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0 pointstaurath10y ago0 comments

If the basic tenants and studies that have called basic income into the forefront are to be believed (and the actual spectre of central state control that people are afraid of in some circumstances is real, and it is), the best way to benefit people in need is to give them cash. Most of the time, people spend it on things they need. If they don't, they are either suffering from a mental or addiction issue and need treatment, or they made mistakes and its their own damn fault, and nobody needs to pity them.

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logfromblammo10y ago· 2 in thread

But on a grand scale, where everybody knows that everyone is getting the same amount of free money, the market adjusts accordingly, within minutes.

You can give 20 people $100 each to spend as they see fit, and it wouldn't affect the price of a Happy Meal. But if you give 100000 people $100 each, you can bet that the price of that food is going up a bit, just because more people can more easily afford a higher price.

Subsidy affects market equilibria differently than using the same amount of resources to lower costs or increase supplier firms, or do industry-advocacy advertising.

droffel10y ago

This is true, however, at a point in time where we are desperately attempting to induce inflation in anything but assets (which was the end result of QE), perhaps "helicopter money" in the form of a UBI would end up stimulating more demand than QE did. Sure, we would experience some mild inflation in basic goods prices, but in net, I think it would be a benefit. Isn't the Fed trying to stimulate inflation anyways, and utterly failing?

logfromblammo10y ago

"We"? I do not share your opinion that the price inflation resulting from monetary policy is in any way a good thing.

You can't stimulate demand with a subsidy. You can't depress demand with a tax. Both of those things are manipulations to the natural equilibrium price, and generate guaranteed deadweight losses.

The only way to "stimulate demand" is by changing what people's desires and priorities, such as by advertising. People have to want now-things more than potential future-things. Tricking them by pretending that they can have both more now and more later and then revealing only after they buy that they will actually have less later degrades trust, which causes more saving and stockpiling, which reduces the velocity of commerce. That reduces the economic leverage of controlling the size of the money supply.

You can't fool all the people all the time, and the ones you can't fool leak their information through the market. Most people know by now that the market can stay irrational longer than you can remain solvent. But we also know that you don't need to outrun the tiger, you just need to outrun your friend. So consumers are paying down debt, and companies are hoarding cash, hoping to be the best-prepared survivors when the whole house of cards falls. Fed policy is not taking into account the fact that it can't just print more confidence.

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