick around for that. However, that's rather like saying that if you had a goose that laid golden eggs, you'd totally pay for some poultry feed - but there is a lot of cause for serious concern about the existence of your gifted goose, here. "Pay us a shit-ton of taxes today for a benefit that will totally show up ten years in the future, trust us!" ... uh, yeah, no.

                      Going back to the rich not wanting to be taxed and being willing to run to avoid taxes, it seems that is a bit a-historic. The wealthy have put up with ever higher taxes in the past and have accepted slowly increasing taxes over time. Not that long ago there was no income tax and before that there was no property taxes. Why is the UBI tax the straw that breaks the camels back?

                      You're confusing two different things here. a) rich people dodge taxes. Actually, there's a large accounting industry, along with tax havens, wealth planners and so on who'd like a word with you about that. Rich people are very good at, and highly motivated at, reducing their tax burden. The extent to which they'll do this varies by the burden and the opportunity costs, and they will use businesses to pass those taxes on to anybody else. Classic case in point: the luxury yacht tax that ended up absolutely raping the US's yacht construction industry, thereby putting a lot of american craftsmen out of work. Didn't mean that the rich didn't like yachts any more. They just commissioned them elsewhere. A related case: Reagan-era simplification of the tax code reduced the headline tax rate (insert pearl-clutching here) but also removed a hell of a lot of loopholes which made a lot of extant tax dodges worthless. The net tax collection rate didn't change much. Now for b) the UBI tax is the straw - beside the point. You might not levy a tax for UBI, but there's a sting in the tail: if it's just a huge cash dump, you do bad, bad things to your money supply. The MMT answer is to soak up the cash with taxes and bond issues. However, if nobody's buying your bonds, that leaves you with taxes. Interestingly, if you have enough wealth flight, that solves the problem too - but the UBI itself doesn't engender tax increases.

                      My story of why it will be rejected is both political and even if the politics allowed for it, growth oriented. If the UBI created growth rather than mal-investment (e.g. a larger pie) I think it would be accepted, but it isn't clear it will. Your story is that the rich don't want to pay too much taxes, where UBI is defined as too much. In other words, your just arguing something like the tlogic of Laffer curves. Based upon some simple research, it seems like 70% tax rates are max "reasonable" within the curve: https://en.wikipedia.org/wiki/Laffer_curve#Income_tax_rate_at_which_revenue_is_maximized [wikipedia.org] [wikipedia.org]

                      Laffer curves depend on a whole lot of assumptions, including various assumptions about the perceived opportunity cost of moving out. Your statement of "... where UBI is defined as too much." is incorrect. I do take the position that the fiscal burden of a UBI as stated is not one that fits within the current fiscal position of many (probably all) countries today, but that stands irrespective of the tax policy attached, ergo Laffer curves aren't even necessarily relevant. It's possible that punitive levels of taxation are the least bad way of supporting a UBI, but even that bids fair to wreck the economy in other ways.

                      Given that most would be refunding some of those tax dollars, a possible 60% tax rate doesn't seem impossible. Is 60% viable? Here is a quick and dirty tool to examine that question: https://dqydj.com/negative-income-tax-cost-calculator-united-states/ [dqydj.com] [dqydj.com] It seems very possible to do so. Granted there are state taxes, etc. Probably have to figure out all the things you'd want to change and there are dynamic feedbacks such a tool does not capture, but it certainly would simplify a lot and it would allow the federal gov't to sack a lot of workers and streamline business needs. That would be the quid for the quo to convince the rich it is worth the change.

                      This again comes back to the realm of pure fantasy. The federal government isn't going to sack people by the million. The unions wouldn't wear it, and the federal unions have a lot of political influence. Even if the long run plan were to simply reduce employment by attrition, that would be a plan that would take dozens of years to come to pass. But even if we ignored that, there's a problem with the UBI in that you have to actually deliver it for it to be useful, regardless of whether you get to tax it back out after the fact. In other words, you have to fork over the money first because you don't know a priori whether Joe High Income will lose his job this week or not, and if the UBI is to mean anything, it means that he will get that money to spend on food the next week. Or health care. Or whatever. In other words, you can't reduce your expenditure a priori. Best case you use a graduated tax to claw it back after the fact. So now you have to ask yourself how much tax gets extracted on average from whom to supply a net UBI, and the answer is that (cutting a long story short) you need to tax the middle classes (as in: a $80K four person household) like a cheesegrater to balance that budget. Unless you're giving up on balancing your budget ...

                      • (Score: 0) by Anonymous Coward on Tuesday January 25, @09:55AM (1 child)

                        by Anonymous Coward on Tuesday January 25, @09:55AM (#1215542)

                        "According to MMT, the government can dictate the value of currency by various means, including ultimately demanding payment in currency and thereby fostering a demand based in fear of the government."

                        If I print a dollar, there is more currency. If I tax a dollar and burn it there is less currency. The amount of currency in circulation, the speed it circulates by, as well as the threat of violent force unless you use the currency to pay taxes is basically how you value how we judge the value of each unit of currency. Granted there is a bunch more stuff like alternative currencies, etc. but the model basically seems true. I don't see how that theory requires it to end with magic money printing. That may be what people do (e.g. a behavioral model), but the description isn't wrong until that behavior is proved to always happen. Also: MMR?

                        "...showing that the real world result of substantial government debt is a substantial slowdown..."

                        The problem with this argument is to lower debt to GDP you run into:

                        ""Pay us a shit-ton of taxes today for a benefit that will totally show up ten years in the future, trust us!" ... uh, yeah, no."

                        I may agree with the issues of too much gov't debt in theory, as you agree with me in theory, but ultimately we both conclude the politics of it revolves around instinctive voter conclusions--be it to believe modern-Keynesianism (e.g. Print in the bad and print slightly less in the good, maybe) or Austrian style austerity and undeniable economic forces. One can easily argue the political will forces more spending and another can argue once it goes bad the politics will force more savings. Visit Greece some time and tell me austerity is good; it's obvious why you'd want to avoid it, at least until you hit inflation. Worse yet, it isn't even clear that austerity solves tax problems since tax revenues shrink when the populace's income from government expenditures shrink.

                        "a) rich people dodge taxes."

                        Of course they do, but you are missing my point. Look at the level the UK taxed back in the 1700s: https://en.wikipedia.org/wiki/History_of_taxation_in_the_United_Kingdom#From_1707 [wikipedia.org]
                        Compare that to taxes today. Why have the rich accepted more taxes now vs then?

                        "UBI itself doesn't engender tax increases."

                        Agreed, but the point of my first post was to say MMT had a proposed solution to possible inflation--increase taxes.

                        "...mexicans (who, if here legally, would be eligible for the UBI otherwise what the hell would the point be?)"

                        I'm confused, why would the USA financially support migrant workers (not even green card holders but those who are visiting for a few months and then going home to Mexico)?

                        "Microsoft isn't established in Washington - as I recall it's a Nevada corporation."

                        Their licensing is done in Reno Nevada ( https://www.theguardian.com/technology/blog/2009/sep/23/microsoft-tax-avoidance-questions [theguardian.com] ), and before that they paid no taxes by printing CDs in Puerto Rico.  You can read up on that here: https://www.propublica.org/article/the-irs-decided-to-get-tough-against-microsoft-microsoft-got-tougher [propublica.org]  The fact that corporations have largely found ways to pay no taxes at all does not mean it should be that way ( https://en.wikipedia.org/wiki/Taxation_in_the_United_States#/media/File:Taxes_revenue_by_source_chart_history.png [wikipedia.org] ).  That it cannot change because the corporations have mostly taken over the US gov't isn't really evidence that the rich will flee, rather they would want to stick around to keep using their investment.

                        "This means a headline expense of 6 trillion or more, every year, in the USA. If you're not paying that much, you don't get the advertised benefits."

                        I took up this challenge just for my own sheer curiosity. I know you might say it isn't enough, but keep in mind this is above the federal poverty line for a single individual. Furthermore it is clearly above folks like this who live on ~7k a year (his 2016 numbers suggest 5k + cost of a house): https://earlyretirementextreme.com/how-i-live-on-7000-per-year.html [earlyretirementextreme.com] . I started with a budget to show my clear assumptions:

                        Food^: 200, Housing~: 500, Health care*: 500, Misc$: 200

                        * Based upon per capita GDP * 10%/12 months. This is the historic norm for the UK, the second most expensive health care in the world: https://www.statista.com/statistics/317708/healthcare-expenditure-as-a-share-of-gdp-in-the-united-kingdom/ [statista.com] Given that this could go directly into a "pick your own insurance or public option" style tax break rather than cash, we'll assume this amount is directly saved by companies on their overall insurance spending. I know there are lots of objections to this choice, but it makes it a lot easier to remove SS/Medi* cleanly rather than estimating partial impacts on lots of fiddly bits.

                        ^ Eating rice and beans for half the meals, can allow you to be well under the approximately 2 dollars a meal this provides. You can afford to cook for yourself since you don't have to work.

                        ~ Renting a room in MO, a trailer for two (e.g. ~1k a month) or 4 people in a college dorm all cost somewhere in this neighborhood. Roommates often don't pay utilities or share them, so I figure that 500 is utilities built in. Yes, I know average housing is way more expensive, but when you look at it from a roommate basis 500 isn't really off the mark as you can see here: https://loz.craigslist.org/search/roo?searchNearby=2&nearbyArea=222&nearbyArea=423&nearbyArea=30&nearbyArea=221&nearbyArea=29&max_price=500&availabilityMode=0 [craigslist.org] .

                        $ Everyone has different needs, be it buying a TV or spending more on nicer food. Others may want a car or use the bus. This gives enough to make that possible. This is a sort of "allowance."

                        This sort of UBI costs 1400 a month or 16800 a year. Limit it to all adults (260M) and that is about 4.3 T in cost. Now I will agree that some folks will need more--they are really disabled. We probably will need some level of gov't program for those folks, but that will be a much smaller group. Those people would not get a UBI check or more correctly, it would go to their care. Prisoner's UBI goes to prisons. I have not seen a serious model to estimate this, but we can take a quick whack at it. Looking at the 2020 fed budget ( https://en.wikipedia.org/wiki/United_States_federal_budget#/media/File:2020_US_Federal_Budget_Infographic.png [wikipedia.org] ) it seems that the SS/Med* are about 2.33 T. The US States contribute another .13T in Medicaid, raising the total to just a bit under 2.5T. This is before SNAP, EITC, etc. which I'll get to later. Using the amount of SS going to people with disabilities we can estimate 90% of folks are probably going to be purely on UBI. So 2.5T * .9 = ~2.2T. That is what we can cut. 4.3 - 2.2 = 2.1 T of additional spending. Then we have to adjust for employer savings in that employees have $500 dedicated to health care. Using 2019 employment numbers (~157M workers x $500 a month) that is approximately .95T in "savings" which could basically go to taxes rather than being spent directly on employees. Therefore 2.1T - .95T = 1.15T in excess spending. But wait, what of the EITC, reducing unpaid hospital bills, reduction in HUD housing, reduction in VA costs, reduction in prison costs and the like that I ignored earlier? That is a bit hard to estimate with just a few hours of research, but it must be somewhere between .15T and .75T. Let's take the low end and say .15 T. So now we are down to a nice even 1 T price tag. That is a 5.4 T budget, below your 6T. The total might be as low as 4.8 T. Compared to a 4.4 T budget (using 2019 numbers as 2020 had lots of "unusual line items") that isn't really that bad.

                        What do we get from this? Everyone has some form of healthcare. Everyone has the ability to have some form of housing. Everyone has the minimum amount of food. We provided millions of workers to the corporations in that we removed many federal employees.

                        Please note this is just a simple budget to show 6 T is excessive, not if this is possible given the politics we currently have nor if this is some sort of optimized solution set. This also doesn't consider what tax rate changes you'd apply.

                        - JCD

                        • (Score: 0) by Anonymous Coward on Tuesday January 25, @04:14PM

                          by Anonymous Coward on Tuesday January 25, @04:14PM (#1215599)

                          "If I print a dollar, there is more currency. If I tax a dollar and burn it there is less currency. The amount of currency in circulation, the speed it circulates by, as well as the threat of violent force unless you use the currency to pay taxes is basically how you value how we judge the value of each unit of currency. Granted there is a bunch more stuff like alternative currencies, etc. but the model basically seems true. I don't see how that theory requires it to end with magic money printing. That may be what people do (e.g. a behavioral model), but the description isn't wrong until that behavior is proved to always happen. Also: MMR?"

                          MMR is Modern Monetary Realism, a way to try to work around the shortcomings of MMT by taming some of its wilder assumptions. At this point taking on MMT is rather like shooting fish in a barrel, which is why people are shifting towards MMR (which offers less in the way of a free lunch but still runs into its own problems).

                          Money supply isn't all that goes into money valuation. When you remember that any given currency is a fungible commodity that rests on a sort of collaborative valuation, but that there is nothing inherent to the valuation in terms in intrinsic value, then you can see how the bottom can drop out of a currency regardless of the supply situation. If nobody trusts the management of the currency, regardless of the situation on the ground, it loses its value as a medium of exchange.

                          "I may agree with the issues of too much gov't debt in theory, as you agree with me in theory, but ultimately we both conclude the politics of it revolves around instinctive voter conclusions--be it to believe modern-Keynesianism (e.g. Print in the bad and print slightly less in the good, maybe) or Austrian style austerity and undeniable economic forces. One can easily argue the political will forces more spending and another can argue once it goes bad the politics will force more savings. Visit Greece some time and tell me austerity is good; it's obvious why you'd want to avoid it, at least until you hit inflation. Worse yet, it isn't even clear that austerity solves tax problems since tax revenues shrink when the populace's income from government expenditures shrink."

                          As a matter of fact the drag of debt on GDP wasn't a theoretical article, but empirically measured, so it's not hypothetical at all. As far as austerity is concerned, it worked out very nicely for Ireland, thanks. Greece has other problems that were completely beside the point, such as a completely sclerotic system.

                          "Of course they do, but you are missing my point. Look at the level the UK taxed back in the 1700s: https://en.wikipedia.org/wiki/History_of_taxation_in_the_United_Kingdom#From_1707 [wikipedia.org] [wikipedia.org] Compare that to taxes today. Why have the rich accepted more taxes now vs then?"

                          The relative wealth in terms of capability, and the relative power of the rich in political terms, have changed like night and day. In 1707, the rich were not merely abstractly rich but also the big landholders and other entrenched nobility, ecclesiastical figures and so on. This was nearly a century before Napoleon made the scene. Structurally, it was not the modern world at all. Basically, this isn't an apples-to-apples comparison, it's not even apples-to-oranges. A much more relevant case would be to compare the last half-century, during which the system hasn't substantially changed, during which technological changes haven't utterly changed the terms of life (despite being monumental). Asking what an eighteenth century bishop, an ex officio member of government, would accept in taxation to a crown in the wake of the Glorious Revolution, really isn't relevant to today's system.

                          "Agreed, but the point of my first post was to say MMT had a proposed solution to possible inflation--increase taxes."

                          Yeah, but that's not an answer to the whole enchilada because if your straightforward reading of MMT is that inflation demands a monetarily-mediated fiscal balance, not only will your taxes yo-yo to compensate for every shock that comes along and changes public sentiment, it completely dodges the MMT monetary goal of full employment. See the contradiction? Putting it slightly differently, if the fiscus is supposed to manage money supply, there is no real role for monetary policy. If there is the (conventionally understood MMT) mandate to drive full employment through monetary policy, the fiscal side simply can't directly control inflation. If the fiscal side could and would somehow do that, it cuts the legs out from monetary policy.

                          "I'm confused, why would the USA financially support migrant workers (not even green card holders but those who are visiting for a few months and then going home to Mexico)?"

                          If you're trying to create an employment context in which you have no minimum wage, in which you have no payroll taxes (besides the generic to try to balance your UBI), in which your barriers to employment are as low as possible on the assumption that you will just be topping up the UBI of workers who are supported - the migrant workers won't come for that pittance without a UBI. Or, if you're paying them so lavishly that they'll come regardless of UBI, you're _massively_ increasing the effective labour costs of agricultural produce because now the farmer is bearing the full tax burden of supporting a society that provides a UBI plus a payroll that pretends that UBI were never implemented. That's the straightforward worst of both worlds. From the migrants' point of view it would stop the whole thing cold, anyway. It turns from: "Come sweat like a pig in our fields for better money than you could get at home!" to "Come sweat like a pig in our fields for a pittance that would make a beggar laugh."

                          "That it cannot change because the corporations have mostly taken over the US gov't isn't really evidence that the rich will flee, rather they would want to stick around to keep using their investment."

                          It is evidence that the rich will work awfully hard to reduce their tax burden because they like money. Again, there's a big industry that supports exactly that inclination.

                          Your estimate of cost of living is low and incomplete. You should go back to look at what's actually involved in those calculations. My 6T was actually pretty conservative (i.e. low). But even if we take your 5.4T as gospel (it ain't), it's way over the cost of SS (which it wouldn't completely replace, as you admit), over the cost of medicare/medicaid, over the cost of all the unemployment payments, and so on. It obliterates, numerically, the present cost of the federal social safety net. And MMT doesn't really help you here because even today the federal budget isn't even close to balanced. You'd have to print trillions more per year to make it work, or tax so much harder than we presently do, that the rational move for any affluent organisation is to look for the exit door.

                          Wrapping this up: the UBI as stated is a punitively heavy fiscal burden that cannot be paid for by replacing similar programmes effective today. Paying for it by printing money (virtually or otherwise) bids fair to be a huge cash dump that would guarantee inflation far beyond the COVID-driven efforts of the federal government over the past year, while taxing to cover it bids fair to be the strongest driver of the wealthy and the profitable overseas that we've seen for decades. MMT and MMR don't help because their answer to inflation is to tax or borrow (bond issue) it away, such huge debt increases would be terrible for an already struggling economy, such huge tax increases would drive out the precise people and organisations that we'd need to keep it all going, and any hope of shooting for full employment (as per standard MMT/MMR monetary policy recommendations) would run hard into the changed landscape that MMT/MMR + UBI create. The market asymmetries introduced by the implicit labour subsidies would not prevent lopsided commodity value alterations from additionally screwing your primary industries. In short, it's a bad idea even if your mass hypnotic powers could get everyone to sit still for it.

                  • (Score: 0) by Anonymous Coward on Monday January 24, @03:08PM (1 child)

                    by Anonymous Coward on Monday January 24, @03:08PM (#1215259)

                    -- Part 2 --

                    "Now you have primary industries caught between punishing taxes and a demotivated workforce, thus a reduction in the functional value of the labour subsidy, meaning that the prices of those primary inputs (say, wheat) rise meteorically compared to the UBI, making for a big inflation driver."

                    I agree completely with this.  However, isn't this true today?  Isn't most farming in the US done by Mexican labor?   My point is that jobs that don't provide economic or social value will not end up being filled by desperate people who will just take any wage.  Instead, only highly productive jobs, highly important or those that are socially valued (think teacher) will be filled. Since crops are highly important the wage would have to go up or it would continue to be done by foreigners.

                    "...but even with the marginal cost structure between California and Oklahoma there has been a lot of movement."

                    I spent way more time on this topic than I intended to because it was really interesting.  There are some major limits to your data and frankly to the data in general.  Without spending serious research time building my own models, I honestly can't say if your view is valid.  But let me point out this happened in the 1990s too and back then they thought it was a good thing:

                    "These outflows reached their peak between July 1993 and July 1994, when over 400,000 more Californians left for other states than moved here from those states... On average, newcomers have higher incomes, more education and are less likely to be married than those leaving California. They are also less likely to live in poverty and receive public assistance. Taken together, these characteristics suggest that California benefits from domestic migration by attracting relatively well educated and high-earning populations..."
                      - https://www.ppic.org/wp-content/uploads/content/pubs/cacounts/CC_800HJCC.pdf [ppic.org]

                    Could this still be the case today?  I simply don't know, I couldn't find good data.  I couldn't find anything on a skill basis, degree basis, wealth/income basis or even age basis.  Yet I do agree there is a net migration outward.  I agree that has been the case for decades.  Interestingly though, the population of California is still increasing (per census 2010-2019 numbers).  I didn't spend any time looking at Oklahoma other than to compare per capita GDP in 2021: 52,913 OK vs 85,460 CA (source: wiki) and taxes.  Per taxfoundation.org state and local taxes per capita in 2021 were: 6,813 CA vs 3,850 OK.  Why would people be running from that level of difference?  Obviously you'd run if you paid 100x average and only needed to move next door to save 100x.  But would you flee your country for a 1.1-2x increase?  I agree some do, but it isn't clear that many do, maybe 3-6k a year and mostly due to burdensome regulations rather than taxes or wealth: https://en.wikipedia.org/wiki/List_of_former_United_States_citizens_who_relinquished_their_nationality [wikipedia.org]  I know Europe is a bit different since the EU has a US state like system for migration but you are leaving your country, including many more dramatic differences like different tax laws.

                    "Again with the separation of politics and economics as if political economics didn't exist..."

                    Maybe I'm not being clear, but what I'm trying to say is assuming that the politics of the country weren't such that it would never get pasted congress, you would use capital controls.  Does that mean UBI couldn't ever happen?  No, just not today.  

                    Capital controls clearly work to some degree otherwise there would never have been a demand to remove them.  They would have just been dead laws like blasphemy still being illegal in some states. There are historic examples like the Asian financial crisis where capital controlled states behaved very differently than those without capital controls, but to be honest this is not my field of expertise. If you have good evidence of when and how they fail, I'm open to learning.

                    "In a sense, you seem to think that I'm arguing about how people wouldn't like it, and seeing that as a political position. It's a political-economic position, pointing out that the reaction of a population to policies placed by governments is a serious factor in policy planning."

                    I've been purposefully vague about UBI and the style implementation as all I was addressing was inflation with a suggestion that MMT might help imagine a solution to resolve inflation issues. Digging in deep at all the various levels, all the policy choices, that is way more work than I intended to cover.  UBI to replace SS/Medicare/etc or UBI to supplement or UBI to slowly replace or ...  The point is there are many different ideas for UBI and to say x is UBI and y is not is to assert a political preference for one over another.  Even if it is a preference in the sense that you prefer to argue against one version of UBI over another.  My point is, your assumptions seems to be based upon a rather extreme version of UBI.  Something like large UBI + all existing benefits.  Charles Murray for example suggests 10k + 3k in medical savings while eliminating all benefits.  Would that have the same response?  I think not, but maybe you think the political economy response would literally be the same?  Let me be clear, I agree that:

                     A. capital controls would have to be implemented in the max version.  For other versions, given the fact that it isn't a tested idea and is politically unpopular, it still likely would need capital controls just to keep the horses from instinctively running out of the barn. 
                    or
                    B. Capitalists would have to believe their backs were against the wall, ala 2008 crisis and want to be saved and wiling to accept some sort of trade for it.

                    Given B didn't even come close to happening, I agree that capital controls would likely be needed today.  But does that mean a B-style scenario is never possible?  I don't think so.  It happened in the 30s and thus SS exists today.  Maybe due to internet and flight, that sort of backs against the wall is less likely to occur since you can just escape with your bitcoin wallet and 12 secret words.  It just doesn't seem obvious to me like it does to you that B can't happen.

                    Let me add one last point as definitions seem to be a reoccurring issue.  My view of political economy in a rough sense is the politics of stuff and the organization required to collectively gather resources to produce that stuff.  Politics roughly is the mix of power, prestige and personality revolving around ideas, intuitions and interests.  Elizabeth Warren for example is full of ideas but no personality.  Trump is full of personality, is excited by the prestige, and cares nothing for institutions.  I don't think you need to even involve the stuff aspects of UBI to decide it is DOA.  That is to say, the loss of prestige, the loss of punishment to reinforce the ideal of work ethics, etc. are enough to kill it without ever considering the resource costs.  My view previously was you were saying the taxes causes people on the margin to run (ala Grover Norquist) but I sort of suspected you were actually sniffing out purely political issues or issues that tend towards politics like power aspects of labor discipline*.  Now I think you were just focused on the max scenario where that concern of taxation is pretty valid.  I don't know if you have the same view on the replacement scenario or any other middle of the road scenario.

                    * There are also political economy aspects of that subject too, but if we are arguing about that then we are just two nerds arguing over exact definitions rather than discussing ideas.

                    - JCD

                    • (Score: 0) by Anonymous Coward on Monday January 24, @06:26PM

                      by Anonymous Coward on Monday January 24, @06:26PM (#1215319)

                      I agree completely with this. However, isn't this true today? Isn't most farming in the US done by Mexican labor? My point is that jobs that don't provide economic or social value will not end up being filled by desperate people who will just take any wage. Instead, only highly productive jobs, highly important or those that are socially valued (think teacher) will be filled. Since crops are highly important the wage would have to go up or it would continue to be done by foreigners.

                      Not really. A lot of manual labour is done by mexicans, but in actual fact on the scale of what we're considering, the bulk is actually done by machinery - particularly relevant when we're considering the context of asset taxation balanced against labour subsidies. If you're ploughing a 10 acre field, you're not running a gang of a hundred workers with mattocks. You're running a tractor with dozens of horsepower at least, probably more - and that only increases with scale. The question isn't whether you have american workers or mexicans (who, if here legally, would be eligible for the UBI otherwise what the hell would the point be?) but whether you have a quarter million dollar tractor run by one farmer, or a farmer, overseers, managers, and hundreds of workers turning the same soil. The argument is unchanged whether they're using mattocks, shovels or broadforks, and only slightly altered by a discussion of horses and oxen.

                      Could this still be the case today? I simply don't know, I couldn't find good data. I couldn't find anything on a skill basis, degree basis, wealth/income basis or even age basis. Yet I do agree there is a net migration outward. I agree that has been the case for decades. Interestingly though, the population of California is still increasing (per census 2010-2019 numbers). I didn't spend any time looking at Oklahoma other than to compare per capita GDP in 2021: 52,913 OK vs 85,460 CA (source: wiki) and taxes. Per taxfoundation.org state and local taxes per capita in 2021 were: 6,813 CA vs 3,850 OK. Why would people be running from that level of difference? Obviously you'd run if you paid 100x average and only needed to move next door to save 100x. But would you flee your country for a 1.1-2x increase? I agree some do, but it isn't clear that many do, maybe 3-6k a year and mostly due to burdensome regulations rather than taxes or wealth: https://en.wikipedia.org/wiki/List_of_former_United_States_citizens_who_relinquished_their_nationality [wikipedia.org] [wikipedia.org] I know Europe is a bit different since the EU has a US state like system for migration but you are leaving your country, including many more dramatic differences like different tax laws.

                      You should also check figures for NY and MA and others who were using those numbers to complain very loudly indeed about SALT deductions and people leaving for places like FL during the time of COVID-19 owing to the potential for remote work - but this is really a distraction from the main event, so to speak, where you're missing the ways that migration happens in business terms without people necessarily moving their domiciles. Microsoft isn't established in Washington - as I recall it's a Nevada corporation. Think of all the Delaware corporations out there. Remember the argument about Boeing moving 787 construction to SC. Ascribing it to burdensome regulations is to obscure the fact that it amounts to a drag on what people want to achieve. This is why companies go location-shopping. Even in cases where old businesses stay put, that doesn't mean that new branches or departments or spin-offs stay in the same place. This is why Austin is booming, for example. All you're doing here is quibbling about the margins on a well-established pattern that recent events threw into sharp relief. But let's ask ourselves: if 1% of people will leave a country where they feel unwelcome for reasons of taxation/regulation/cosmic butthurt at a given level, would you expect that proportion to change if you were to increase the degree of taxation, regulation or cosmic butthurt? Not every jew who could, left the Third Reich - and many of them paid dearly for it. But out-migration was definitely a strong factor.

                      Capital controls clearly work to some degree otherwise there would never have been a demand to remove them. They would have just been dead laws like blasphemy still being illegal in some states. There are historic examples like the Asian financial crisis where capital controlled states behaved very differently than those without capital controls, but to be honest this is not my field of expertise. If you have good evidence of when and how they fail, I'm open to learning.

                      Capital controls can work up to a point. But they don't convert your population into land-bound serfs by themselves either. All you're doing is slowing a determined outbound trickle. (Again, just look at the case of Argentina, desperate to control outbound flow and yet unable to entirely stop it especially in the light of a strong black market.) Want to find a rich venezuelan? You can, but not many of them are left in Venezuela any more. Try Miami instead. However, capital controls do impose substantial costs on business because they're an active deterrent to inbound capital flows; if you turn your country into a roach motel for money, financiers notice that and respond accordingly.

                      I've been purposefully vague about UBI and the style implementation as all I was addressing was inflation with a suggestion that MMT might help imagine a solution to resolve inflation issues. Digging in deep at all the various levels, all the policy choices, that is way more work than I intended to cover. UBI to replace SS/Medicare/etc or UBI to supplement or UBI to slowly replace or ... The point is there are many different ideas for UBI and to say x is UBI and y is not is to assert a political preference for one over another. Even if it is a preference in the sense that you prefer to argue against one version of UBI over another. My point is, your assumptions seems to be based upon a rather extreme version of UBI. Something like large UBI + all existing benefits. Charles Murray for example suggests 10k + 3k in medical savings while eliminating all benefits.

                      I agree that it depends strongly on what you call a UBI, but the problem then comes down to what the putative benefits are. The generally advertised benefits are: a reduction in the complexity of the social safety net, liberation from bullshit jobs, elimination of absolute poverty. This leads us directly to: if you're reducing the complexity of the social safety net, that's because you're replacing it. $$$ If you're liberating people from bullshit jobs it's because you're supporting them without those jobs. $$$ If you're eliminating absolute poverty, it's because what you're providing matches that baseline of expense. $$$. It's really that simple. If you're not paying people enough to live independently, it doesn't fit those criteria. End of story; there really isn't a lot of wiggle room. You could argue that the unemployed of the San Francisco meatpacking district should move somewhere else because you're not paying that level of UBI to them just because of local costs (ditto other expensive places such as Manhattan, downtown Seattle, DC and so on), but even if they're in a trailer park in the unfashionable end of MO, the net delivery of food, housing, clothing and medical care is tens of thousands of dollars per person, per annum, on average. As observed before, you do not and can not know ahead of time who will require how much support, so you have to pay it all to everyone for it to be universal, regardless of clawbacks through tax. This means a headline expense of 6 trillion or more, every year, in the USA. If you're not paying that much, you don't get the advertised benefits. You get Joe Sixpack some cash to pay for his next sixpack. This has nothing to do with political preference, and everything to do with believing that the proponents of UBI mean what they say.

                      Would that have the same response? I think not, but maybe you think the political economy response would literally be the same? Let me be clear, I agree that:
                                      A. capital controls would have to be implemented in the max version. For other versions, given the fact that it isn't a tested idea and is politically unpopular, it still likely would need capital controls just to keep
                                    the horses from instinctively running out of the barn.
                                    or
                                    B. Capitalists would have to believe their backs were against the wall, ala 2008 crisis and want to be saved and wiling to accept some sort of trade for it.
                                    Given B didn't even come close to happening, I agree that capital controls would likely be needed today. But does that mean a B-style scenario is never possible? I don't think so. It happened in the 30s and thus SS
                                    exists today. Maybe due to internet and flight, that sort of backs against the wall is less likely to occur since you can just escape with your bitcoin wallet and 12 secret words. It just doesn't seem obvious to me like
                                    it does to you that B can't happen.

                      Sure, they can both happen. Both would suck. Governments make stupid decisions all the time, which is why South Africa has load shedding and has given up on being the world's leader in mineral extraction, and why the past president (Mbeki? I forget.) called the educated people who were leaving, traitors. This is why India is trying to back away from some of the more aggressively anti-business stances and regulations, and is trying (with success it would be generous to call "mixed") to tempt its entrepreneurial diaspora back.

    • (Score: 0) by Anonymous Coward on Thursday January 20, @07:05AM

      by Anonymous Coward on Thursday January 20, @07:05AM (#1214090)

      The problem isn't inherent to capitalism. The problem is with laissez faire capitalism, the growth of corporate behemoths, and the loss of competition, not with the underlying principle. Adam Smith wrote about individuals pursuing their self-interests resulting in the common good of society being met. In the example you describe, the issue is the separation of ownership and management. A manager, while not directly making the widgets, would still contribute value in ensuring the operation runs efficiently, purchasing raw materials, negotiating the sale of the widgets, training new employees, and plenty of other useful tasks. The problem is the separation of ownership and management, where the owner isn't directly contributing value to the business but still profits. Smith wouldn't have supported what you're describing any more than Marx did.

      The issue isn't capitalism, but the evils of modern capitalism and how they deviate from the original idea. Adam Smith opposed laissez faire capitalism, monopolies, and the existence of corporations. I'm absolutely in favor of capitalism. However, laissez faire capitalism and its modern resurgence due to people like Milton Friedman belong in history's trash can.

    • (Score: 0) by Anonymous Coward on Thursday January 20, @01:05PM

      by Anonymous Coward on Thursday January 20, @01:05PM (#1214136)

      And the trouble with Marx is that he ignored the work of the entrepreneur, which is actually the most important part. The fundamental premise of capitalism is that the most important part of the job is deciding what to make, how to make it, and convincing people to pay for it, and that assembly line workers are pretty much interchangeable.

      The fundamental premise of communism is that the most important part of the job is working on the assembly line, and everything else could be done by interchangeable bureaucrats.

      The entire 20th century was a huge experiment to determine who was right, and the answer is not in doubt. The fact that some people don't like the answer does not change anything.

      Steve Jobs and Elon Musk have ten thousand times more money than their employees because you can't replace them with ten thousand employees.