Giving everyone in the economy extra money just causes the price of everything to inflate as goods and service providers increase charges, negating any purchasing power increase you think you were creating.
Do you believe in the power of the market? If I start charging more for food at my restaurant, some other guy will say, “hey, I could get his customers if I charge less, and I’ll still be making a profit.”
Half joking, I don’t believe in just the market, but with regulation I do think it’s powerful and useful.
I also think businesses raising their prices has more to do with hyping inflation and a lack of alternatives. I think we’d see a lot more entrepreneurial activity if people weren’t afraid of losing healthcare or being unable to provide for themselves.
Unfortunately monopolies, duopolies, partnerships, conglomerates, and similar, across so many of the essential goods and service markets means ‘perfect markets’ where competition drives prices down, rarely exist in practice. That’s not even mentioning all the other factors which work to drive inflation, like constant demand for endless growth. UBI doesn’t solve anything. These are systemic issues which require systemic change.
There is an almost infinite number of models and policies a country could implement to address wealth inequality, and UBI would be at the bottom of that list in terms of effectiveness. UBI is not the tool for that job. Depending on the country you’re talking about and their current economic and monetary situation, you could… introduce legislation that restricted CEO incomes to a maximum percentage greater than a companies lowest paid employee? … increase tax rates on large accumulated wealth sums over a certain threshold like trusts and superannuation? … Increase taxes on sources of wealth that aren’t direct wage income, which is how most wealthy make their money in the first place? … Criminalise price gouging by preventing a company from raising prices when they have posted a profit in the last financial year? Literally thousands of more sensible and effective things you could change that would have a positive impact on addressing wealth inequality.
What? Raising minimum wage doesn’t significantly affect inflation because it’s only happening to a portion of the population - the lowest paid. The fact UBI isn’t means-tested is precisely why it causes the inflation problem. When everyone gets an X% increase in their purchasing power, markets auto adjust prices to match, because why wouldn’t you? (Source: am Australian, we have famously high minimum wages)
First of all, everyone does not get an X% increase in their purchasing power. That could only happen if everyone had the same income. And unless the government is just printing money to pay for the program, they’re paying for it with higher taxes, so the net affect on wealthier people with be a decrease in their net income.
Second, even if a government was crazy enough to pay for it by printing money, the affects on buying power are pretty much the same as with taxes: rich people’s money loses a lot more value than poor people’s does simply because they have more of it.
Third, are you seriously suggesting that taking money from group A (or devaluing their money) and giving it to group B won’t make the group B more wealthy and group A less wealthy?
Finally, competition in markets is a thing. A business can’t just increase its prices without the risk of driving away customers. And even if a business somehow knows your financial situation well enough to know you just got an $X increase in your income, they still have no idea how much of that money you’re willing to spend on that business’s higher prices.
“First of all, everyone does not get an X% increase in their purchasing power”. Yes they do, that is the definition of a UBI. Currently, everyone has different levels of income. if you give everyone an equal amount of additional income, you have by definition increased everyone’s purchasing power by X%.
“rich peoples money loses a lot more value than poor people’s does simply because they have more of it”. I don’t understand what you are trying to say here.
“Are you seriously suggesting that taking money from group A and giving it to group B won’t make the group B more wealthy and group A less wealthy?” No? I haven’t suggested that at all? You’ve jumped a lot of hoops to get from what I’ve said to this conclusion. Firstly, who said UBI must be funded through taxation? Secondly, presuming the model you have described (not UBI, but wealth distribution via taxation), it’s important to define what your measure of ‘wealth’ in this scenario. Of course if you take money from group A, and give it to group B, group A has less and group B has more. But that’s only half the equation. If the cost of everything jumps because the market corrects itself relative to purchasing power of consumers, the ‘value’ of that so-called ‘wealth’ at the end of the day may not have changed. The question at hand is whether UBI will reduce cost of living pressures, and the relative cost of goods and services is a part of that equation which you need to factor in when evaluating outcome.
“A business can’t just increase its prices without the risk of driving away customers”. Correct. See my previous comment on all the ways this isn’t true in practice when considering market dominant forces like monopolies and similar. Economics is complicated. UBI is not the solution you think it is. You may be confusing it with Wealth Distribution, which is what taxation seeks to address (among other things)
“First of all, everyone does not get an X% increase in their purchasing power”. Yes they do, that is the definition of a UBI. Currently, everyone has different levels of income. if you give everyone an equal amount of additional income, you have by definition increased everyone’s purchasing power by X%.
This is gonna be a really tedious conversation if I have to explain arithmetic to you.
If Johnny has $100 and Suzie has $10, and I give them both $5, Johnny’s wealth has gone up by 5% and Suzie’s has gone to by 50%. If, furthermore, I pay for it by collecting $9 in tax from Johnny and $1 from Suzie, Johnny has lost $4 overall while Suzie has gained $4, and their combined wealth hasn’t changed a bit.
Giving everyone in the economy extra money just causes the price of everything to inflate as goods and service providers increase charges, negating any purchasing power increase you think you were creating.
Do you believe in the power of the market? If I start charging more for food at my restaurant, some other guy will say, “hey, I could get his customers if I charge less, and I’ll still be making a profit.”
Half joking, I don’t believe in just the market, but with regulation I do think it’s powerful and useful.
I also think businesses raising their prices has more to do with hyping inflation and a lack of alternatives. I think we’d see a lot more entrepreneurial activity if people weren’t afraid of losing healthcare or being unable to provide for themselves.
Unfortunately monopolies, duopolies, partnerships, conglomerates, and similar, across so many of the essential goods and service markets means ‘perfect markets’ where competition drives prices down, rarely exist in practice. That’s not even mentioning all the other factors which work to drive inflation, like constant demand for endless growth. UBI doesn’t solve anything. These are systemic issues which require systemic change.
UBI is meant to come from taxing wealthy people more.
Where it comes from is beside the point. It’s not a solution to reducing cost of living.
I’m all for systemic change, and UBI is one. What systemic changes do you have in mind?
There is an almost infinite number of models and policies a country could implement to address wealth inequality, and UBI would be at the bottom of that list in terms of effectiveness. UBI is not the tool for that job. Depending on the country you’re talking about and their current economic and monetary situation, you could… introduce legislation that restricted CEO incomes to a maximum percentage greater than a companies lowest paid employee? … increase tax rates on large accumulated wealth sums over a certain threshold like trusts and superannuation? … Increase taxes on sources of wealth that aren’t direct wage income, which is how most wealthy make their money in the first place? … Criminalise price gouging by preventing a company from raising prices when they have posted a profit in the last financial year? Literally thousands of more sensible and effective things you could change that would have a positive impact on addressing wealth inequality.
Those sound great! Thanks for sharing them.
That is a concern, but your argument is basically every business is going to be greedy no matter what. Pretty bleak outlook of the human condition.
Maximising profit is unfortunately the principle driving factor of modern commerce
We don’t have ubi right now and prices continually rise. You dumb?
Which school of economics did you attend?
Without doxing myself, an Australian University
Quit recycling debunked arguments against minimum wage.
What? Raising minimum wage doesn’t significantly affect inflation because it’s only happening to a portion of the population - the lowest paid. The fact UBI isn’t means-tested is precisely why it causes the inflation problem. When everyone gets an X% increase in their purchasing power, markets auto adjust prices to match, because why wouldn’t you? (Source: am Australian, we have famously high minimum wages)
First of all, everyone does not get an X% increase in their purchasing power. That could only happen if everyone had the same income. And unless the government is just printing money to pay for the program, they’re paying for it with higher taxes, so the net affect on wealthier people with be a decrease in their net income.
Second, even if a government was crazy enough to pay for it by printing money, the affects on buying power are pretty much the same as with taxes: rich people’s money loses a lot more value than poor people’s does simply because they have more of it.
Third, are you seriously suggesting that taking money from group A (or devaluing their money) and giving it to group B won’t make the group B more wealthy and group A less wealthy?
Finally, competition in markets is a thing. A business can’t just increase its prices without the risk of driving away customers. And even if a business somehow knows your financial situation well enough to know you just got an $X increase in your income, they still have no idea how much of that money you’re willing to spend on that business’s higher prices.
“First of all, everyone does not get an X% increase in their purchasing power”. Yes they do, that is the definition of a UBI. Currently, everyone has different levels of income. if you give everyone an equal amount of additional income, you have by definition increased everyone’s purchasing power by X%.
“rich peoples money loses a lot more value than poor people’s does simply because they have more of it”. I don’t understand what you are trying to say here.
“Are you seriously suggesting that taking money from group A and giving it to group B won’t make the group B more wealthy and group A less wealthy?” No? I haven’t suggested that at all? You’ve jumped a lot of hoops to get from what I’ve said to this conclusion. Firstly, who said UBI must be funded through taxation? Secondly, presuming the model you have described (not UBI, but wealth distribution via taxation), it’s important to define what your measure of ‘wealth’ in this scenario. Of course if you take money from group A, and give it to group B, group A has less and group B has more. But that’s only half the equation. If the cost of everything jumps because the market corrects itself relative to purchasing power of consumers, the ‘value’ of that so-called ‘wealth’ at the end of the day may not have changed. The question at hand is whether UBI will reduce cost of living pressures, and the relative cost of goods and services is a part of that equation which you need to factor in when evaluating outcome.
“A business can’t just increase its prices without the risk of driving away customers”. Correct. See my previous comment on all the ways this isn’t true in practice when considering market dominant forces like monopolies and similar. Economics is complicated. UBI is not the solution you think it is. You may be confusing it with Wealth Distribution, which is what taxation seeks to address (among other things)
This is gonna be a really tedious conversation if I have to explain arithmetic to you.
If Johnny has $100 and Suzie has $10, and I give them both $5, Johnny’s wealth has gone up by 5% and Suzie’s has gone to by 50%. If, furthermore, I pay for it by collecting $9 in tax from Johnny and $1 from Suzie, Johnny has lost $4 overall while Suzie has gained $4, and their combined wealth hasn’t changed a bit.