Econ 101 and Basic Income

submitted 1 year ago by qxcvr

For starters, I am a huge fan of basic income. I think it would be a wonderful way to move
humanity forward but I keep bumping into the basic idea in econ 101 where the more people want a
product, the more the price will rise given a fixed supply.
My guess is that the basic income would be around $1k. Half for shared house or apartment and
half for food/transportation. My thought is that the price of an apartment will immediately rise to
$950 (from 500 or whatever) because quite literally everyone will be able to afford it. I would not
be surprised to see that prices rise over 1000 since most basic incomers would have a room mate
and a part time job. Any thoughts on how long until this price rising trend simply gobbles up the
subsidy leaving people in the same situation as before.
Honestly, it would be a great idea to ( if basic income ever comes about) to buy up low-rent
properties and raise the rates to just below the basic income price. Run it for a few years and sell it
with the new valuation calculated from the raised rents. Any ideas from you guys?

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[]theJalden 7 points 1 year ago
This is where the free market comes in. And why it is actually necessary for this sort of system to
work. While it is the job of a business to maximize profit, they also need to out compete other
businesses. Which would create a downward pressure.
I concede that an increase in prices is a very real fear many advocates of BI. But, all that would
happen is that the economy would reach a new equilibrium, the rates of payout and taxation might
have to be reevaluated early on, but everything should converge into place. Scarcity will still exist,
but distribution will be more limited by supply than by insufficiant funds.
As it stands there are thousands of apartments and housing developments that are unfilled because
people can't afford the rent. With a BI it is conceivable that the owners of the buildings, mostly
banks, will find more profit in renting them out. And it may also be easier to get a loan, because
there is a guranteed income for each individual.

[][deleted] 1 point 1 year ago

Which Is why I suppirt bi and handing them money in a free market rather than expanded welfare.
Weve seen what guaranteed government loans for education have done to its price. No free market ,
huge demand, unlimited money "just sign on the line". Price freeze the rent for 2 years of
adjustment. Renters asset value will rise and few people making capital through rental are a hairs
breath from poverty

[]MauledByPorcupines 1 point 1 year ago

Scarcity will still exist, but distribution will be more limited by supply than by
insufficiant funds.

I don't see the difference. If supply is limited, prices go up, leading to an insufficient fund situation.

[]JayDurst30% Income Tax Funded UBI 1 point 1 year ago

Prices go up, profit goes up, more suppliers enter the market, supply increases, prices go down, new
equilibrium reached.
[]MauledByPorcupines 0 points 1 year ago
If "more suppliers enter the market," then how will "distribution will be more limited by supply?"

[]JayDurst30% Income Tax Funded UBI 1 point 1 year ago

I am assuming that theJalden is referring to the short-term.

[]1standarduser 4 points 1 year ago

If you gave everyone $x000 instead of on other programs (create no new dollars), than prices
remain the same.
Keep wealfare, food stamps, unemployment, as, etc and prices will rise.
101

[]schala09 8 points 1 year ago

It's possible that prices would rise as a result of this transfer. However, it's unlikely to have the
effect you describe, where prices for everything immediately rise to the level of the basic income.
It's just basic supply and demand. Every single landlord in the country would have to collude to
raise prices to exactly the level of the basic income. If any landlords defected, then everyone would
rent from those landlords, and the ones charging too much would have vacancies.
Also, you're making a few other assumptions that I think are dubious. You're assuming that the
supply of housing is fixed, but why would that be true? If there are more buyers in the market, then
prices will go up, but then more sellers will enter the market, and prices will go down.
Additionally, consider someone who currently lives in a shared house because that's all she can
afford. With the basic income, now she can afford to get her own apartment. That means that the
basic income has actually reduced the number of people looking for shared housing.

[]qxcvr[S] 1 point 1 year ago

Supply of housing is fixed. Yeah, you got me there. I hadn't thought of it in that direction... Ok so if
this passes perhaps we could expect a surge of higher quality apartments/condo's being built. This
would balance the prices as 32 year old "boomerang kids" move out of their parents houses and in
with their girlfriends/boyfriends as roomies as opposed to the simple rising in prices of currently
existing stock... :>) I love thinking about this stuff.

[]valeriekeefe 3 points 1 year ago

Actually, you need some ECON 102 (intro to macroeconomics) to answer your question.
So where do we get the thousand-a-month? Decreased government transfers through other
programs, which decreases aggregate demand, and increased taxation, which decreases aggregate
demand.
The net effect on demand of a budget-neutral basic income is near-zero (I won't say zero, because
downward distribution could have an effect on savings rates). This might translate into a small rise
in the price of basic goods and services, as purchases are directed towards them, but profit-seekers
will increase supply in the long-run, mitigating that.

[]m0llusk 2 points 1 year ago

Basic income would not change the price of housing or transportation because people have such
different priorities. People who want to focus on education and books or movies and conferences
will spend the money on that instead and will still be at the low end of the housing market renting
rooms instead of full apartments. Some people avoid driving so they can pay for more house and
others drive the best they can and only rent a minimally acceptable place to sleep.
It is also important to look into location as an issue. Going by population most housing is in
crowded urban areas where anything under a thousand a month is unusually inexpensive and not
always available.
This scenario seems a lot like the idea that Google is about to move to South Dakota idea that gets
floated by business analysts who look at things like tax rates without seriously looking in full detail
at what is going on in the market. Taxes may be lower in South Dakota, but prominent technology
developers mostly live on the coasts.

[][deleted] 1 point 1 year ago

Income elasticity of demand shows that most of the money would be piddled away on luxuries. We
could also simply make it law to not raise rent, which sounds radical now but nixon did similar
things. Thats also a huge huge number 1k a month per adukt citizen? I think the best ive seen within
reason, as in politically viable was around 8k annually or 6 hundred a month, rent if you share a
place and maybe some groceries (obviously not in manhattan or san francisco) . 1k a month when
the average minimum wage worker hardly pulls 14k after current federal taxes is a bit much, that
would definitely incentivize quitting work which just isnt good in a service economy.

[]lameth 1 point 1 year ago

If the current minimum wage worker is making more, then they will see a drop in available money
if they just quit working whole cloth.
Basic is the key concept: you don't get to go out to eat, you don't get to buy new clothes, you don't
get to go on vacation with a basic income. Though, all those things become available with part time
work, if you so choose.

[][deleted] 1 point 1 year ago

Right. Which is why its reasonable to look at monthly stipends or caps. If we had a GBI ay or near
say 14k which is what a minimum wage worker makes after federak taxes then we have definitely
incentivized wholesale quitting of jobs (not that something as non heuristic as say fast food wont
soon be replaced with automation) .

[]Godspiral 1 point 1 year ago

econ 101 was written with a 19th century perspective, and still then as today with a deeply pro
banker bias. With technology and globalization, and structural unemployment somewhere on this
world, we can ramp up production very quickly.
My thought is that the price of an apartment will immediately rise to $950 (from 500 or
whatever)

UBI could be a reduction in benefits to some people such as disability/welfare recipients. Even if its
not, it doesn't make every apartment affordable. On the one hand, those that were working can
probably afford a nicer/more expensive place. On the other hand, those that weren't working, and
don't intend to, can go live in a rural area, as they aren't tied down to job searching criteria.
So there are both up and down pressures on rents. If rents go way up though, you might choose to
rent someone's room, or rent out one of your own, or choose room mates, and builders will make
huge skyscrapers to roll in the rent dough, which will all cause rents to fall back down.