Why a Universal Basic Income Will Not Solve Poverty

[lordsphinx]

I think that's the problem a lot of people fail to focus on. They all believe that if they gouge prices everyone else will too. It seems odd that those who complain about rising wages and UBI are usually the ones who use competition among like businesses as reasoning. If he doubled the rent from $600 to $1200 and expected 100% occupancy because of the UBI and I increased mine from $600 to $800 I'm pretty sure that people are going to come live in my building instead of his.

You’re absolutely right, they would go to your building instead of mine. However, if you could get $800 instead of the $600 you were getting before, are you saying that you would still keep it at $600? If you raised the price to $800, but found that you could raise it further still to $900 and keep 100% occupancy, you’re saying you wouldn’t? That’s the thing… if people have more available money, then you can raise your prices… period. Of course nobody is going to double the rent they’re asking, I pulled numbers out of my ass. That said, the principal remains the same. If there is more money to be earned from a market sector, then those in that market sector will find the most profitable price to charge.

[May90]

What? But that is simply government manipulating the market, and also practically unenforceable over the long run.

Thomas Piketty points out rightly that Capital always out paces labour, what does one do with all that money? Horde and and manipulate elections if recent history is any indicator. Those laws will be sabotaged, not applied and be litigated to meaninglessness. The problem is Capital has time and money to eventually undo all reforms.

It is hard to make laws that will address and prevent all these issues from happening; I don't think any country nowadays has laws that consistently prevent rich corporations from affecting elections, manipulating the market, etc. That said, the laws we already have probably work much better than if they didn't exist: we would have a huge monopoly in every field, destroying all competition easily and doing whatever they want in politics.

There is also a difference between government directly manipulating the market for its own gain (the extreme is what was taking place in Mussolini's Italy, where the government essentially functioned as the global corporation and did whatever it pleased), and simply overseeing a set of laws aimed at preventing the monopolies/oligopolies from suppressing honest competition. As you mentioned, indeed, the corporations with time try to undo all those laws; people, in turn, should control the government and force it to keep those laws in place and working, in order to not give the power away to corporations.

[Captain N]

You’re absolutely right, they would go to your building instead of mine. However, if you could get $800 instead of the $600 you were getting before, are you saying that you would still keep it at $600? If you raised the price to $800, but found that you could raise it further still to $900 and keep 100% occupancy, you’re saying you wouldn’t? That’s the thing… if people have more available money, then you can raise your prices… period. Of course nobody is going to double the rent they’re asking, I pulled numbers out of my ass. That said, the principal remains the same. If there is more money to be earned from a market sector, then those in that market sector will find the most profitable price to charge.

You would have to be under the impression that you would keep 100% Occupancy with gouged prices. You wouldn't...In fact I guarantee you would see more fluctuations among other landlords instead of a straight double up. Your argument is based on a fairy tale that you could double your price, everyone else would do the same, and you would still maintain your entire population. All another landlord in the area would have to do is drop his price slightly and you're out of all your tenants.....people will always try to pay less for the same product if possible.

[Daelak]

My point is, the wealth inequality is not the cause of the problem, it is not something that greedy rich corporations manually infuse to get richer. The wealth inequality is a natural consequence of the way the economy works, it will always be there; however, it can be natural, in which it simply reflects that some people are more prone to work hard than others - in which cases there is nothing wrong with it - or unnatural, in which the wealth is redistributed in the way that benefits the rich and puts the poor down - in which case it is a big problem. In either case, the inequality isn't just created out of a thin air, it is a consequence of the internal economical mechanisms - and it is those mechanisms that should be fixed in order to solve/reduce the problem of poverty, not the inequality itself. Manually solving inequality by taking money away from the rich and giving it to the poor doesn't work.

It is the cause. Human beings are irrational, and nothing is more textbook irrational than rationalizing the need for hundreds of millions, billions of dollars for an individual. The more wealth inequality, the slower the velocity of money through the economy, which is then realized as slower wage growth, shortage of private and public investment, and lower returns in the equities markets. Taxing the wealthiest among us and putting those funds into new infrastructure and investment into 21st century trends and technology will always have a greater return, both for the individual billionaire and society at large, than delusionally defending an economic system that is self destructing because you cannot reconcile your political beliefs to observable reality.

[Mayhem]

Most profits go back into the economy in the form of businesses and real estate. Most of it isn't horded as fiat or in an island account, though there is a lot of shady schemes, it's important to keep overall perspective.

Ah, you have to present some back up to that, because that seems highly unlikely.

[Daelak]

Most profits go back into the economy in the form of businesses and real estate. Most of it isn't horded as fiat or in an island account, though there is a lot of shady schemes, it's important to keep overall perspective.

All the wealth that is not being consumed (passed through the economy) or in an active participatory role in business operations (start ups, payroll, R&D) is an inefficiency. The vast majority of wealth held by the most wealthy is doing neither of those things, which only hurts both the WEATHLY future returns and the rest of the economy, creating the vast gulf in wealth inequality we have today.

[lordsphinx]

You would have to be under the impression that you would keep 100% Occupancy with gouged prices.

The thing is that I would retain 100% occupancy, that’s the thing. Why do you think Apple, Samsung can charge $600 for a phone that costs $60 to make? Again, price is set at what people are willing and able to spend, they’re not set at a price lower than the competitions. If that was the case, Samsung would set their price at $200 and Apple would no longer sell phones. You’re arguing for idealistic economics, not actual real world economics.

[IIamaKing]

Stopped at 10k to 300 million Americans. 300 million is our rough population, not the number of adults who would receive a payment. If they cant be bothered to get that right how much else is flat out wrong.

[Captain N]

The thing is that I would retain 100% occupancy, that’s the thing. Why do you think Apple, Samsung can charge $600 for a phone that costs $60 to make? Again, price is set at what people are willing and able to spend, they’re not set at a price lower than the competitions. If that was the case, Samsung would set their price at $200 and Apple would no longer sell phones. You’re arguing for idealistic economics, not actual real world economics.

No you wouldn't retain 100% occupancy because housing costs are not the same as luxury item costs unless you're going to start accepting Credit Card payments for rent expenses. People purchase luxury items on credit cards a majority of the time and most luxury items are paid over time or paid during tax return season. Doubling your rent costs would be a disaster for you and a boon for me. People could likely afford to stay at your location yes...but if I have the same size apartments at $400/month cheaper do you really think they're going to stay there? I'd like to believe that most consumers aren't going to pay an extra $400/month on the same size living space you're offering when I'm offering the same for cheaper.

[lordsphinx]

No you wouldn't retain 100% occupancy because housing costs are not the same as luxury item costs unless you're going to start accepting Credit Card payments for rent expenses. People purchase luxury items on credit cards a majority of the time and most luxury items are paid over time or paid during tax return season. Doubling your rent costs would be a disaster for you and a boon for me. People could likely afford to stay at your location yes...but if I have the same size apartments at $400/month cheaper do you really think they're going to stay there? I'd like to believe that most consumers aren't going to pay an extra $400/month on the same size living space you're offering when I'm offering the same for cheaper.

You’re forgetting that the demand for apartment housing will go up. More people will be living on their own vs with their parents, people will choose to live alone vs with roomates, etc etc. The only way you would be able to take tenants away from someone charging more is if you had empty apartments in the first place.

[Endus]

But see, this isn’t how prices are set. No matter what it is I’m offering, the formula is the same:

Step #1: How much is the consumer willing / able to spend on my widget?
Step #2: Am I able to supply my widget for that price or less while making a profit?
Step #3: If yes to #2, then proceed. If no, then do not proceed.
Step #4: Reduce costs of producing / maintaining my widget as far as possible
Step #5: Profit

If there is more money is the hands of the consumer, than the consumer will be willing and able to spend more on my widget. I will not keep my price the same. This is simple economics, and thinking that I’m the only one who would raise the cost of my widget is naïve.

It's overly simplified. If I have twice as much money available, that does not mean I'm willing to pay twice as much for your product/service. I am going to expect more for that higher price. Same reason if I get a new job making twice as much money, you can't just double my rent and have me not react.

[lordsphinx]

It's overly simplified. If I have twice as much money available, that does not mean I'm willing to pay twice as much for your product/service. I am going to expect more for that higher price. Same reason if I get a new job making twice as much money, you can't just double my rent and have me not react.

Just forget about the numbers themselves for a second (I doubled the cost for effect, not because of any super technical voodoo math). If the cost goes up at all, then the premise holds true.

[PosPosPos]

Conservatives love to make the fallacious argument that doing x won't solve problem y, therefore x shouldn't ever be done even though there are other significant benefits overall - when it's also never touted to do anything of that sort to begin with.

It's like saying people shouldn't eat because it doesn't prevent them from dying from old age one day, and ignore the fact that it keeps them living for the rest of their lifespan.

[Captain N]

You’re forgetting that the demand for apartment housing will go up. More people will be living on their own vs with their parents, people will choose to live alone vs with roomates, etc etc. The only way you would be able to take tenants away from someone charging more is if you had empty apartments in the first place.

Actually with an increase in disposable income the demand for actual houses would increase. Renting only takes priority when there is no available housing at reasonable prices as a mortgage is usually cheaper than rent (area depending). If the price of your apartment jumps to $1200/month and people can now afford a mortgage of that rate or lower for a larger and/or better house you're still out of tenants. People would still grab apartments if the price was right...but they're more than likely not going to pay the same for a rental when they can pay less elsewhere or pay the same for their very own home/condo.

[Daethz]

Wait so you would get the income even if your already a billionaire?
Lolno.

Basic Income only works with a excessively high tax rate for the rich and a cuttoff point for benefits when you reach a certain personal income.

[PosPosPos]

Just forget about the numbers themselves for a second (I doubled the cost for effect, not because of any super technical voodoo math). If the cost goes up at all, then the premise holds true.

Well, then maybe you should show some evidence that inflation will outpace the increased income. Which requires actual math, not an opinion of some random whoru on the internet throwing out random and unsupported numbers for the sake of fueling his own flawed agenda.

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Wait so you would get the income even if your already a billionaire?
Lolno.

Basic Income only works with a excessively high tax rate for the rich and a cuttoff point for benefits when you reach a certain personal income.

It doesn't matter in the bigger picture, there aren't that many billionaires+++ and giving them a few thousand extra isn't going to make a difference in their wealth.

[Endus]

Just forget about the numbers themselves for a second (I doubled the cost for effect, not because of any super technical voodoo math). If the cost goes up at all, then the premise holds true.

Unless you're claiming that prices will change at a 1:1 ratio, then it doesn't hold true.

And if you are, then that's just straight-up incorrect.

[melodramocracy]

Where would that money come from?

Same place it comes from now. From a consumer point of view, money is tied to nothing other than a constantly changing perception of value. The more automation takes hold of an economy, the less value money has (or should have), because there will be fewer people earning it.

In the shorter term, automation will eventually require social safety nets to be increased (such as the topic of this thread), or, businesses will have headcount requirements that need to be met. Because yes, most of this does boil down to the collection of tax dollars at various levels.

In the very long term, automation will actually the main driver that ends capitalism as we currently practice it.

[lordsphinx]

Unless you're claiming that prices will change at a 1:1 ratio, then it doesn't hold true.

And if you are, then that's just straight-up incorrect.

I’m saying that not just rent, but all good and services would cost more, because people would have more to spend. The end result a decade or two down the road is a new poverty level that’s higher than it is right now. The term inflation is used to discourage printing money from thin air (rightfully so), but taking money from sitting in some hedge fund manager’s account and putting it where it would be spent is effectively the same thing. You’re injecting money into a consumer market, one way or the other.

[May90]

It is the cause. Human beings are irrational, and nothing is more textbook irrational than rationalizing the need for hundreds of millions, billions of dollars for an individual. The more wealth inequality, the slower the velocity of money through the economy, which is then realized as slower wage growth, shortage of private and public investment, and lower returns in the equities markets. Taxing the wealthiest among us and putting those funds into new infrastructure and investment into 21st century trends and technology will always have a greater return, both for the individual billionaire and society at large, than delusionally defending an economic system that is self destructing because you cannot reconcile your political beliefs to observable reality.

I don't think anyone rationalizes the need for a person to have billions dollars; our needs probably aren't even close to earning $20k a year, and that's well below the median salary in most First World countries.

However, in a healthy economy the rich don't become rich by stealing, exploiting, etc. The rich become rich by working on businesses that make them rich; those businesses provide supply for fulfillment of certain demands of consumers. Taxing the rich strongly makes it much harder for them to develop their businesses that, among other things, also create jobs for, among others, the poor - while doesn't benefit the poor much, since redistribution of wealth towards equality causes the prices to skyrocket. There is a reason all those communist experiments, with the end goal of achieving total equality in wealth distribution, resulted in just everyone being extremely poor. Granted, that was caused not only by economy, but also by failed political systems - but the two are somewhat related.

I think equality in wealth distribution is a good thing, as long as it is natural and is a result of natural processes in the economy. When it is created manually, by taking away from the rich and giving out to the poor - the economy stagnates. Some wealth redistribution, welfare and such, is a good thing, because more people become able to be involved in the economy, enriching it - but too much of it, and we get a situation in which the price growth leads to simply more people being in tough economical spots.