Jach's personal blog

(Largely containing a mind-dump to myselves: past, present, and future)
Current favorite quote: "Supposedly smart people are weirdly ignorant of Bayes' Rule." William B Vogt, 2010

Basic Income and borrowing from the future

When I look at economic growth numbers for the United States over the past century, I sometimes get the sense that we as a country have stumbled and for a while now have been trying to sprint faster and faster so that we can avoid doing a face-plant. The face-plant isn't inevitable, if we can just pick up enough speed, and if we don't run into anything...

One non-show-stopper obstacle that affected us has been the introduction of the standard 40-hour work week, whereas in previous times working much longer than that wasn't uncommon. Also getting rid of a lot of child labor affected us. But we've compensated with adding women to the workforce, and the tremendous amount of power the computing and automation ages have given us. Individuals have also compensated by going deeply into debt, borrowing from the future that in theory will have access to more resources than the present. But it still seems like we're barely capable of sustaining our incredible growth, and recessions like the kind we're more or less out of have almost ended us.

When I look at Basic Income, I see it as, if it worked at all, just another form of borrowing from the future in order to keep up (in theory) the growth pace that is at least partially dependent on consumer spending, but more importantly I see it from the perspective of proponents as an attempt to help the poor live longer.

My academic view suggests at first glance that Basic Income is a stupid idea. It wouldn't work at all toward its supposed goals, because it would act primarily as an increase in revenue for apartment complex owners. Let's say you're running profitably with 80% of your apartments filled, and with Basic Income suddenly a lot of people in your area want to fill the other 20% because they can now afford it. If more people want to fill the available apartments than are actually available, prices rise -- for everyone, because the ideal is for supply to meet demand at maximal profit. (Typically I think it's very difficult for an apartment complex owner to reach 100% fill rate and also be on a sharp supply/demand curve, where if they lowered prices they'd get more applications than normal and if they raised them people would move out. So they determine what fill rates at what prices they need to profit and work around that.) Furthermore, let's say that you increase prices for everyone exactly the amount of Basic Income they will all receive. You know they can afford it. Similarly you know any new applicants can also afford it, and because Basic Income has essentially become the new 0 mark, the supply/demand ratio is kept exactly the same.

Basic Income shifts the supply/demand ratio for apartments (or houses in general) to increase demand, as more people can suddenly "afford" it. But an intelligent supplier will notice the increase in demand, and if he or she was already happy with the way things were, they can increase the cost of the supply in order to drive demand back down to pre-Basic Income levels.

Suppose the government, in addition to giving everyone Basic Income, passes a new law forbidding apartment complex owners to raise rent. (For all time -- if just for N years, the problem is merely delayed (at least for apartments) for N years.)

Okay, so we play the game with food. It's a lot more subtle; not everyone needs a banana, but with some fraction of the new Basic Income you can expect there will be some percentage more demand than there used to be for bananas. So just like the apartment case, if you were happy with the demand before, you'll increase the cost of the supply in order to drive the demand back to what it used to be. Similarly for other food items, with the items most in demand now receiving the sharpest price increases to capture as much of the new Basic Income as possible.

A solution may be to play whack-a-mole with price increases, but eventually the government may have to put a complete control on the price of goods that's independent of market realities... I'm not going to elaborate on why this is a horrible idea. If you think it may be a good idea then post a comment and I can direct you to things you should read.

Now, my real view interjects for a moment. First it notes the similarity with federal college loans driving up the prices of college suggesting the amount of aid increase becomes the new $0, but it also notes that more people are going to college. (Actually mostly more females; males I think are only barely past the previous maximum enrollment percentage that occurred during the Vietnam War.) So that indicates that the goal -- getting more people to go to college -- seems to be at least partially working, even if we may have some huge problems in the future with students failing to pay off the debt in a timely manner. So maybe Basic Income could partially work towards it goals? My real view's question then is: does Basic Income increase or decrease the number of people who can make it to a Singularity before the century is out? (That's my real goal for any policy, because I think the odds of a positive Singularity happening at all are good for this century even though the odds for a negative Singularity are presently better...)

Let's pretend magically that somehow with Basic Income everyone who doesn't want to be homeless is no longer homeless, and if they're mentally ill they can get access to the medication they need. (These are big problems that have had several attempts at solving them unsuccessfully, and so already my prior for Basic Income to be the silver bullet that succeeds is low...) Surely that would increase the life expectancy of such people, and increase the number of people who might make it to a Singularity.

If Basic Income could work, then it's borrowing from the future. But the future with a Singularity has to a first approximation infinite resources, so it's fine to borrow infinitely from it. (Of course really there's finite everything; "post-scarcity" is really what I'm getting at here.) I'm perfectly fine with borrowing from the future so long as it increases the number of people who can expect to live out the century.

So again, my primary question is: does Basic Income do that? My academic view chimes in again and says Basic Income can't work, so it wouldn't actually increase the number of people expected to live out the century. But it also suggests that if Basic Income just creates a new $0 mark with most of the new income going to apartment complex owners, then it doesn't necessarily hurt to try as that alone won't decrease the number of people expected to live out the century...

Even though I don't think Basic Income will even partially fulfill its goals, I think it's worthwhile to test that prediction with smaller countries or individual states that implement Basic Income before implementing it across the whole US. The main reason not to implement it too widely at first is because while I also think Basic Income won't have a negative effect on the number of people expected to live out the century, there's still a chance it could, and so damages ought to be the least possible.

Posted on 2013-11-08 by Jach

Tags: economics, government


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