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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: 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.