RE: The Monsters, Inc. Argument for Unconditional Basic Income: How to convert an economy based on fear to one based on joy

[scottsantens]

Wow, you really think you know a lot of things you don't actually know. Okay, so you've never read that Milton Friedman supported UBI. Does that mean he didn't? Or does it mean you just haven't read where he did? Because guess what, he did, and here's what he said when he was specifically asked about UBI:

“A basic or citizen’s income is not an alternative to a negative income tax. It is simply another way to introduce a negative income tax if it is accompanied with a positive income tax with no exemption. A basic income of a thousand units with a 20 percent rate on earned income is equivalent to a negative income tax with an exemption of five thousand units and a 20 percent rate below and above five thousand units.”

So now that you know that, how does it impact your thinking? Milton was right. UBI and NIT are indeed two ways of accomplishing the same thing, and if you read the hyperlink above, you'll better understand that.

You also show that you don't understand what's going on in Alaska. What happens when the oil runs out? The dividends keep on going. That's the entire point of setting up the Alaska Permanent Fund in the first place, which is now over $61 billion in size, to transform a non-renewable resource (oil) into a renewable resource (money). The fund is invested in markets, and the dividend it earns is divided among all Alaskan residents.

Oil is also not the only way of going about creating such a fund. There are many resources that can be used. I suggest looking into them. Here's a good paper about it if you're down for reading a paper to learn lots of new things.

You also show you don't even know what's going on in Finland. It showed mixed results? No it didn't. There ARE NO RESULTS, because the experiment is ongoing to the end of the year. There's not even any preliminary data because there's no access to it yet. Results will be known by the end of next year or early 2020.

You don't know what you think you know. You appear to like to make shit up, or to just accept as fact what others have said, without actually looking into it to verify accuracy.

By the way, your article is just as full of shit as the rest of what you've said here. The very first claim you make is that it's a simple law that if you provide people money all prices rise.

Here's just one example for you to chew on. Let's say a village has an egg scarcity, but people like eggs, so the cost is $1 per egg. Then, everyone is provided UBI. According to your "law" of economics, the cost of eggs should rise.

What happens when a bunch of people use their money to buy chickens? Suddenly, the supply of eggs skyrockets. What happens then? The cost of eggs falls of course, because eggs are now abundant instead of scarce.

Oops, there goes your "law of economics."

By the way, UBI is not about expanding the money supply and dropping new money on everyone (although some people do like that idea). The reason it and NIT are alike, is that both are a net transfer from those above a threshold point to those below a threshold point. That's not inflationary. It's moving existing money from one place to another. And although that can still have some effects on prices, there are a lot of variables involved such that some prices would go up, some down, and some wouldn't be affected at all, and all of these effects also vary by time, such that they can be observed for a matter of days or years depending on other factors.

Markets are not static models. They are complex adaptive systems.

Comments

[ericarthurblair]

First of all that is not a quote of Friedman supporting UBI, that is him comparing them in a way that is selectively taken out of context in a manipulative way. Second, as I explained before Friedman is not God and he doesn't have all the answers EVEN IF HE DID support UBI (which he doesn't). The interview I linked previously shows him comparing UBI with NIT, and why he supports NIT over UBI specifically.

Regarding Alaska, just because a fund is in place to account for minor market oscillations does not mean the money supplying it is infinite. The same goes for any natural resource. There is no such thing as an infinite supply of anything (except maybe ignorance).

Regarding Finland, no official results have not yet been published. However that by no means makes it impossible to observe existing trends and make extrapolations of the success or failure (in this case failure) of the experiment.

By the way "your article is full of shit" is not a refutation of any of the points made there. Let me ask you a question about your simplistic chicken analogy. What then happens to the price of chicken feed? There is always another down chain cost created by inflation. Your premise operates on the illusion that handing out money will magically make more resources available. Furthermore handing out money is destructive to the VITAL price discovery system of which any resource based economy is based off of. Without that there is no accurate way of monitoring scarcity and value of goods, and the systems of production are destructively skewed.

As far as your "net transfer from those above a threshold point to those below a threshold point", that is also known as re-distribution of wealth, and is at the core of Communist ideology, no matter how apolitical you claim UBI to be. These people may be disproportionately wealthy but they are also the people that GENERATE most of the wealth to begin with. At a certain point you keep taking more and more until they no longer have motivations to keep producing at such levels and tax revenue starts falling.

Once again, the problem with wealth redistribution is eventually you run out of other people's money to spend, then the resulting system simply eats itself as has been demonstrated every time in history when such an economic model was attempted on a large scale. Bury it in all the terminology you like, you are still talking about using the state to take from some by force to give to others.

Markets are complex adaptive systems, yes. However resources are not. Resources are quite finite, and you can wave your magic wand over the money all you want and in whatever way, but more money does not equal more resources.

[scottsantens]

handing out money is destructive to the VITAL price discovery system of which any resource based economy is based off of.

To the contrary, there is no price discovery possible if people don't have money to signal demand for goods and services.

I suggest reading this to get a bit deeper into just how badly markets can be distorted when a large group of participants have no means of participating in the price discovery calculation mechanism.

The price system may run into trouble on the low end of the economic spectrum: How can someone send a price signal when they don’t have any money at all? How can the comparatively feeble price signals of the very poor compete with the price signals of the middle class, which are strong and (happily) getting stronger?

It’s possible, and tempting, to make gross simplifications of this situation. But the impaired ability of the poor to signal via the price mechanism has some predictable effects, and they aren’t especially good. We might say, for example, that inexpensive, high-quality basic consumption goods will be underprovided, in favor of conspicuously non-basic goods. The latter signal at great cost that the consumer belongs to a higher social class. That’s a big problem if you’re poor. (Revealing, too, is that the word “basic” itself has acquired such a negative connotation in recent years.)

We might further hypothesize that when charity is left to the upper classes, a good deal of supposed charitable expenditure will be devoted instead to virtue signaling. Charity will tend to be demonstrative rather than helpful, a subject I’ve discussed before. Charity in the form of simple cash transfers to the indigent will almost certainly be more efficient, and Hayek’s theory of price signals explains why this is so, and this would apply as well to state-provided charity as private.

In short, it seems that an unconditional basic income might do three important things in light of the Hayekian price system:

1. A UBI would allow the indigent to communicate their needs by means of efficient price signals, rather than relying on inefficient charities to do the exact same thing. The needs of the indigent would therefore be met more effectively, as the economy re-ordered itself to match them.

1. A UBI would allow the price signals of the indigent to compete somewhat better with the signals being sent by the still-rising middle class. May our middle class rise forever, but long as they do, the gap between them and the utterly indigent is going to grow. That’s a real problem as regards the communication of local knowledge in the economy, but it’s also a problem that a UBI could address.

1. The unconditional nature of a UBI would prevent the market distortions inherent in conditional grants, which always incentivize or disincentivize particular behaviors. The incentives that are set up by means of conditional grants are the product of politics, and to the extent that politics intrudes on the economic process, it crowds out the price signals that communicate consumers’ actual needs. Hayek argues that such intrusions should be resisted with great force, and a UBI might be one means of doing so.

By the way, you're welcome to read the actual interview with Milton Friedman instead of continuing to pretend you know what he was thinking.

[ericarthurblair]

So by your logic if there is no UBI suddenly money ceases to exist completely and we can't have price discovery? You are quite the contrarian. That works good for ideology, not regarding the laws of economics so much. Price discovery does not cease to exist just because certain people don't participate in the market.

The fact that you linked this segment of an article as an argument shows me you nor the author have any understanding of the definition or function of price discovery (or perhaps are willfully perverting it).

Price discovery is the method by which producers are signaled the supply and demand of limited resources and therefore are able to price them correctly. Certain portions of people not participating in the market (even if true), do not prevent the mechanism of price discovery of RESOURCES. An individual person or even groups of people's inability to "price signal" as the article puts it is irrelevant to the price discovery mechanism because some one else wants those resources more and they are willing to pay for it. No amount of waving your magic money wand will make producers want to sell resources for less than what they could realistically get.

In short price discovery sets the value and price of resources. With out it there is no reliable way to do so and production is interrupted resulting in over or under supply causing instability and shortages long term, for everyone.

I have read enough of Friedman to know he did not support UBI, and enough of your work to know you hear what you like and discount the rest. That article is more contrarian tripe again jam packed with rhetorical and ideological arguments sprinkled with economic terminology in a sad attempt to give it credence.