I wouldn't be surprised if this could actually work.
"Being poor is expensive" as it is said and it is a vicious cycle as well. Because not being able to pay the total upfront cost of - in the long run - cheaper solutions, they can be stuck paying smaller amounts but more in total over time. People with cashflow problems might not be able to pay in time, leading to dunning costs cutting into their budgets. Cashflow problems might make them pick single tickets for the bus while a monthly pass would be cheaper on the long run. Not being able to pay for maintenance of the car now? Pay for a more expensive repair later instead. Same goes for health issues.
Once they are able to avoid these costs for a while, they might save enough that they are no longer actually poor (albeit still at risk of becoming trapped in this cycle again when unexpected expenses appear).
Sir Terry sums this problem up quite nicely in Men at Arms:
"The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness."
I love Terry Pratchett, but is there any evidence that this is true in our modern economy? As opposed to just being a cute story that reinforces our existing biases that "the rich get richer, the poor get poorer" which is demonstrably false over the past few hundred years?
I bought a 7 yr old $8000 dollar car, that's still going strong 12 years later, if I'd bought a $40000 car, could I expect it to last 512= 60 years? And that's being generous and assuming a linear relationship. If we use the example from the book, spending 5 times as much should give me a car that lasts up to 10 times* as long, so 120 years!
The Cost of Being Poor is a well known comparative study of the urban poor in Indiana, United States that addresses this directly. There have been numerous others.
These are people who definitely could not get together the $8,000 for a 7 year old car in good condition, or get a loan at all besides a Payday one. They live paycheck to paycheck.
The question is not just a quantitative one of the car cost, depreciation, years of use. It’s a qualitative one, as in quality of life. A poor person who can only afford to take the bus loses time sitting on a bus instead of grocery shopping, taking care of their kids, etc. and needs to exert mental energy to plan their day around bus rides and schedules. They generally “pay” in numerous ways besides the pure value of the vehicle vs. some other more expensive vehicle. Above all, they pay in mental bandwidth. They spend most of their mental energy worrying, planning, and stressing about being poor. That distinction can help clarify this argument a lot, and that old boot example doesn’t capture that.
Not to mention the fees that you typically face when poor, like bounced checks and exorbitant payday loan interest charges.
Or medical costs because your low-paying job offers minimal health insurance.
Or extra costs because the government system designed to help those with low income is crushed under the weight of COVID, so your benefits take months longer to arrange and arrive (something a friend of mine is battling right now).
> These are people who definitely could not get together the $8,000 for a 7 year old car in good condition, or get a loan at all besides a Payday one. They live paycheck to paycheck.
I also thought it was a bit funny that the parent poster cited an $8k purchase in a discussion about poverty. But either you're being a bit disingenuous yourself here or else you are similarly out of touch. Since you should know one can get a well-functioning used car for a lot less than that.
Also in many countries, people take public transit at all income brackets. I've done it in the US for long periods myself. Personally I find it less stressful than driving in traffic.
"I love Terry Pratchett, but is there any evidence that this is true in our modern economy?"
Certainly. It is well-documented that the supermarket chains that pop up in economically disadvantaged parts of the USA while established supermarkets pull out, are actually more expensive. While the package on the shelf might seem the same price as in a more mainstream supermarket, it in fact holds less contents.
> While the package on the shelf might seem the same price as in a more mainstream supermarket, it in fact holds less contents.
They are often just the same packages at higher prices, the more “upscale” supermarkets can make up for the lower margin on goods both stores sell with higher margin goods that wealthier clientele will buy alongside core goods (things like in-store cut deli meats and cheeses, high-end alcoholic beverages, gourmet cheeses, in-store kitchen prepared ready-to-eat food, etc. When both kinds of stores exist within a radius where they compete with customers—the wealthier being more mobile—they use this fact in marketing, too, because this also let's them win same-good price comparisons.
Some brands offer products at dollar stores that are identical to traditional store products except by volume; a hair or so less weight/volume per buck. It adds up.
My Mephistos are excellent shoes, which I wore constantly around the world. Not so much as a stitch is out of place. When the soles wear out, they can be repaired.
Going on four years now, my father had a pair for two decades. If I were wearing sneakers from Payless, I'd be a few pairs in by now, no question about it.
That particular brand is a bit on the luxury side of the tradeoff spectrum, but it remains the case that you can spend a couple hundred on lifetime shoes, or fifty bucks on shoes for a season.
A lot of things are like this. Cars aren't one of them.
This seems like something that is obviously not linear. There are prices that are about quality, then there are prices that are about style, and other objectives.
A $20 shovel is going to be more durable than a $1 shovel. A $15000 solid gold shovel is not going to be, as you arent paying for durability anymore.
It doesn’t have to be a durable good, it can be a service.
I live in NYC. A monthly unlimited subway pass is 120 dollars. If you can’t afford that lump sum all at one, you can 2.75 pay per trip. If you use the subway 2 times a day (to and from work) for 30 days, that’s 165 dollars... more than the upfront of an unlimited pass.
And this is where credit is useful - if you can't afford the $120 lump sum, but you _could_ afford the $165 spread out, then it should be possible for somebody to profit off this arbitrage.
They lend you $120, and ask for slightly less than $165 back - let's say $145. So you save up the money you normally would have spent on tickets daily and at the end of the month, you pay back the $145, and you have saved yourself $20, while the lender made a return on investment of about 20% (a very respectable amount, given it's unsecured).
That’s the tricky part with interest rates. They have to make sense in gross dollar terms as well as percentages.
That’s why merchant credit card fees are painful for small shops. Ie 3% + 35 cents isn’t so much until your average ticket size is $5 and all of the sudden 10% of your revenue is going to intermediary.
There’s fixed cost associated with moving cash around so that 20% return is likely negative under current infrastructure.
So credit in this case would just be a way for a third party to benefit from the disparity without altering the situation much. That doesn't sound very useful to me.
Work adds an artificial limit to the number of times the subway is used. The point is, if you go out once a day using the subway, it’s costs you more if you can’t bare the upfront cost.
The claim is not that it's a linear relationship, it's a step function. There's a threshold where you spend enough to get a high enough quality that it lasts longer and saves money. Beyond that you reach diminishing returns and you're paying for minor luxuries or status symbols.
But that step is a hell of a lot lower down the price ladder than your "stereotypical average yuppie" with their 4Runner full of Whole Foods groceries they're gonna mix in their Kitchenaid says it is.
food nutritional quality i can afford the 1$ greaseslab but not the carrots
with shelter think about having to live farther from the business district spending more money on a longer bus to get to work.
cars i buy a junker cause that's all i can afford it breaks, i spend more money to fix it all because i couldn't afford the extra 1000 to buy a slightly more reliable car.
>As opposed to just being a cute story that reinforces our existing biases that "the rich get richer, the poor get poorer" which is demonstrably false over the past few hundred years?
The point of this story is to let the upper middle class feel smug about driving 4Runner instead of SantaFes and wearing Levis instead of Walmart jeans. It's saying that consuming "nice" things is right and justified by the numbers. The "the rich get richer, the poor get poorer" theme is just a sideshow for plausible deniability. The upper middle class love the quote because it's telling them they're doing it right. The fact that it may confirm their biases is tangential.
yes. if you have money you invest and get richer. poor might not get poorer, but for them it is problematic to save any significant amount. One example: buying a house vs renting it. (where I live amount for rent is approx the same as interest amount for mortgage). one who bought a house has a cushion (house is an asset) for retirement, one who always rented has to continue to rent.
You get well into the point of diminishing returns fairly quickly with cars. A poor person might not even be able to scrape one or two thousand together for a car, let alone the cost of maintenance, fuel etc.
If you can deny the rise in inequality that is at this point obvious, the decimation and precarity of the lives of service workers and former manufacturing workers, the unhealthiness of what should be the most univerally gleaming and glittering society in the history of humanity, I don't know what to tell you.
As a very real example, my family was not very well off growing up. My parents could typically only afford used Chrysler cars. The result was invariably getting stuck with vehicles that quite frankly were at least as expensive as the competition after repair costs and extra insurance.
And, speaking as someone who thankfully doesn't have to worry nearly as much about such things thanks to the sacrifices my parents made...
The DIFFERENCE in quality of life changes too. Its not just the cost of buying the cheap stuff every time, it is also that frustration of watching it break over and over.
Also, dare I say. One of the biggest silent accelerators of our class divide (financially) is this dilemma.
In the 40s-60s stuff was built to last. Lower income families could save and buy an expensive appliance but know it would last or at least be repairable. A fridge was a real investment. A set of silverware had the extra couple mm of thickness or even a square handle so it wouldn't bend at the first sign of trouble.
Now? Its all disposable, so those who have money to keep up with planned obsolescence will pull ahead. Consumers save 5-10$ on a 100$ tool, but now it lasts 3-5 years instead of 30-50
On the surface, I assign this to nostalgia and maybe survival bias;
Automobiles alone provide an example where, in the the 80s, Japanese manufacturers began dumping automobiles in the the U.S. market (and making cheap quality products in the U.S. in the 90s) where the base model could last 2-3x as many miles as the prior domestics (GM, Chryslers).
I also make this statement with a 25 year old refrigerator, washer, and dryer) and a 16 year old luxury import automobile with 180k miles on the original clutch (that I bought used) and have spent very little on preventative maintenance on.
*Side anecdote on cars and unwise subscription to brand loyalty. A 1989 Mazda (made in Japan) that I bought used in 2005, had more security (key encoding, immobilizer) features than two friend's 10+ year newer Chryslers that were stolen in ~2010
Appliances are a bit of a pickle, because with energy efficiency alone you can save so much money on running costs by upgrading.
In fact, you can save so much energy that at least one utility I've had over the years has a program to pay people to replace appliances, because it turns out that's cheaper than new power generation and transmission.
> On the surface, I assign this to nostalgia and maybe survival bias
There's some aspect of truth to it in some industries (though not cars, as you say). Kind of. So a washing machine that you buy now probably won't last as long as a washing machine that you bought in 1980 (though it will be cheaper to run). The catch is that the purchase price is, in real terms, _much_ lower. And you can actually buy washing machines that last a long time today, but most people simply aren't willing to spend thousands on one.
The modern machine costs a few hundred euro and if the drum goes, well, that's the end, buy another one. You can get one with a replaceable drum for maybe 1500 euro, but you're probably not going to, realistically.
> And you can actually buy washing machines that last a long time today, but most people simply aren't willing to spend thousands on one.
i don't believe that. A company selling washing machines have incentive to make one that breaks _just_ after the warranty expires, so as to enable more sales. It can't be both true that the consumer saves money, and the company maximizing profit. One of the have to suffer - and it's usually the consumer.
Higher end Miele machines have a very good reputation on this, as do some BSG machines (again on the high end). Honestly, given the pricing, Miele probably still wins by selling you a 1500 euro machine that might last 30 years, vs a 300 euro Indesit that would be lucky to make it to 10 years.
It's not rocket science; to make a reliable maintainable washing machine, you need to make one where all important parts are feasibly replaceable. In particular, if a machine has replaceable drum bearings, that's a good sign.
There's not much brand loyalty for washing machines, so the manufacturers are probably not going to see a second scale. Of course they will cheap out on parts if they can (as long as the parts will last just longer than the warranty), so that doesn't make much difference in practice. But you can buy from a company that offers a longer warranty if the longevity is worth it to you.
You can buy a Speed Queen washing machine today, they're supposed to be comparable in quality to their commercial products. A front load washer will set you back about two grand though.
A 1989 Mazda is old enough to not have anything worth stealing (ie. airbags) and with few cars still running no one has bothered to even try and crack the immobilizer. Your friends' late model Chryslers probably have $3000-$6000 worth of airbags alone.
Brands have been meaningless for a long time. Open an applicance made by Whirlpool, Amana, Kitchen-Aid, Jenn-Air or Maytag and you'll find nearly identical internal components. They are all owned by Whirlpool. Yet this has no effect on people swearing by or swearing at any one brand.
Buying a car, you can try to shop by brand but surveys by Edmunds and Consumer Reports have the car companies trading places frequently year over year. Even perennial favorites Lexus and Toyota have model/year combinations that perform worse than other brands.
I'm not even sure that drop-shippers are hocking lower quality items. The items are so similar to name brand kit that I'm pretty sure they're using the same supply chains to source a lot of that stuff.
Meh... Products today have shorter life spans because we figured out how to build them that way, while being far cheaper and no less (often more) reliable for the intended lifetime.
It’s just basic mathematics: when reliability depends on hundreds of parts, their individual failure rates are amplified. You need either extremely tight tolerances (today), or design with so much excess that it raises mean time to failure far beyond your intended minimum.
Search them for future and time and you'll hit upon the main thesis quickly, eg:
Banfield carefully defined class membership, not in terms of income status,
such as government statistical poverty levels, but in terms of orientation toward the future, or time preference.
I can't say I ever heard such an idea so clearly stated before. I still haven't dug into the argument too much to know one way or another or be able to offer much in way of a critique, but it's caught my eye and attention enough to make it a reading TODO.
I haven't read the book either, but from reading the reviews it seems like the thesis is that your wealth is a function of your time orientation - whether you prefer to plan short term or long term.
If that's the case, I disagree strongly. It seems like a post-hoc conclusion; if you are wealthy, you can afford to plan for the long term; if you are poor, often you can only orient your behavior towards immediate needs and survival. Poor people know that its better to save for a house than pay rent to a landlord - they're not stupid. But your kid has a cavity that need filling, the rent you are paying is due, and god help you if you have an unexpected expense like your car breaks down.
Does the author account for decades of wage suppression that prevents all from sharing in the nation's wealth? The systematic erosion of labor rights? The (I'm assuming the author's American) carceral state that makes people unhireable and takes away some of their most productive years for earning and saving? In the case of the Black community, does he account for the generational effects of centuries of stolen labor? The list goes on.
The follow up studies on this are also quite interesting, especially the one with the "unreliable tester". There are many factors that go into individuals' decision making processes, and trust is a big one.
My dad always bought used cars. He avoided chrysler. It's not like their used cars are somehow the only cheap ones.
These days I'd say the highest quality cars are definitely not the most expensive. At least in the US where it seems like the biggest luxury brands require the most maintenance and depreciate the fastest. If you want to lose the least money by depreciation, buy an unimpressive used toyota.
For that matter I can't really think of anywhere significant that the little parable applies. The way to get rich is to spend like you're poor, and save your income.
Part of me also thinks that this Nostalgia is related to maintenance ideology.
Ie, it's not that Washers, Dryers, TVs, Cars never went bad, but they had repairable parts and were worth the money to have repaired.
This is not unrelated to ongoing maintenance at a house; Derelict houses (and popular poverty highlight - hookworm related Septic maintenance) are maintenance items that still need to be done; having these maintained creates jobs; but are derelict.
Modern appliances and cars are highly repairable. I've repaired many of my own appliances and vehicles to significant savings. The difference is that labor is expensive. Fixing things takes problem solving skills that are generally highly valuable on the market. Especially when you couple those skills with a little bit of specialized knowledge.
>As a very real example, my family was not very well off growing up. My parents could typically only afford used Chrysler cars. The result was invariably getting stuck with vehicles that quite frankly were at least as expensive as the competition after repair costs and extra insurance.
As someone who used to flip $200-$2k cars and still drives those kind of cars I feel very, very comfortable saying that the difference between a Carvan and a Sienna is more or less "pay as you go" vs "lump sum up front". The difference is that the guy with the Sienna never says anything bad about it because they have all this up front money tied up in it and would feel stupid bad mouthing it.
Maybe I am alone but I disagree and agree here. I agree that rich people know how to spend less but one does not become rich on savings alone. It takes the ability to make value out of nothing whether it be your the lord of feudal lands which you rented out to peasants or online book company that made buying and selling slightly easier. Those people made money because they made value. Not just saved value.
I think this well intentioned advice can actually act as a hindrance to escaping poverty. If you spend a ton of your time walking through the grocery story saving a couple bucks buying cheaper eggs you really lost a lot of your potential earns in that time you spent. Because this is a behavior you will repeat and repeat and the accumulation of this time is a net minus on what you could have saved if you spent that time learning a valuable skill. I think that's why any major uptick in peoples wealth is usually (not always) correlated by education. Places with smarter people tend to have more money because smart people generally speaking know how to create value.
Yeah, good money-saving tricks are the ones where you only spend a lot of time thinking once, and that helps you switch from one type of auto-pilot to another type of auto-pilot. If you have to think every time, then you pay with your time, and you quickly run out of available time.
For example, if you notice that X is equivalent to Y and costs less, it may take some time to notice, but afterwards buying Y is just as simple as buying X, once you develop the new habit. Or if there are two shops in the same distance, and you spend some time researching which one sells more cheaply the stuff you usually buy. (Or a more distant shop, that is so much cheaper that you can afford to pay for having the stuff delivered to your home, and still save money.)
This is a fun and often repeated quote, but bears little relation to the modern world. A nice pair of boots doesn't cost more than a months salary. They cost 2 days of labor at minimum wage and last for years.
A nice of pair of hiking books can be had for $100-$200. I can spend more than that and it may be worth it to do so for specialty purposes. But you can buy a pair of what may literally be the best custom 3-season hiking boots for ~$700.
Are those a good buy? If you do a lot of hiking, yes. (Though they're big and heavy so I only wear them for some things.) In any case, they may be at best 10x of the cheapest pair of boots you can buy at Walmart, which are incredibly cheap footwear historically.
Interestingly, the most expensive boots at places like Walmart are not for rich people but for working class people who need high quality since they wear them all day in their jobs doing construction or whatever.
"Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars."
But then there were LeBron Nikes made in China with cheap labor and sold for $225. Those were the kind of shoes poor people bought using their credit cards.
Not sure why this is being down voted. Perhaps some consider it punching down?
While a generalisation it is true that some economically disadvantaged spend a lot on 'luxuries' like shoes or cars. Often this is for social signally and sometimes because it's a luxury they can afford now vs those which appear completely unattainable forever.
Some rich people too spend extravagantly beyond their means. It's just less obvious since they aren't obviously hurting for money on other ways.
In college, I lived with roommates in a working class urban neighborhood three or four blocks away from campus. The block I lived on featured the convenience of only one side of the street having houses on it. The other was nose-in parking, facing a creek.
The cars that lined the other side of the street were uniformly nice. Every time I remarked about that, my roommates would dump on the working poor for buying showy cars they couldn't afford.
They never once considered that the street was used as free overflow parking by university employees, which even cursory observation showed to be the case.
So yes, "they buy nice cars they can't afford" is a mean cliche, even if I'm sure you can find some case of it being true.
A lot of people on HN are from Upper-Middle-class backgrounds and it's funny how the same just-so stories and excuses come up when discussing the poor. The idea that poor folk are going to use their UBI to buy the 24 pack of eggs instead of the 12 pack, or the leather boots instead of the faux-leather boots, and spend the long-term savings towards a Coursera subscription just isn't realistic, howsoever common.
It will definitely help separate those that are eager and able to escape poverty from those that aren't.
For example; It can be stated that fixing a homeless issue by giving people homes isn't addressing all of the root causes of homelessness. In slice of the homelessness concerning mental health issues, some people will have sold their homes and have nothing, others will be in a similar sort of position (perhaps even somehow kicked out of their own home) as others have just taken advantage of them.
I think everyone is eager to escape poverty. But to your point, poverty and homelessness are the visible symptoms of a whole web of problems. There are those who were temporarily nudged into poverty by misfortune, and those that are bound to it by addiction and mental illness and much more.
All that to say, I think we as a society should offer the most compassionate programs that we can to anyone experiencing homelessness or poverty. I started supporting my local chapter of pathways to housing, which provides condition-free housing, stipend, and medical care to homeless people. That large upfront investment - giving people space to sort out their underlying issues - leads to 85% of participants having homes 5 years after entry. It's a cool program that I'm still learning a lot about.
A big problem of this was positioning of customer reviews over things like Consumer Reports or other publications that have to maintain a long-running reputation (the random reviewer who gives 5 stars doesn't). Reviews became what people trusted, then those were manipulated or paid for, but nothing has filled the trustworthy vacuum because of that just yet.
(Consumer Reports is still there of course, just not as popular of a source as reviews for some reason)
Just as a plug / FYI for Consumer Reports - it's worth checking your local public library to see if they've got a subscription to C.R. that you can use for free.
Nowadays, with everything being online, you might even be able to use the Consumer Reports website for free, through your local public library.
Exactly. I can say that we were a low-middle class family, so whenever we wanted to buy something, we would just go and buy the best one that will last for a while, even if it meant that it is twice as expensive. Nowadays, it is really getting hard to find something that fits this criteria.
It's still possible, but it'll take you 6 hours of research, wading through garbage links on Google Search and instead of twice as expensive, it'll be 5x as expensive.
I find the cheapest thing and go up a few percentage points (5-10%) and buy that instead... you have to remember a corner or two were cut on the way to the cheapest thing. Buying the most expensive stuff is often not worth it.
"We are not rich enough to buy cheap stuff." - I'll promote this too, whenever I can, as long as I'll have expensive stuff to sell. As for friends and family, it's just "lean to quality" (not necessarily the expensive type).
German has the two words "günstig" and "billig". Both can mean inexpensive but "billig" also has the negative connotation of something being of bad quality.
There is a lot to this. I have a unfortunately close relation to someone who would just continually buy new undershirts and other clothes instead of washing what they had already. Closet full of still tagged clothing. An adult, married with children. They made enough money to waste it.
If you wash them and then leave them to dry for a few days, that should be safe. The virus dies when exposed to fresh air; how quickly, that depends on temperature (a few days in winter, a few hours in summer), but err on the side of safety and give it a week. The high temperature of the washing machine, the soap, and drying for a few days, all of them combined should kill the virus almost certainly.
Also, you don't need to literally kill all virus particles. Reducing their number already reduces the probability of getting sick. A certain amount is needed to attack you successfully; a lonely virus particle is mostly harmless. Also, the virus cannot enter your body by being in the clothes your wear, only if you touch the clothes and then your mouth/nose/eyes.
tl;dr - yes, if you wash the clothes and leave them dry for a few days, it is safe
I'm not talking about cleanliness. I'm talking about the fact that most items fall apart and new items are so cheap that used items are getting less and less desirable. There's been articles on here about the way the used clothing industry has imploded over the last decade. There might still be some thrift shop usage, but the longer tail that allowed retailers to offload the majority of donations is disappearing.
I usually use this logic nowadays whenever someone asks me about buying a 300$ laptop, UNLESS the use case is, in fact, literally email, static html, and word processing (which I've only seen once).
Spending that extra 150-200 can make a huge difference in longevity.
I always tell people to buy a used business class (latitude, probook, etc). Electronics that last 2 or 3 years and are in a repairable form factor will last way longer then the cheap consumer stuff. You can get parts for them for close to a decade.
Most economists probably would be surprised if it could actually work in general. Cash handouts do not cause the behavioral changes necessary for individuals to develop sustainable habits. Most poor people are not poor because they don’t have access to the market, but because they either don’t know what to do, or they don’t have the discipline to do what they know they should. Cash handouts can make this even worse as people become complacent and dependent on them, and the impetus to work out a sustainable solution dissolves. The implementation of welfare programs in the US during the 60s has a strong negative correlation with progress in lower income (and often minority) communities.
An ideal solution might involve temporary relief for catastrophic events that can help an otherwise mostly sustainable lifestyle, but avoid misaligning incentives in a way that makes the problem even worse.
> Cash handouts do not cause the behavioral changes necessary for individuals to develop sustainable habits.
That's because cash handouts given are usually not even close to being enough to develop sustainable habits.
#1 help in developing a sustainable habit is receiving an education that allows an individual to pursue a better job. Education is very expensive in the US.
It is doubly expensive if the adult in question has to take care of dependents. AFAIK, there's not a single program that would come close to let an adult improve their education, while also helping them take care of kids.
Possibly true, but I'd like to see this thinking applied to the welfare and misaligned incentives we grant big business FIRST before we apply it to the already disenfranchised.
These UBI experiments all have a flaw, they are time limited and the participants know it. Just try imagining it. Someone tells you will receive $500 per month for a year. So that's a reliable income you can make a year long plan for.
Then someone tells you that you will get it for life. Suddenly the difference in behavior is immense. You can move somewhere with cheaper rent. You can go to college. You can start making real plans depending on that income.
It's like the difference between a pension or social security and getting a fixed lump sum.
Right, it's a fixed sum but split out into arbitrary increments over an arbitrary period of time. If it was $6,000 paid one time, would anyone try to consider that a UBI experiment?
Psychological side effects aside, the economic math really points towards UBI. Current economic strategies really favor constant consumer spending to keep the wheel turning, and one of the best ways to do so is to make sure the bottom layer is fed.
We haven't gotten here by accident either. What about raising the minimum wage? What about lowering interest rates? Its a sign that people including the wealthy and powerful are worried about an economic collapse. I don't think the labor participation rate or psychological ramifications are really on their minds as much as their fear of economic loss.
It's a hypothesis that the difference would be immense. You're assuming people's present day decisions are highly impacted by expected incomes at long time horizons.
I can see arguments going both ways. But these experiments actually let us test the effects: offer UBIs of varying durations. If effects are broadly similar at 3 years versus 1 year, that gives us confidence that (assuming away highly nonlinear effects) further experiments at 5 years and beyond will also be similar.
how many actually think of their jobs being decades-long certainties though?
in this market, the likelihood of maintaining a salary for 2-years, 5-years, 10-years are so abysmally small compared to all the other lock-ins in life - housing, marriage, citizenship. i have the same angst when my salary was $50k/year as at $500k/year.
> how many actually think of their jobs being decades-long certainties though?
People plan for their careers early in their adult life, spend anywhere from close to half a decade to a decade or more studying for that career, and generally have an idea of what the market rate for labor in the role they want to work is. They also expect to, on average, make more money in the future than they did in the past as they advance in their career.
I'm pretty sure most people reading this have spreadsheets that carefully plot expected lifetime earnings, carefully modeling different assumptions about general and healthcare inflation rates, anticipating likely tax code changes, etc., and don't know anyone who doesn't.
But it would floor most HN readers to realize that probably around half of Americans have zero particular plans for the medium and long term, with a meaningful minority not having a clue about how to pay their bills next month.
> how many actually think of their jobs being decades-long certainties though?
Folks can generally aim for a growth trajectory, irrespective of their specific employer, until their industry collapses. Which is kinda the point of UBI. This was true of my mom, grandma, and great grandma. Which is kinda the point of UBI: to restore the stability that once buoyed our society.
Yes. After establishing 5 year experiments have decent results, it makes the most sense to move to lifelong experiments. 1000 people at $1000/month for life could probably be funded with around $1B. A lot, but not an insane amount. Even a motivated billionaire could swing that without much trouble, and that would give us pretty good answers for the microeconomic effects of a UBI.
> 1000 people at $1000/month for life could probably be funded with around $1B.
You wouldn't need quite that much. An initial investment of $300k would be sufficient to pay out $12k per year indefinitely one individual, assuming a modest 4% annual growth. So for 1000 individuals you would only need about $300M, not $1B.
4% is very optimistic; early retirees usually aim for 3%, and even models with that withdrawal rate fail over long enough time periods. You'd want it to be well-funded enough that there's no question it could commit to the payouts indefinitely (so that people don't act more conservatively than they would knowing it might fail). On top of that are costs of administration and study.
The number I ended up with was actually around $600M, and I figured might as well round up.
If you want people to go to university or other higher education for instance, then any UBI pilot would really need to be a minimum of 4-5 years to give people assurance they will be supported through the entire period of unemployment.
But that's an unacceptable position for UBI advocates to take because it makes the experiment unfalsifiable over any reasonable time horizon.
UBI advocates claim that an alternative form of welfare system (because that's what it is) would have immense benefits, but they would only become visible if you don't do any experiment to find out what they are. This is completely unscientific and based on enormous assumptions about human nature.
I feel the more UBI is debated the less convincing it gets. The claimed benefits evaporate when closely studied.
Advocates say there'd be no administration overhead, but there would: you still need to avoid paying UBI to fake identities, dead people, non-citizens, etc. That's a significant proportion of administrative overheads.
So advocates then say, well, the savings in administration overheads would be so large that it'd pay for itself. But you can measure and see the overheads of the welfare system today and they aren't that large in percentage terms. Nowhere near enough to pay for a UBI even if you pretend 100% of those costs are for means testing. This claim is supposition, not backed by serious calculations.
Advocates get the experiments they lobby for, and then turn around and claim that the null findings should be ignored because it just wasn't tried hard enough. But where have we heard that claim before? That no matter what level of resource redistribution is tried, when it doesn't work it's just not "real UBI"? Right: another social scheme that attempted to guarantee income to everyone, which always has people vigorously campaigning for it and always excusing its failures.
In the beginning when UBI was floated, I was interested. It's at least a novel idea. But like many people on this forum, I would be a big loser from UBI. I don't need it and will be paying huge taxes to pay for it. As any realistic implementation would be surely funded by excessive borrowing and inflation, I'd also lose my savings and my children would incur large debts too. For such a catastrophic scenario to gain my support the benefits have to be enormous and utterly convincing. An unfalsifiable claim of the form "UBI doesn't work unless we all UBI harder" will never cut it. Unless the concept evolves significantly, I suspect I will be opposing UBI my whole life.
If UBI advocates believe their country should give, e.g. hundreds of dollars a month to the over 1 billion people in Africa in the name of being truly universal, please do explicitly state that every time the proposal is made. It'll save a lot of time for us all because such a delusional idea will kill the idea dead even quicker. Obviously it has to be limited to citizens because those are the people paying for it via taxes.
> Obviously it has to be limited to citizens because those are the people paying for it via taxes.
This is so delusionally, obviously false it fatally undermines your argument.
A huge number of non-citizens pay taxes!!!
Where do you get the idea that non-citizens don't pay taxes!
Shakes head despairingly at the ignorance
Your argument would work if you said UBI must be limited to people on $X or higher salary, or who have been on such a salary. Because people who have only ever earned <$X do not pay taxes.
But as you know, that is not the UBI idea. It is advocated on the basis of a principle, of basic safety, simplicity and dignity, combined with a working theory that it is more affordable than people tend to assume because of the net system-wide benefits. Rather like the USA's constitution itself.
> If UBI advocates believe their country should give, e.g. hundreds of dollars a month to the over 1 billion people in Africa
Hello straw man argument.
UBI advocates do not advocate that.
However I apologies for not being clear enough.
What I have in mind is that your own country (wherever it is) contains "non-citizens" and "citizens", and for some of them it's a bureaucratic lottery which category they are in. It is not a fair or humane system within the country itself.
And therefore UBI for citizens means UBI for some people living (some their entire lives) in the country get support and others do not.
It would execerbate the non-level playing field economically by raising prices for those lucky to be in the "citizen" group and increasing hardship for those not lucky to be in it, who have no realistic choice but to continue living as they do.
Which is obviously against the stated purpose of UBI, to dissolve bureaucratic drivers of poverty within a country or administrative region and ensure everyone gets a basic level of safety.
After all, everyone there is subject to the laws, economy, and at the moment pandemic, and they are in principle supposedly protected by the police and law and civil systems. It's hypocritical that they are governed by almost every facet of the system, but we would then design an "ultimate" survival safety net and say "you are governed and affected by everything in the system, except not the safety net".
If you are in the USA, consider "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."
It is widely agreed that the USA's Declaration of Independence is there to be a guiding, strong principle to govern the lives of the people of the USA, overriding ordinary law and ordinary politically-motivated systems in the country, and that it was not intended to govern everywhere else on the planet.
It does not, however, say "all men [actually we mean some according to a bureaucratic tick-box] are created equal..."
If you don't think people who failed the citizen-lottery living in a country should be subject to its most basic economic survival safety net, yet they are required to be subject to all the other systems... Then that safety net is what it is, but it defeats the entire point of universality if it is not held up there along with other universal driving forces of the country such as human rights, declaration of independence, rule of law, etc.
Fine, by "citizens" read "citizens and permanent residents". If you know of a better term that encapsulates who would be eligible to receive UBI, please provide it.
> Fine, by "citizens" read "citizens and permanent residents". If you know of a better term that encapsulates who would be eligible to receive UBI, please provide it.
Different UBI advocates prefer different target populations. I have heard all combinations of:
Age: All adults; All adults and emancipated minors, All (regardless of age); All, but with a reduced benefit for (all or only dependent) children.
Citizenship/immigration status: All domestically resident citizens and nationals; All citizens and nationals; all citizens, nationals, and LPRs; All citizens, nationals, LPRs, and other resident aliens, where the last may be defined either as the IRS does for tax purposes or somewhat more expansively.
Exactly. And what happens when UBI gets combined with the "borders are human rights abuses" idea?
It turns into giving the whole world resources for free. As UBI would be stratospherically expensive, the people who can receive it must be tightly limited, which means very strong border controls and under no circumstances could the economically unproductive be allowed to immigrate. Yet the sort of people who believe in UBI are the sort of people who claim it's universal because of "dignity", so, fat chance of that.
I think its advocates should just man up and admit it: UBI is communism rebranded.
You're presenting communism for what it really is, but UBI for what it claims it will be.
Communists used to claim that communism would be effectively like a UBI. "From each according to his ability, to each according to his needs", etc. Marx never really elaborated on how this vision was meant to work in practice. It turned out the only way to get close was huge state control.
UBI is, let's be clear, a form of wealth redistribution. For the vast majority of workers it would not give them anything. It would take money away. Money would come in one pocket but go straight out the other in higher taxes, it must be so, because UBI removes the incentive to work for a lot of people who are comfortable being at the base level of subsistence it allows. That means they'd stop generating taxable income, increasing the burden on everyone else.
Thus for people like me, who work, UBI is not about giving me flexible resources. My work does that. UBI is about taking my resources to give them to other people. These people may feel freer or like they have more self-determination indeed, as they now have more money for less work than before. But for other people they are less free and have less self-determination, because previously they could have spent that money on themselves but now it's taken from them by the government.
Now UBI is a form of central planning. It must be because it posits a single variable that yields a "universal" income. Who decides what that income is and how it moves up and down? The government does, one might say, the government plans it. And who plans how it is funded? Same answer.
> UBI is, let's be clear, a form of wealth redistribution. For the vast majority of workers it would not give them anything. It would take money away.
That would only be true if you adopted a monumentally stupid funding model, so I'd recommend if you adopt UBI, you don't do that. The most sensible funding models involve new high-end taxes to fund basic income (wealth or property taxes with a broad exemption that would leave out most of the lower, working, and middle classes seem a popular idea recently, though I personally prefer, to give the short form, to at least start with equalizing taxes across forms of income to remove the preference for capital and other non-labor income).
> UBI removes the incentive to work for a lot of people who are comfortable being at the base level of subsistence it allows.
People are more than happy to put additional effort into increasing labor income when already working considerably and earning more than a subsistence level, so I find that argument specious ab initio, moreover, UBI, to the extent it replaces existing support programs that create disincentives to additional income, would actually increase the incentive to earn outside income, and reduce barriers to doing so.
> Now UBI is a form of central planning.
Even if you can stretch the definition of the latter so that's a sensible statement, its certainly less central planning than traditional means- and behaviorally-tested social welfare systems by any sane standard, so if it in anyway (even by simply counting as income against those systems qualifications) displaces such systems, it reduces the role of central planning in the economy.
It's really unclear why you argue paying for UBI with taxes is monumentally stupid and then go on to state it'd be funded by "high end taxes", clarifying that your preferred type of tax rise is equalising capital gains and income tax (i.e. a tax rise that'd affect huge numbers of people). That's exactly the point: it would be funded by tax rises. The fantasy that it can all be funded by just taxing a few people so that won't matter is risible: many countries (like the UK) already have problems with a tax base that's too narrow, yielding huge unpredictable swings in government income as a small number of rich people either move around or suffer changes in fortunes. The costs of UBI would be staggering, the idea that just a few rich people can be made to shoulder the burden is the same cop-out all socialist schemes always use. It doesn't work, there's a limited amount of blood squeezable from the stone. People leave or find ways to avoid the taxes.
People are more than happy to put additional effort into increasing labor income when already working considerably
And many other people don't give a crap and would happily live off of the level of income they get from benefits, if there weren't an enforcement bureaucracy prodding them to search for a job.
If you're trying to solve the problem of unintelligently set welfare thresholds, I have two questions for you:
1. Why not make that the issue you campaign on? Many people can get behind more intelligent formulas for withdrawing welfare, that's a bipartisan issue. UBI is not the easiest way to fix this.
2. Why do you think the current form of governments, that have totally failed to configure the current welfare system correctly, would set the variables in a UBI system better?
(2) is a huge one. UBI posits a single level of income that's right for everyone, but living costs vary wildly even across jurisdictions. The "universal" aspect of UBI would last about five minutes in the face of Marxist lobbying. Before you know it people with some kinds of lifestyles would be receiving more than others. Otherwise nobody in San Francisco or New York is gonna be living off it, right?
Even if you can stretch the definition of the latter so that's a sensible statement, its certainly less central planning than traditional means- and behaviorally-tested social welfare systems by any sane standard
Behavioural means testing is a tiny part of the administration of contemporary welfare systems, which are in any case dominated by pension provision (i.e. not behaviourally means tested). The vast majority of the central planning derives from:
1. How much do people get?
2. Who is forced to pay for it?
The mechanics of distribution are optimisable like any system of bureaucracy but not at all the primary or most important thing.
I'm not sure which country you are thinking from here.
But if you're thinking that open borders means people would all flood into the USA for personal wealth, you have it wrong.
If many countries offered UBI, while keeping everything else the same, many people would flood out of the USA in search of better healthcare and education, for example.
Even if every country offered UBI simultaneously, which isn't possible, they would offer very different amounts. UBI is welfare and acts as an immigration pull - it cannot be actually universal despite its name. There must always be many conditions on who receives it, hence, it still requires extensive means testing.
But in practice some countries will go first. And they will become far more attractive to immigrants as a consequence, and will need to have a plan for that.
> I think its advocates should just man up and admit it: UBI is communism rebranded.
UBI is Negative Income Tax rebranded (literally, UBI with a progressive income tax scheme is mathematically equivalent to NIT.)
Milton Friedman was a communist, who knew?
> As UBI would be stratospherically expensive, the people who can receive it must be tightly limited, which means very strong border controls and under no circumstances could the economically unproductive be allowed to immigrate.
UBI with any immigration qualification (even as weak as the "resident alien" standard, and a fortiori something like the LPR or in the maximal case Citizens-only standard) is an economic border control; as it makes life more expensive (and hence less attractive) for any non-qualified immigrant (while the inflationary effects are more than offset by the benefits for the recipients at the low end, they are not offset at all for non-recipients.)
I do. You do realise that a key argument of UBI is that it is argued to be net overall economically beneficial, right?
Non-citizens of a country are workers, wealth generators and tax payers too, if you hadn't noticed. The myth that non-citizens are just "takers" needs to die.
a key argument of UBI is that it is argued to be net overall economically beneficial
That argument has been lost woefully before it even started. Nobody has provided a convincing argument for this and it doesn't even make logical sense: this is the economic equivalent of a perpetual motion machine. It's literally arguing that resources can be created out of nothing.
In reality UBI is a form of wealth redistribution. That's all. The money being handed out to non-workers for free represents resources that other working people are creating. Those people will get less for their work as more will be taken from them by the government, same as any tax and welfare system.
The belief that this will create new wealth is a form of magical thinking, which is why when pressed UBI advocates start talking about how everyone on UBI is going to become an artist or poet instead of just playing video games and screwing around on Instagram all day. If UBI thinking were true then we'd be drowning in stories about how people lost their job, went on welfare and very quickly found themselves the owner of a successful new business doing the things they always loved.
But virtually no such stories are to be found anywhere. People who are on welfare today don't typically start spontaneously creating wealth. That's why there's an entire enforcement infrastructure in place, just to ensure they start doing anything productive at all.
Non-citizens of a country are workers, wealth generators and tax payers too, if you hadn't noticed
You're implicitly making assumptions you aren't stating, which is something UBI advocates do a lot.
Think about it. Your statement is logically very wrong: the vast majority of people in the world who are not citizens of a country don't live there and never have, thus are certainly not workers, wealth generators or tax payers for that country.
What you mean is "non-citizens who are permanent residents" or some approximation of that, but you aren't saying it, and as discussed elsewhere in this sub-thread UBI advocates don't agree on who would actually be eligible to receive it.
Moreover to stop UBI degrading into giving out free money to the entire world, the concepts of citizenship and residency would need to be much tighter than they are today. A border wall wouldn't cut it because suddenly anyone who made it past the wall would have a flow of income they could cut a corrupt border guard or immigration officer in on, so you'd suddenly need a much tougher enforcement infrastructure. "Immigration is wonderful, let's have way more of it" would have to stop immediately because otherwise it would actually be giving money to the whole world.
> Think about it. Your statement is logically very wrong: the vast majority of people in the world who are not citizens of a country don't live there and never have, thus are certainly not workers, wealth generators or tax payers for that country.
My statements refer to non-citizens living in a country and subject to the country's systems. The "logic" you point out is wrong is only wrong when you delete all the context surrounding them and take them to mean things they are obviously not intended to mean.
Besides that, the motivation underlying your observation on is silly and reflects nobody's intent. The vast majority of people who don't live in a country are simply irrelevant to the discussion; they don't need to be wealth generators or tax payers in a country where they would not be in receipt of UBI from that country.
> The belief that this will create new wealth is a form of magical thinking
It depends greatly on how you define wealth. All definitions of wealth encode implicit assumptions about what is desirable and who should get it; in a nutshell, they encode values.
If you're defining wealth as money or capital, you're encoding the assumption that more money or capital should guide decision-making about who gets to live a happy life.
Although I don't advocate that approach as the driving ideal, as it is not what I'd call "actual wealth", as long as it's a requirement asked for by most people wanting it that way (or believing it has to be), I would put the effort into developing systems around UBI, such as for example improving education and work opportunities to go alongside it, such that it resulted in net gain in money or capital within the country's system of economic measurements as well.
Yes, I do believe that's possible. No, I don't assume it. It requires being smart about building something new, not an act of passively assuming something happens by magic.
However you look at it, the belief that non-UBI systems result in more wealth than UBI systems is an equally unfounded assumption and therefore a form of magical thinking too.
In my opinion the smart way forward in the midst of so many unfounded assumptions is to recognise that's what they are, and having done that, constructively build systems based on what we decide is right, combined with what we believe can actually work. (But I'm an engineer; figuring out how to make new things happen in the midst of cultural inertia is what I do, so I would think that way.)
I assert that UBI is worth taking seriously because better values, and therefore my definition of what we should define as civilisational wealth, includes personal safety, basic freedom and dignity for all people.
It is not actually about money, it is about something we should endeavor to create if we can find a way to do it, because it is the right thing to do. Nor is it about wealth distribution despite the first instinct of many to think it is. It is in fact about smart investment. The goal, the objective function, is to end up receiving from people more than they are given, yet to do so in a way that upholds basic quality of life, universal values, life, liberty and pursuit of happiness, that sort of thing.
That is why I tie it to idealistic basics like the USA's bill of rights, because so many people claim to believe in those rights and refer to them as motivation behind their personal ideology, but when it comes down to it, they hold a hypocritical view on this.
The system we have at the moment creates an entirely artifical underclass who are quintessentially citizens, but not legally citizens (or permanent residents or however you want to slice-and-dice definitions), and who are prevented from contributing as much as they would to the country they participate in. The system we have at the moment limits the country's overall wealth, through a belief that preventing people from working and trading, as well as preventing their access to support systems, will somehow result in greater wealth for the country, which is obviously wrong when you stop to think about it.
> What you mean is "non-citizens who are permanent residents" or some approximation of that, but you aren't saying it, and as discussed elsewhere in this sub-thread UBI advocates don't agree on who would actually be eligible to receive it.
Well, I was responding to someone else who talked about non-citizens, so my response is colored by that, to challenge the incredibly widespread trope that "non-citizens" is a fine shorthand for people who don't deserve the same basic rights as other people because they did something wrong.
What I mean when advocating UBI is non-citizens who live in a country and are subject to all the country's other "universal" systems, such as bill of rights, rule of law, financial economy, trading laws, etc. I have said it explicitly and clearly in my other comments.
Of course UBI advocates don't agree on everything. It's a sign of thinking, and of constructive compromise. It is not an argument for or against anything, but it sounds like you think it is.
> Moreover to stop UBI degrading into giving out free money to the entire world,
You're implicitly making a lot of assumptions you aren't stating, which is something anti-UBI advocates do a lot...
> Oh is that what the U in Universal basic income stands for.
The Universal refers to the absence of means- (and usually, also most, at least non-criminal, behavioral-) testing, it doesn't indicate an absence of boundaries on the target population. Almost every UBI proposal includes some immigration status boundary, and often age and/or legal independence standards, as well.
I doubt creditors would offer much against that guaranteed income. If you can't prove extra income on top of it taking your UBI would kill you before you could repay the loan.
Why not? Payday loans are an entire (abusive) industry built around charging a huge fee to get instant cash right now. Why wouldnt the equivalant for ubi be a thing?
Payday loans aren't giving you enough to buy a car or fund a good vacation over ten years repayment either, and they require some proof of non-assistance income already.
I could see some kind of creditor offering a one or two months payment loan at high interest, but nothing like what is described
There's a difference between offering risky loans to people with poor credit and offering long term loans to someone without a non-assistance source of income.
Managing how others manage money has it's own cost. I wouldn't be surprised if 50% of the assistance budget was allocated to making sure receivers spent it "the right way."
Between the applications, compliance, debit card fees, reimbursement schemes, and a completely separate financial network, that money is sucked out of a system supposedly designed to supposedly help people with money issues.
Indeed. One city nearby was spending ~$4,500 a month to feed and house families, but the conditions were fairly horrible (dilapidated shelters with communal bathrooms, poor food quality). Simply handing the families the cash would have been better. Of course, then you have other issues like welfare cutoffs and people from other municipalities coming to receive such benefits, problems that would be solved by a nationwide UBI.
UBI might seem crazy to some people, but I'd like to remind everyone that governments worldwide effectively print trillions of dollars and use that money to inflate stock prices.
Governments could instead distribute the money through UBI. The advantage, if you do that, is that people will spend that money on things they need. This seems better, to me, than keeping alive zombie companies that are "too big to fail" and contribute little to no value to society. If you give people UBI, they are voting with their wallets and giving money to companies that produce something useful.
As for the national debt... When the government borrows money from a central bank, it's effectively borrowing money from itself. They might pretend otherwise, but central banks are effectively an arm of the government. The national debt is an artificial construct. Governments could eliminate it with the stroke of a pen.
There's also the unspoken issue... there are probably a decent number of people who profit off the current system that who do not want their meal ticket cut off.
(Of course, this is ignoring the idea that UBI would possibly let them do something better with their lives, but humans are gonna human, right?)
Yeah, but what happens when someone blows the free money on something besides basic needs, and still needs assistance with food/shelter/medicine/etc? Does society step in again and also provide "managed money" in that case?
Increase the frequency and reduce the quantity of disbursements. This won't solve for individuals who are completely incapable of taking care of themselves, but it will cover the vast majority.
I would love to see someone test the difference between a $35 a day vs $1000 a month UBI. The $35 a day approach seems like it would solve a lot of the problems people worry about with regard to misuse.
I assume landlords would want some sort of automatic standing payment set up so they get paid daily.
If daily UBI was implemented then society will find a way to take the money easily and at low/minimal cost (automated, immediate online bank transfers are free in Europe for many years now). I think landlords would be quite happy as it is guaranteed, no worrying if the person is employed or not.
However back to the original concern about people just spending all this money and having nothing left for essentials, a daily payment still has this problem (ie imagine paying all your UBI on rent with nothing leftover for food, transport, healthcare etc).
They don't, they can pay rent like normal, and if they blow it, they get evicted and become homeless, but next once they get sick of being homeless, they can then learn to save their ubi for 2 weeks to pay rent.
If they provide the money at regular intervals, than the person wouldn’t be out of money long even if they blow it all.
My suggestion would be no, we don’t step in. I think for one, we overestimate the number of people who would not use the money for their needs first. I think if we found there were a lot of people who still needed help, we could create an assistance group that can help people find the help they need.
So your solution to people spending all of their UBI money frivolously is to give them even more money? (instead of helping them spend it on, say, essentials)
No, I am saying the UBI payments aren’t a lump sum, they are regular payments (like every 2 weeks, for example)
Someone can only blow the two weeks of money.
If they still can’t survive, I am a saying we could have other programs to assist that group (it will be a much smaller population), and I am saying the help would be counseling, training, etc.
Various studies have shown that (perhaps surprisingly) just giving people cash works better... I can't read the article (paywall) but I expect that's the point of this trial too.
Of course, it would be good to it while also offering help with education, any substance abuse issues people might have, etc. but the paternalistic kind of "can't trust people on welfare to spend their own money" view just makes things worse. We've definitely seen it in Australia, they created a cashless debit card that locks out certain types of spending and trialled it in certain areas. It's been a massive failure, people not being able to get cash out to pay rent, it doesn't work in a lot of stores, forcing people to higher priced shops that are part of the system, the card has a lot of stigma attached to it so people are ashamed to use it, social outcomes are worse, and the administrative cost per person is about half as much as the actual annual amount given in welfare (!!) but the company that runs the scheme has links to the party that is in Government and donates to politicians so they're expanding the trials of scheme...
That's just so heartless. Someone not able to prioritize housing and food over for example drugs has a very serious problem and needs help.
People in that situation are still human and are not doomed. People do recover from such ailments all the time given the right structure and support.
And if they can't recover they still deserve the support. That's our responsibility to each other. When "personal responsibility" means just letting people suffer and die we should leave it behind.
This is exactly why it won't work, according to the UBI "vision" that is usually promoted. There is no way that people who think UBI is a good idea, would also allow the recipients to blow their UBI on dumb stuff and end up on the street. In practice, it would just be a re-branding of the existing system of benefits, with a few more hangers-on.
What happens today to people who are given a room in a shelter and trash it, or spend all their EBT money on products that they resell/trade for drugs?
UBI does more than reduce overhead - it gives better incentives and options for people who can't commit to a substantial number of hours per week (at least not initially) to be able to contribute to the economy. But it doesn't solve every problem and shouldn't be expected to.
I have this idea that there are two types of poverty.
1) People who make mostly good decisions, but have had bad luck. They've been hit by medical expenses, for example, or been born in circumstances with no real opportunity.
2) People who make bad decisions chronically. Many of these people have substance abuse problems and mental health issues, or come from backgrounds where they never had the opportunity to learn any self-control like dysfunctional families.
It seems like the best thing you can do for #1 is to give them cash, but cash would be wasted on #2. Also, that poverty in the developing world looks mostly like #1, but in the developed world looks mostly like #2.
Am I way off here? Do other people have these thoughts? Is this callous? I'm really asking for feedback.
(I'm posting anonymously because I'm afraid of having this unpopular opinion attached to my real identity.)
As long as we do not treat this as a dichotomy, and agree that both #1 and #2 are on a scale, this sounds reasonable.
It also depends on income. If you have good income, you can survive a little bad luck, some suboptimal decisions, and a minor substance abuse. Let's not pretend that middle-class people are all without vice.
It is easiest to help people who have a one-off financial problem, but otherwise good education, skills, and habits. A one-off medical expense. A broken car you don't have money to fix, but can't get to your job without. Not enough money to start your own business, despite having a solid business plan.
It may still make sense to give cash to both categories, because it would be difficult (and expensive) to distinguish them from outside. Consider the salaries paid to the bureaucrats judging who is worthy of receiving the help, salaries paid to their managers, the expensive offices they would live in, the extra costs they would impose on the people being judged, and the costs of mistakes they would make -- just giving cash to all poor people unconditionally and expecting that half of it will be wasted on hopeless cases may still be much cheaper.
I think it's wise to acknowledge as part of #2 that it's not just because some people are stupid or impulsive or short-sighted. Substance abuse, mental health, past trauma, bad influences, poor family dynamics, etc. all certainly play a part.
There probably is a subset of people who, as you say, make bad decisions chronically. But even among those people, you will find that many are either open to or longing for help in making wiser decisions.
So the thought process behind just giving them money directly is that they know best what their needs are.
But I think an important part of this is also offering them services that would help them make better decisions with that money, such as financial counseling.
Plenty of people have your types of thoughts - I'd argue it is very rare that people don't :) They just happen to come to different conclusions regarding what's good and what's bad, including 'calling poor people bad decision makers is really bad' that you are aware of and are keen to avoid :).
These are interesting matters and are well explored by analytic moral philosophy.
I don't think we have the right to decide who is a "chronic bad decision maker" and who is not. Does it matter? What exactly qualifies as "waste"? Do you have the right to decide what's wasteful and what's not? Ultimately that's what got us here in the first place: a welfare system that's woefully inefficient (because there's so much bureaucracy and red tape associated with using the money on the "right" things). Maybe we should just allocate a fixed national budget for social welfare, and distribute it equally to all takers. If you want to blow your $500 a month on booze.. why not? It's still good for the economy, and who knows, maybe you'll end up not blowing the money after a few months of agonizing hangover.
It's a cold hard fact of life that things are expensive.
Our ancestors were able to afford things in the year 1900 by building them themselves. They often lived on free farmland, worked the land to grow their food, had one pair of clothes, had no need for transportation or entertainment expenses. If you got sick or there was a drought, well...
Then in the 1950s suddenly Americans were able to afford everything with just a basic job. Wife, house, car, kids. However in Germany and Japan at the same time, a family was precisely able to afford dirt.
Gradually, as this imbalance has rightfully been corrected through economic competition, we Americans have just been crying about all the luxuries we can't afford anymore.
It's a cold hard fact of life that most necessary things (not luxuries) really aren't that expensive anymore. It's mostly just housing and healthcare.
Healthcare is weird, maybe it will never be cheap without socialized medicine.
Housing is way overpriced though. The fed has continued to artificially inflate the price (despite a significant amount of housing that goes unused) by buying unprofitable mortgage backed securities and zoning prevents development restricting supply. Go outside and look around. Even in wealthy developed places most of the land in the US sits completely unused (not farms, just unused woods.) Where there are buildings they're often mostly empty because that's profitable (because the debt owed by the owners isn't called.) Because taking out loans to build luxury housing is profitable despite demand for low/medium income housing, low/medium income housing never gets built.
The crying is because if in the 50's we could afford these things with just a basic job then why 70 years later do many struggle to afford the same things? Has technology and society not evolved to be more effective and efficient since then?
Global society has indeed become far more efficient today than in the 1950s. That's precisely why a working class job no longer affords a middle class lifestyle.
All industrialized countries except the United States were physically destroyed by World War II. The US was the only place where any significant amount of industrial infrastructure still existed, so the US had a massive postwar economic boom as the nearly sole supplier of industrial goods as the rest of the world lay in ruins.
American workers thus enjoyed a brief period where a basic working class industrial job could pay for a middle class lifestyle, entirely due to that inefficiency.
Nowadays, things are far more equal and efficient globally. American workers no longer enjoy exclusive access to industrial infrastructure, so having a basic job once again yields only a basic lifestyle.
Housing, medical, and education have gone insane with respect to price.
Additionally lot's of work has gone to poor people around the world - modern transportation and communication has allowed the living standard of the world to greatly increase. When looking at the global level, the reduction in poverty has been amazing.
So this problem has 2 sides - heavily regulated domains have seen a huge price increase, and low skill work has been stagnant as it's been spread around the world.
Most of the things you pay for costs more the more other people earn. A doctors visit will cost more as he earns more, as do all other jobs demanding access to others people time. Land (and therefore housing) costs more as other people get more money to bid on it, as do all other things with strict limits to supply.
Goods that doesn't follow this tend to either be vastly more affordable or vastly superior today than 70 years ago. The exception would be goods requiring fossil fuel which has gotten more expensive for obvious reasons.
You may find this perspective by Russ Roberts, host of EconTalk, to be interesting: https://www.youtube.com/watch?v=3dL5G4QYEhc . Explores this very question in his series.
I'm curious about what you mean by "crying about all the luxuries we can't afford anymore". Who is doing that (crying)? What exactly are they saying? Is this just some sentiment that you picked up on social media or is there substantial evidence?
Thanks for the question, I'm happy to give my perspective:
In the 1950s, the reason that the US consumer was able to afford a $10,000 house on $2,500 of yearly gross income is because A) houses were available at that price and B) income was available at that level. If you fast forward 70 years, A and B are a lot less true, but I would like to focus more on B.
High wages are not available for the majority of Americans (e,g Amazon warehouse employees, not doctors and software engineers) because of two reasons:
1) Middle class manufacturing jobs have rightly or wrongly been shipped overseas
2) There are no American companies capable of employing 150 million Americans at $100,000+ per year. Instead these American companies are collectively only employing a few million people at most.
The result is a two tier society, with a small group of rich individuals and a large group of poor individuals who rightfully are wondering how can they obtain the money/"luxuries" of life like a house, a car, good medical insurance (or fair medical prices), vacations, good schooling, etc, all of which were possible in the 1950s.
The answer sadly, for those who are not gainfully employed, is that they need to somehow find a way to land a $100,000 a year job, which is not easy when there are not many on offer. Like I said earlier, I'm sure 150 million people could learn how to code or be doctors, but I very highly doubt that the government and corporations that control this country would ever want to see that happen, because of course they are the ones who need to pay the salaries.
The de facto result of all this is that corporations and governments find ways to cut expenses by cutting services or outsourcing jobs to cheaper countries with cheaper labor.
It is a political problem that can only be solved politically, unless the world suddenly decided to start engaging in technological subversion of worldwide systems by choosing Bitcoin instead of Visa, bitmessage instead of Facebook, and solar panels instead of grid electricity.
>The result is a two tier society, with a small group of rich individuals and a large group of poor individuals who rightfully are wondering how can they obtain the money/"luxuries" of life like a house, a car, good medical insurance (or fair medical prices), vacations, good schooling, etc, all of which were possible in the 1950s.
>The answer sadly, for those who are not gainfully employed, is that they need to somehow find a way to land a $100,000 a year job, which is not easy when there are not many on offer.
That's just not true. There are plenty of places where you can get the things in your first paragraph on far less than 100k a year.
It is hard to say, because I am not sure what the impetus was exactly for corporations to leave the United States. It's not even possible to say it was a "good" or "bad" thing they left because if an American loses a job and an Indian gains one, is it good or bad? If a factory that pollutes the environment leaves for another country, is it good or bad? If a shareholder extracts value from increased cost efficiency from offshoring, is it good or bad? For me, very hard to say.
What I will say though is that the world needs to do a much better job of lowering prices for consumers. Right now much of the excess riches generated in this world is from screwing customers, not serving a large number of customers fairly. An example of this would be the American medical industry, or Chinese construction industry.
Budgetwise this is not feasible without raising taxes across the board.
We already have safety nets in place to aid people. EBT, WIC, Medi-Cal, Lifeline phones, discounted/free home internet. I’m not sure what giving money to someone does. I would use it buy crap that doesn’t make me better off which is supposed to be the point of the program.
In my 20s and 30s, being wise with money was not my strong point. Giving me free cash every month wouldn’t help me but aid me. I probably would buy cigarettes, alcohol, and gas. How does that help me better in life?
In the USA households worth 1 million or more own 79% of all household wealth in the country.
The bottom 50% in the USA has approximately 0.025% of all national wealth. Yes 0.025%.
This is untenable. Solutions to this need to be implemented, fast. It is a moral imperative. It is a systemic stability imperative.
If you were in the bottom 50%, would you prefer navigating a dozen programs to handle food, phones, heating, internet, baby clothes etc. or would you rather just take cash and make those decisions in the market just like everyone else?
> would you prefer navigating a dozen programs to handle food, phones, heating, internet, baby clothes etc. or
i would rather just take the money. but are we really suggesting that all social programs should be cut and replaced with cash handouts? what happens when somebody does take that cash, spends it non-essentials, and then can't feed or house themselves or their children? do we just let them starve or freeze to death, because we've already given them cash?
i'm not against a basic income, but i think it needs to be secondary to universal basic housing, universal basic nutrition, and universal basic healthcare.
A lot of UBI schemes do basically just say that UBI replaces all the other social programs. This is one of the ways UBI can deliver some efficiency, replacing dozens of programs with their staffs and their means testing with a simple flat payment. The administration of such a system is pretty straightforward, each person gets a check every period.
As a society there is a desire to provide people with a backstop for basic necessities because if someone can't earn a wage then they could starve to death and as a people we decided that citizens starving in the streets would be bad, or at least destabilizing. Similarly, people freezing to death or cooking to death in the elements, also bad, better provide some kind of shelter.
There is a real question about the transition period, if you gave people a UBI and they decided to blow it on drugs and were starving, should you give them additional assistance.
To the hypothetical person that would choose drugs over food and shelter, there are two ways of looking at it.
One way to look at it is as a public health issue. People that would willingly choose drugs / alcohol / etc over survival likely need some kind of substance abuse treatment, not food / shelter / etc. If you can't survive off of UBI the most likely reason is that something is wrong and instead of just providing more money (in whatever form) we should provide that person with the actual treatment they need to become a functioning member of society.
Another way to look at it is that it's personal choice. Society provides each person enough money to live. People can choose to live long simple lives or they can have a few drug-fueled months, it's not our place to tell people how they should experience their short time on Earth. Each citizen has the freedom to live whatever life they want, everyone has the means to live a reasonable life, and some will choose not to.
I fall into the first camp of thought. The person so addicted to drugs / alcohol / etc that they would choose to spend all their UBI on that over their own survival isn't actually being helped by giving them food and shelter. It just enabled them to continue existing with their substance abuse problem. UBI could free up the resources needed to meaningfully treat people that are incapable of caring for themselves by reducing the amount of time spent managing funds given to the vast majority of people that when given money use it in the expected fashion.
There will always be the people that want to blow all their money on their vice of choice and also refuse to get treatment because they like that lifestyle. To them I would say, good luck, it's not how I choose to live my life, but who am I to say what's right for you. There will likely still be private organization, churches, outreach groups, advocates, etc for these people.
> A lot of UBI schemes do basically just say that UBI replaces all the other social programs.
That's when you know the proponents are either unserious or naive about politics. In real life, UBI would be yet another program, on top of the existing ones. Even if people could be convinced to discontinue the other programs, it would take decades.
UBI would have to be paid for with taxes on incomes (or spending) not wealth, and incomes are much more evenly distributed, so everyone currently paying taxes would have to pay substantially more. If you try to pay for UBI with wealth taxes, your funding stream will rapidly dry up.
I am not saying it is impossible, I am just saying that UBI would not be paid for by the ultra-wealthy, and it's not clear that the middle-classes want to pay for UBI.
The thesis behind these programs is explicitly that the government shouldn’t waste timing being paternalistic about the recipient’s spending, like existing programs are. It only matters if in aggregate people’s lives are improved, not whether they are “spending wisely” according to someone’s ideal.
There may be other reasons why programs like this aren’t good, like financial feasibility or positive outcomes aren’t sustained when it’s broadly applied, but “I don’t trust someone to spend it well,” which is just a stand in for “how I would spend it,” needs to go away in favor of outcome-based evaluation.
The question I've always wondered about UBI type programs (and I've been a fan) is what happens when people don't spend the money wisely? Take homelessness for example, what happens when you give homeless people $1,000/month and they spend it on drugs and are still homeless and hungry? In the end it seems like we will be left paying for UBI and social programs like public housing, food stamps and drug addiction programs. UBI will simply not be a replacement for most social programs as it is often advertised, which in my mind means we probably can't afford it.
>The thesis behind these programs is explicitly that the government shouldn’t waste timing being paternalistic about the recipient’s spending, l
When government is getting that money by taking it from other people it has responsibility to see that the money is spent in a manner that's beneficial. If that's blackjack and hookers then fine but if it turns out that the money is spend on blackjack and hookers and doing so doesn't benefit society then we can't in good faith keep taking people's money for that use.
I'm all for outcome based evaluation, but we need to have the balls to say "ok, well no blackjack and hookers then" if that's what the numbers support.
Healthy people will want to work some amount, we see that explicitly in the huge amount of time today’s elites are putting towards work versus leisure.
Poverty is often connected to mental health issues. There is no reason to complain about laziness when handing people money, because we already know that these people cost way more when you don’t hand them money (because of hospital visits, crime, etc.)
Many cities (in the USA) are mandated to have balanced budgets, limiting the size and scope of providing UBI-style benefits so something like this is difficult to role out without federal support. I’m pro a limited UBI but I don’t think it does people any good to not have a job to do so I’d want to see UBI as being a first tier program with a universal jobs guarantee as a second tier with each municipality having the choice over what they want those jobs to be.
The problem with these experiments is the same for any that provides middle-class-to-poor people with a benefit: they know it's only a short term thing so they will use it up while they have it. I doubt we're going to get any real results with this.
It's been a while since I dug into it, but essentially the study was filled with logical flaws. In summary, people were enrolled in health insurance plans and studied to see how they would react. If given 'free' health care would they use it more and if given high-deductible, would they use it less.
Two giant flaws I remember. First, no crap if you gave a broken country a short-term solution people will use it up (which supports the conclusion that we should make health care expensive). Second flaw was that if a person was enrolled in high-deductible and had high expenses they could quit! and go back to their normal plan. So of course the data would support that high-deductible folks spent less. Which is why we're all stuck with high-deductible garbage.
Poverty is complicated. It's not simply income. For example, the book "Evicted" (https://www.evictedbook.com/) details some of the cycles that keep people from being impoverished.
But let's pretend it's as simple as handing out money. How long will it be before the markets adjust? Simply put, rents will certainly increase. The market will be able to bear it.
So again, poverty. It's complicated. Not impossible. But complicated.
Cash is likely a small part of the problem, but I suspect poor financial habits are a major contributing factor, as well as education, mentorship, and opportunity.
To me it seems obvious that there should be an income floor.
The problem with these experiments though is that there is no possible way to make it universal with budgets in the same universe as we have now.
And if you study universal basic income, you will eventually learn that the universal part is actually critical.
But I think that UBI is actually necessary. Since it's completely unsustainable with our current system, I believe we need a new system with money that is much more high-tech.
These bromides need to be qualified to be of much use. How much reduction? How much money and what kind of housing? What are interesting, meaningful activities that can be prescribed by some central authority in these circumstances? Those are the difficult public policies that need to be worked on.
For example, I'm not so sure that giving folks a small welfare check and putting them in highly subsidized public housing projects is the best solution. I'm sure it does reduce poverty and homelessness with some, but does it also increase unemployment and alcoholism? I don't claim to know the answer, but it's worth exploring. Perhaps a UBI is the answer? Just giving away condoms seems less effective than also creating educational programs. There are plenty of alcoholics with interesting things to do, maybe there is more than just lack of resources at play?
I've taken a liking to UBI lately but I think you hit the nail on the head. It's easy to assert all the benefits or problems with UBI at face value and argue over them but it's much more difficult to judge the relative scale of each and tease out all the interwoven systems that are affected by such a sweeping program.
I'd like to see more experiments, trials and studies but ultimately they'll all fall flat because they're not the real deal (still useful, just not 100% accurate). The 'Universal' part is what makes it so interesting to me and also happens to be impossible to test without actually implementing it at a massive scale. Any data gathered from not-truly-universal sources will always be fundamentally flawed from the perspective of what the impacts actually would be in the real economy.
There are lots of open questions around UBI but IMO that just means it needs further debate and discourse.
> I'm not so sure that giving folks a small welfare check and putting them in highly subsidized public housing projects is the best solution.
The best solution to what problem, exactly? All of them?
> I'm sure it does reduce poverty and homelessness with some, but does it also increase unemployment and alcoholism?
It feels like you're shifting the goalposts here. Are you trying to find some kind of silver bullet where one "solution" solves all of these problems at the same time? Each of those "bromides" offers actual good solutions to each of those individual problems.
Notable also is that the OP did not call it "welfare" checks or "highly subsidized public" housing. Those extra qualifiers make it quite clear what your agenda/already made opinion is, even when you're attempting to hide it in conciliatory/placating language.
> The best solution to what problem, exactly? All of them?
The stated problems of poverty and homelessness (and perhaps secondary and tertiary problems).
> Each of those "bromides" offers actual good solutions to each of those individual problems.
I don't think they do, because they are poorly defined. How much money must be given to reduce poverty? A small welfare check? $1,000 per month in UBI? A $6,000/month stipend from your parents? How much poverty is reduced and how?
> Notable also is that the OP did not call it "welfare" checks or "highly subsidized public" housing.
That is exactly why I chose those terms, because OP didn't other than using "money" and "housing". They needed to be more precise, in my opinion so I used an established vehicle for giving money and housing as an example. I actually don't have specific policy in mind here, I just feel being too vague about these things doesn't actually help and tends to confuse things.
> You can reduce alcoholism and drug use by giving people interesting and useful things to do.
My personal experience makes me doubt this is the case. To give an example, my grandpa was an alcoholic and had a family of 7 and was the lead accountant at a major pharma company. Did he lack things to do?
I think the main cause of drug use is availability of drugs. That's one reason why doctors tend to be addicts more than the general population. My anecdotal experience is that the people that used drugs were not people that lacked "interesting and useful things to do", they were rich (and accomplished) kids with money to blow and drugs were always just a phone call away.
I'm not against people living motivated and interesting lives, but I just think you are vastly oversimplifying a major public health problem.
There's a fairly substantial body of research that shows that substance abuse is reduced when individuals are given the opportunity to do things that they find interesting and stimulating.
Maybe your grandpa was depressed and was self medicating? One anecdote doesn't really prove that full blown many year research studies are wrong.
You can reduce poverty by teaching people employable skills.
You can reduce homelessness by making more housing available for purchase.
You can reduce abortions by educating people about sex life.
You can reduce health care expenses by teaching people to live a healthier life.
Except the last two, you're just treating the symptoms and not addressing the actual problems. There are legitimate problems with giving things away for free. A few would realize the full value but for the majority would still remain in the same situation they were before.
Obviously, if they wants that, it's not involuntary.
You strawmanned a figure out of thin air.
And you didn't ask if they likes their taxes going to existing corporate subsidies, or F35s, or Presidential golf vacations. All of those could be traded as well.
Let's look at this a different way. How many people dealing drugs are doing so because they feel they don't have better prospects. How much does drug abuse cost society?
If society took the money they put towards policing, treatment, etc., and prevented that problem in the first place by just giving cash handouts, could it save both money and suffering?
I don't know the answer, but I'm pretty sure just reflexively looking at top-line costs isn't the way to improve society.
The only ex-dealer I've met was doing it because he could make $800 in an hour in semirural southern California. It's hard to convince someone making easy, risky money to switch to making less, hard, but sure money
The for-profit prison industry, who use incarcerated people as labor for pennies an hour, has enough political sway in this country that I have reluctantly accepted that these reforms are essentially never going to happen in my lifetime.
That's assuming there's no return on the investment, of course.
One of the strongest arguments for heavy foreign aid and development in my opinion is the squandered human potential. The man or woman who could be the next Einstein may well be tending a cassava field right now. That's our loss as well as theirs.
>That's assuming there's no return on the investment, of course.
Was there an assertion that there isn't a return on investment? Asserting that the inevitable outcome of rampant income redistribution is systemic collapse is compatible with "investment in personnel has returns"
Forcing the most productive workers to subsidize the consumption of unprofitable workers always leads to failure. "How am I to eat when I only grow 10kg of wheat a year but need to eat 11kg? We should use the state's violence to take 1kg from the farmer who grows 20kg and eats 12kg, Now I can grow 13kg of wheat for every 12kg I eat! A net gain in production!"
It's a misallocation of capital, simultaneously (the apparent) investing in the more profitable producer would have been better and (the non apparent) that deluding the worker into believing farming 13kg of wheat for every 12kg increases the price of the input goods and input labor for other industries.
Marxist Communism's argument is essentially: "While capitalism's losses are privatized, the fact that the profits are also privatized causes everyone to suffer. Instead of allow bricolage economics, the state's central planners will be to sole source of investment and sole consumer. Profits will be nationalized but losses will also be nationalized."
Having that state be the sole investor in an economic -- a monopoly on entrepreneurship -- dooms it to failure. It does not mean "investments [even centrally planned ones] don't returns"
> The man or woman who could be the next Einstein may well be tending a cassava field right now.
Probably not. Einstein was not a solitary genius. He lived in a culture and society that placed high value on learning and especially math.
He was also in communication with some very gifted people such as Emmy Noether who actually discovered the mathematical foundation for much of his work.
Srinivasan Ramanujan on the other hand is a much better example of finding someone who had super human abilities in an unexpected place.
This is a tired line that needs to die. It was popularized by Thatcher in 1976.
Take a look at Norway's finances from that date until today.[1]
Norway decided that the profits from natural resources belonged to every citizen of Norway, not just the companies that landed the leases. The profits were invested in infrastructure, including education, and conservatively invested in external markets as a hedge to internal economic crises. The results speak for themselves.[2]
America has more natural resources, more workers, more opportunities to make sensible economic decisions that provide for the well being of everyone. Instead we have an oligarchy that write laws to benefit themselves. The claims that it won't work here because market socialism "doesn't work", or because America is "too different" are pure bullshit.
Well if you're American. You've got this big military costing you heaps that could probably have some fat trimmed of it.
1 less JSF would feed and cloth and house a lot of homeless.
If you're the American Federal government, you don't need to trim military spending. You can just print more money. We've been doing it for quite a while now with hardly any ill effect.
Oh I totally agree, money's only really 'real' on the small scale. When you're able to wield the authority and sovereignty to make you're own central bank. That's when money becomes a policy tool. Hence why central bankers hate bitcoin.
No it's still accurate. The idea of classical economics here is that when the money supply in circulation increases and the total goods for sale stay the same, prices increase as well. What we're seeing is that because the USD is the world's exchange currency, it is a good way for foreigners to store wealth. So all these dollars end up locked away overseas which means that the money supply in circulation doesn't expand.
Of course, the US can only play this game so long before we devalue our currency enough that it's worth it for the world to switch to another currency. And when that happens, the USD will no longer be a good store of value, which means all those dollars will come flooding back. And we'll experience decades of inflation in a very short period of time, with disastrous consequences.
Depends on who you ask. I track things like food staples the value of which to humanity stays about the same e.g. eggs, milk, bread... Shadowstats[1] is an alternative view of CPI etc.
Inflation's been normal? Maybe we don't share the same reality. Let's continue with the USA, which previous commenters have be referencing.
The median price of a US home has gone up 45% [1] since 2008 when The Fed started "printing money hand over fist". Did the quality of all homes suddenly go up by 45% in lockstep? I would doubt that. It could be that all people started to be more productive simultaneously, and despite an aversion to paying a premium on housing, the price increase is merely a symptom of a supply-restricted market -- and yet Median incomes (household, individual) only increased (26%[2],28%[3]).
The US is experiencing at least 13% and practically 45% asset-price inflation over the period you referenced. I would hardly say that's "normal". It's the sign of a dying currency -- one that cannot maintain its long term purchasing power. [4]
>Classical economics no longer correctly models reality.
Economics is not physics -- it's an intangible process of action, human action. One cannot make an economic model of the utility I get from the sloth of laying in a field on a warm day, even if it means I'll be less robust against a winter storm. "Ce qu'on voit et ce qu'on ne voit pas" and TNSTAAFL still hold despite what the central planners decree.
[4] Living in a home is a consumptive act: Using land, material, past labor for one's enjoyment. It is not "investing". One may try to reduce the costs of that consumption by buying the house etc.
The median sale price of existing homes has gone up 45%. Without knowing the profile of homes sold, it's hard to say what it means. It could just be that turnover has accelerated at the higher end of the market, or slowed at the lower end, or both (which would be consistent with basically everything I've seen about the real estate market since 2008, both in terms of direct reports and indirect influences—better lending terms but stricter qualifications to get a loan at all, for instance.)
> The US is experiencing at least 13% and practically 45% asset-price inflation over the period you referenced.
Asset-price inflation isn’t what the unqualified term inflation refers to, and aside for the fact that money supply can drive both, is otherwise driven by different forces to general inflation (both in terms of distributional and behavioral drivers.)
> I would hardly say that's "normal".
Why not? Certainly the home price measure you've chosen went up a lot less in the 12 years from the trough in 2008 that you measured from than it did in the 12 years leading up to the peak just before the downturn. Even ignoring the question of whether it's a relevant measure, by what standard is it unusually high?
Hmmm. I wonder if tax policy has anything to do with this, or the way wealthy people can shelter money in a residence. I wonder if lack of savings interest is a big driver...
Correct me if I'm wrong, but I didn't analyze anything. My goal was to assert: Inflation is present in the US economy, Home prices as an example; and to provide some relative bounds on what that rate might be.
>I wonder if tax policy has anything to do with this
What's you thesis of the tax policy changes that occurred in the past 12 years that caused asset-price inflation?
>way wealthy people can shelter money in a residence
How are "wealthy people" "sheltering money" in the bottom 50% of all home prices -- those homes who prices would need to change to change the median price?
>lack of savings interest is a big driver
The opportunity of high, investment returns doesn't reduce the prices of the goods we need to buy to exist.
If I was to actually provide some analysis for the price increases, I'd posit:
Downward, interest-rate manipulation by central banks has caused systemic-wide credit expansion. The new money that results from this policy affects economic of all goods but most severely inelastic goods -- such as houses and in markets that receive artificial economic intervention from central planners (in the US, the housing market is a prime example).
Assets that don't increase in value are "losing money", per economic theory. Homes are a low interest money sink. You can buy a home, hold it and get a decent return on your money.
You can also mortgage the home at low interest, and gamble that money for higher interest in stocks, etc. You can use rental income to offset your mortgage costs.
This is a perfect storm for pushing up costs and denying lower income Americans the ability to pay rent and buy homes.
Inflation is not "normal" to me. It is theft by dilution to encourage "velocity". As long as it's a reality I have to constantly search for ways not to grow my wealth but to even simply maintain what I've worked for. It encourages unrealistic economic growth which is not environmentally sustainable in the long term. And IMO it's immoral.
When everything is free, nothing is. Some people have no understanding that infinite money doesn't mean infinite problems in the end. At some point in time, someone will pay the bill.
Yeah but no one is saying to give people infinite money? Poverty is expensive, and it’s cheaper in the medium term to house homeless for free and get them on track to paying taxes again than to let them run up hospital bills for preventable injuries or illnesses.
A central bank with the authority over a reserve currency never runs out. We (the US Fed, specifically) incinerated $3 trillion in USD value in response to COVID. We've borrowed and continue to service trillions in debt for useless decades+ wars. We can afford it (because it's cheaper to pay for these things upfront, before they're more expensive down the road), and those who say we can't use that as an excuse to avoid the uncomfortable conversation about why they don't want to pay for it.
Providing the homeless with housing reduces social service and ER costs [1]. Paying for IUDs and other forms of long term birth control reduces unwanted pregnancies [2]. These are just two examples, but the thesis is sound: spend now, get ahead of the curve, and have less spend need in the future. Instead of technical debt, this is policy debt, which leads to actual debt.
At some point, the inflation does become a problem. But notice how it hasn't yet? Take a look at Japan, which has printed an awful lot of money and yet inflation is still hard to come by.
I don't see the need to plan for inflation until a future point arrives that demonstrates there might be inflation. Looking at evidence from developed countries and their central banks, they are unable to generate an appreciable amount of inflation from monetary policy (significant quantitive easing operations). Maybe generous fiscal policy causes it (UBI, "helicopter money", and the like), it just seems a bit disingenuous to argue what we'll do about a hurdle that seems unlikely to present itself (many developed country central banks are near zero, at zero [ZIPR], or below zero interest rates [NIRP] [1] [2] and you're still not generating inflation [3] so ¯\_(ツ)_/¯).
Spain is experimenting with something not quite UBI [4] (but close enough for this comment I will refer to it as such), and their inflation rate is currently negative [5]. Something to follow.
EDIT: jcranmer said it better in a sibling comment ("To me, it seems a case of economists clinging to models that predict the opposite of reality, and it contributes to my general impression that economists prefer mathematical models even if their correlation to reality is poor.") [6].
> Looking at evidence from developed countries and their central banks, they are unable to generate an appreciable amount of inflation from monetary policy (significant quantitive easing operations)
Since QE operations were not designed to produce inflation (and were arguably designed specifically to not produce consumer price inflation), this isn't exactly surprising. They did, however, affect prices of the assets the government bought up as predicted.
Suffice to say, there's a massive difference between monetary expansions in a time of deep recession - economic policy orthodoxy since Keynes - and the assumption that inflation isn't a thing in developed countries.
It's much the same as a startup can pay for stuff by emitting more equity: pay for the right stuff and the value of the company might actually rise and there are many examples of valuations leaping afterwards, but you can't just assume these examples and the infinite divisibility of the cap table means no startup needs to worry about dilution or impact on future valuations.
> Spain is experimenting with something not quite UBI [4] (but close enough for this comment I will refer to it as such), and their inflation rate is currently negative [5]. Something to follow.
Spain reforming its benefits system to create a new payout to 5% off its population to be funded by debt and taxes isn't remotely similar to Spain reforming its benefits system to pay its entire population newly printed money, so the fact the former has little immediately evident inflationary impact in the middle of Covid tells us very little about the latter.
Given the nearly unlimited number of places one can find explanations of why printing more money causes inflation, I think it's reasonable to assume that, at worst, it _can_ do so. As such, throwing caution to the wind and just printing as much money as you need because "it wasn't a problem in <that country>" seems risky.
When you have a model that says something should happen under certain conditions, and every practical instantiation of those conditions have failed to cause the predicted effects, perhaps your model is wrong.
I'm reminded of the Phillips curve which relates inflation and unemployment. If you graph these data points for the 1950s and the 1960s, you do get a great correlation. But extend the graph to the 1970s and the 1980s and the data instead looks a lot more like a random scatterplot. Yet the concept is important enough to be covered in Economics 101 textbooks. To me, it seems a case of economists clinging to models that predict the opposite of reality, and it contributes to my general impression that economists prefer mathematical models even if their correlation to reality is poor.
What in tiny experiments like the article's? Inflation and even hyperinflation have occurred many times in many places in the last century. In Venezuela the inflation rate is something like 2000 percent. It's not just theory. Even the US had double digit inflation when I was in school. We were taught things about the time value of money (using numbers like 8 percent interest rates) that seem nuts now.
As for interpreting trends unwisely, isn't that what you're doing by noting a lack of inflation and arguing therefore that fundamentals don't matter. Common sense says if you give out more cash, people can bid up prices higher. There are undoubtedly variables not accounted for in all economic models. As the statisticians say, "all models are wrong". But those unknown variables can turn on you too. Every bubble consists of people ignoring fundamentals because they don't fit the recent curve, then getting burned when it crashes.
Or, the model is right, but the system is being gamed in a way that isn't clear to us in the public. Then when we find out what the game is it'll be too late.
You have to actually examine the specifics of the issue and see whether the measures actually reflect the reality. But in this specific case there's a pretty strong case that what's broken down is not the relationship between how many people are able to find work and the rate of inflation, but the relationship between how many people are able to find work and the "unemployment rate".
Yes. It comes with the territory of realizing that there are actors gaming the biggest systems around, and part of the game is building support for those gaming the system, without knowing which segments of our society are participating.
I'm more worried about the implicit economics textbooks cover how an old model was falsified in the 1970s, therefore we should assume every other economic model is also false argument he was responding to...
I'm admittedly skeptical of MMT, but turning that argument around, IF it were true that the US can never run out of money, then why worry at all about the cost of things? Why not just print 100% of the money to provide 100% of the things people want?
WRT providing homeless with housing and birth control specifically, I think a very strong argument can be made that a government agency is not the best provider of that service. Why wait for a slow, inefficient bureaucracy to waste a bunch of the money and time on admin costs? Every athlete and actress telling us from their multi-million-dollar homes we need to help the homeless could pool their excess money in a non-profit trust and just do it. They would help way more people with way less effort. People unable to do so need not be coerced through the tax system into participating in a less efficient program.
> IF it were true that the US can never run out of money, then why worry at all about the cost of things? Why not just print 100% of the money to provide 100% of the things people want?
The point of MMT is not that it's impossible to cause inflation, but that printing money and investing it in the national interest doesn't, for the same reason that issuing shares doesn't reduce a company's stock price if those shares are being issued in exchange for a capital investment. We shouldn't print money to fund consumption, but we should be happy to print money to pay for infrastructure, healthcare, research - anything that's ultimately going to return more money to the economy than it costs.
> WRT providing homeless with housing and birth control specifically, I think a very strong argument can be made that a government agency is not the best provider of that service. Why wait for a slow, inefficient bureaucracy to waste a bunch of the money and time on admin costs?
Why do you believe that a government is more likely to be a slow inefficient bureaucracy than a private NGO or whatever it is that you're suggesting?
> People unable to do so need not be coerced through the tax system into participating in a less efficient program.
No-one with that kind of money is "unable" to pay their fair share of taxes. They choose not to.
It's the same as everyone paying their share of a dinner. If one person skipped out, everyone else could probably cover their meal without really noticing. But everyone would object to doing that, because no-one wants to feel like a sucker.
I may question MMT premise, but the comment I was replying to said "central bank with the authority over a reserve currency never runs out". Here, you qualify that a little more to say "central bank with the authority over a reserve currency never runs out... as long as they spend it on infrastructure, not consumption". A little more palatable, but I would still question whether any given thing
is "going to return more money to the economy than it costs". Any savvy investor knows such "sure bets" are usually scams. The real problem is we don't know what the return on, say, a bridge to nowhere, study of cow farts, or blanket no-strings-attached UBI is, or what the unintended consequences or opportunity cost of such investments is. So we should experiment, but I don't see true, objective, double blind experiments being done in most of these UBI experiments, or real attention to the downsides. Just some hand-waving "meh, don't worry about the deficit or inflation, it'll pay for itself", without real evidence. Also, who defines what is "infrastructure"? Is oil exploration "infrastructure"? Google and Facebook? Too-big-to-fail financial companies? Government officials kids and friends?
> Why do you believe that a government is more likely to be a slow inefficient bureaucracy than a private NGO or whatever it is that you're suggesting?
Because I've worked with government organizations. A large chunk of the employees lack motivation for what they are doing. Arcane employment rules mean you can't fire people who are dead weight, or pay the well-performing people based on merit. NGOs and private sector have other motivations that usually (not always) makes for more efficiency. One has only to go to their local DMV to see this. And of course, it's a spectrum. Most reasonable people see merits in some government programs, and some private. Where to draw those lines vary.
>It's the same as everyone paying their share of a dinner.
I think a better analogy is a group where half want to go to a really expensive lavish restaurant (UBI+Universal Healthcare+Free Housing), and the other half want to go to a local pub (safety nets, small government, private charity). They could fight over which place to go, or, just each go to their own place. No need for the expensive dinners to insist the pub-goers go with them, or for the pub-goers to begrudge the restaurant-goers their meal. The "unable" I referred to were poor-to-middle class. I'm saying a middle class person saving for her retirement and kids' education, need not be coerced by millionaire class actors and athletes into paying for UBI or other programs she doesn't think are wise investments. If the Screen Actors Guild members think UBI is so great, their first step could be to set up one with their own funds.
> I think a better analogy is a group where half want to go to a really expensive lavish restaurant (UBI+Universal Healthcare+Free Housing), and the other half want to go to a local pub (safety nets, small government, private charity). They could fight over which place to go, or, just each go to their own place. No need for the expensive dinners to insist the pub-goers go with them, or for the pub-goers to begrudge the restaurant-goers their meal.
The benefits apply at country scale. So it's more like someone saying "well, I'll respect our voting and go to the fancy restaurant if that's what the rest of you want, but I'm only going to pay what a pub meal would have cost because I'd rather go to the pub" - i.e. a major dick move.
All of this stuff sounds great from an academic perspective, but life is not simple. There are people who given a couple of thousand dollars a month, will throw a bag of potato chips and beef jerky at their kids and buy some booze and a Mustang on a 7 year, 18% APR payment plan.
You cannot make an alcoholic stop drinking. They need to make that decisions.
You cannot give people money and assume they will get out of poverty.
Money is a tool to solve problems, but it doesn't solve them, many people in poverty who end up on the dole need social and other supports.
The percentage of parents who are negligent parents is small and not relaged to the poor. The percentage of drinkers who are alcoholics is small and not relagated to the poor. Refusing to help anyone because a small percentage of them act in ways that richer Americans get a pass for is unethical.
"Being poor is expensive" as it is said and it is a vicious cycle as well. Because not being able to pay the total upfront cost of - in the long run - cheaper solutions, they can be stuck paying smaller amounts but more in total over time. People with cashflow problems might not be able to pay in time, leading to dunning costs cutting into their budgets. Cashflow problems might make them pick single tickets for the bus while a monthly pass would be cheaper on the long run. Not being able to pay for maintenance of the car now? Pay for a more expensive repair later instead. Same goes for health issues.
Once they are able to avoid these costs for a while, they might save enough that they are no longer actually poor (albeit still at risk of becoming trapped in this cycle again when unexpected expenses appear).