
Study: A universal basic income would grow the economy - rbanffy
https://www.vox.com/policy-and-politics/2017/8/30/16220134/universal-basic-income-roosevelt-institute-economic-growth
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chimeracoder
A couple of things right off the bat. This study assumes that:

\- There is zero effect on propensity to work

\- The national debt has no secondary effects on the economy

\- Changes in taxation do not affect consumption or investment behavior, at
any tax level.

Those first two right there are incredibly massive assumptions, and they
amount to two of the biggest criticisms of these proposals in the first place.
And the third is flat out wrong, with enormous amounts of data available to
debunk it.

Moreover, the third assumption ("Increasing government revenue by increasing
taxes levied on households does not change household behavior") is actually at
odds with their end conclusion! If there were truly no change in household
behavior (whether at the margin or in the aggregate), then there could be no
primary mechanism for this policy to have an impact in the first place. (And
because this study explicitly ignores secondary impacts, without a primary
impact, what are they actually claiming to measure?)

So I'm not sure what the value is in a study that basically says, "If we
ignore the biggest and most commonly criticized negative effects, the effect
of this policy will be positive".

~~~
snarf21
Exactly, and no mention if this would affect welfare and other social
programs. So if someone still gets all the aid they do today _and_ $1K per
month, then there is more money to spend but are there more people who want to
work where that money is spent?

I think it likely that this would cause low end job wages to rise, not
necessarily increase employment.

~~~
xienze
> and no mention if this would affect welfare and other social programs.

Which is quite surprising because every, and I mean every, UBI proposal talks
up how much money we'd _save_ because welfare would be eliminated. I just
don't see how that's possible, because inevitably there are going to be a lot
of people with real or self-imposed crises crying about how they don't have
enough money to pay rent or buy food, and what is the government going to do,
tell them "tough shit, you should've managed your UBI better"? Uh, I doubt it.
We'll end up stuck with welfare programs as a UBI safety net and then people
will inevitably game the system by crying broke every single month.

This whole thing is such a ridiculous leftist fantasy, the biggest giveaway is
that it completely ignores basic human behavior.

~~~
appearsonline
One wonders which humans you surround yourself with to consider that "basic
human behavior".

~~~
xienze
Trying to maximize earnings is basic human behavior, sorry to break it to you.
Welfare scams occur regularly, and that's before UBI.

And you're dodging the bigger question: I'm on UBI and my money runs out,
can't afford to feed the kids. Multiply that by at least several thousand
people every month. Now what?

~~~
jpindar
Same as now. You don't get more food stamps just because you ran out.

~~~
xienze
The difference is it's earmarked money today. There's no potential to spend
your food money on a phone and then claim you can't buy food at the end of the
month.

~~~
kirsebaer
Most countries just give cash to people without income, they don't bother with
a separate food program. That seems to work fine.

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phkahler
Another missing element in the model: People who need it most are renting. You
hand everyone $1000 per month and I guarantee there will be a large uptick in
rents. This will short circuit economic activity and just push the money
straight to those who own rental property, thereby increasing the wealth gap
while raising the cost of living. I won't all go into this effect, but
certainly a lot of it will.

~~~
specialist
The moment I get my monthly cheddar, I'm moving to a nicer place with lower
cost of living.

The USA has more housing than people. Alas, that excess supply isn't near the
jobs.

~~~
phkahler
So you'd move to one of those places with cheap housing and no jobs? Does that
mean you'd not be working?

Of course the influx of people to low cost areas with no jobs would create
some jobs in those places and raise prices on everything from housing to
pizza.

~~~
specialist
Given broadband and strong coffee, I'll make the jobs.

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hacker_9
_" But a $12,000 a year per adult basic income is another matter. The
Roosevelt paper finds that paying for it would require increasing household
tax revenue by 120 percent — a more than doubling. To do that, it assumes that
all but the poorest 40 percent pay more in taxes. The middle quintile
(households with an income between $48,300 and $85,600, per the Tax Policy
Center) would see their average tax rate go from 14 percent to 25 percent; the
top one percent would see its average tax rate go from 32.9 percent to 67.9
percent."_

Well, this idea is dead in the water then.

~~~
norea-armozel
Yeah, more likely the rich would just self-fund fascist paramilitaries to keep
"the poors" in line like they've always done.

~~~
lawless123
We'll add a tax on private armies first.

~~~
rbanffy
The rich will make their politicians add a tax so that the middle class to pay
for the armies that keep themselves in line.

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mseebach
> They find that enacting any of these policies by growing the federal debt —
> that is, without raising taxes to pay for it — would substantially grow the
> economy. The effect fades away within eight years, but GDP is left
> permanently higher. The big, $12,000 per year per adult policy, they find,
> would permanently grow the economy by 12.56 to 13.10 percent — or about $2.5
> trillion come 2025. It would also, they find, increase the percentage of
> Americans with jobs by about 2 percent, and expand the labor force to the
> tune of 4.5 to 4.7 million people.

> They also model the impact of the plan if it's paid for with taxes. That
> amounts to large-scale income redistribution, which, the authors argue,
> would stimulate the economy, because lower-income people are likelier to
> spend their money in the near-term than rich people are. Thus, they find
> that a full $12,000 a year per adult basic income, paid for with progressive
> income taxes, would grow the economy by about 2.62 percent ($515 billion)
> and expand the labor force by about 1.1 million people.

So, borrowing and spending 300 million adults * $12,000/adult/year = $3.6
trillion/year would grow the economy by $2.5 trillion? And raising it in taxes
would grow the economy by just half a trillion?

Or what am I missing?

Also this:

> because lower-income people are likelier to spend their money in the near-
> term than rich people are

But what about the long term? We can debate the finer points about when and
how much etc, but it remains uncontroversial that rich people invest
nontrivial amounts in long term stuff. With near-70% top average (not
marginal!) tax rates, this will go down by _a lot_. How will this
redistribution from long-term investments to near-term spending affect the
economy over the long term? Yes, fewer yachts and private jets (there are also
people employed supporting those, and the net employment benefit suggested is
already quite modest), but would an Elon Musk or Jeff Bezos subject to a 70%
tax rate invest in the next SpaceX/Blue Origin (not to mention thousands of
other startups backed by angels and personal/friends&family savings)?

~~~
logicchains
I did my bachelors in economics, and one of our textbooks taught that all
other things being equal (ceteris paribus), more wealth equalisation (taking
from the richer and giving to the poorer) means less wealth creation in the
long term. Why? Wealth will naturally concentrate in the hands of those more
capable of creating it: if Jo is making 2% per annum return and Jane is making
4% per annum return, and they both start with the same amount, then Jane's
share of the total wealth pool will continuously increase relative to Jo. The
key thing to note is that as Jane's producing twice as much from her wealth as
Jo, if we take resources from Jane to give to Jo then they'll be used less
effectively, slowing overall growth.

To illustrate, imagine they both start with $1000 each. The total wealth pool
is hence $2000, and they both have 50% each, perfect equality. Now, let's look
50 years in the future, assuming the previously mentioned interest rates per
annum compounding annually. According
to[http://www.moneychimp.com/calculator/compound_interest_calcu...](http://www.moneychimp.com/calculator/compound_interest_calculator.htm),
Jo will have $2,691.59 and Jane will have $7,106.68. The total wealth pool is
$9,798.27. Jo hence now has 27.47%, and Jane has 72.53%. They're both less
equal, but they're also both wealthier, and the overall wealth pool has
increased.

Now, let's look ahead another 50 years. If no wealth transfer occurs, Jane
will have $50,504.92 and Jo will have $7,244.65, with the total wealth pool
being $57,749.57. If we equalise wealth, however, such that both have
$4,899.13, then in 50 years Jane will have $34,816.57 and Jo will have
$13,186.44, for a total wealth pool of $48,003.01. This is 83.12% of the total
wealth pool that there would be if no wealth transfer took place. This effect
is applies similarly if wealth redistribution happens every year through
redistribution of income.

In this sense there is hence a direct tradeoff between economic growth and
wealth transfers from richer to poorer in the long term (all other things
being equal).

~~~
antisthenes
Good thing our society doesn't optimize for maximum absolute wealth growth in
a vacuum, else we'd have 1 person with all of the country's wealth.

> If we equalise wealth, however, such that both have $4,899.13, then in 50
> years Jane will have $34,816.57 and Jo will have $13,186.44, for a total
> wealth pool of $48,003.01

Have you considered second order effects here? What if additional wealth
allows "Jo" to increase their per annum return because they invest it in a
business or education?

> In this sense there is hence a direct tradeoff between economic growth and
> wealth transfers from richer to poorer in the long term (all other things
> being equal).

I have a BA in Economics as well, and ceteris paribus models stop being useful
past the 2nd year of study. I don't think they're ever useful except to
illustrate the most basic concepts to freshmen and laymen. When you apply such
models to the real world, you end up with a situation I described in the 1st
paragraph.

In this case, the condition assumes that the rate of wealth creation is fixed
and unalterable on a scale of 50 years. It also falsely assumes (just world
fallacy) that wealth is already allocated in such a way as to belong to people
with high (unalterable) wealth creation potential.

~~~
logicchains
>Good thing our society doesn't optimize for maximum absolute wealth growth in
a vacuum, else we'd have 1 person with all of the country's wealth.

The person must be trading with others somehow to be gaining those 4% returns;
they could only end up with all the wealth if literally nobody else saved any
money. And if nobody else saved any money, there'd be no economic growth at
all if not for the person with all the wealth.

>Have you considered second order effects here? What if additional wealth
allows "Jo" to increase their per annum return because they invest it in a
business or education?

Jo started with the same amount of wealth as Jane; he had no less opportunity
to invest it in a business/education, invest it in something to increase in
something that increased his investment returns, than she did.

>In this case, the condition assumes that the rate of wealth creation is fixed
and unalterable on a scale of 50 years. It also falsely assumes (just world
fallacy) that wealth is already allocated in such a way as to belong to people
with high (unalterable) wealth creation potential.

It doesn't assume the latter, it assumes Jane and Jo started with the same
amount of wealth, and shows that given this condition it will result in more
wealth being allocated to the people with more wealth creation potential.
Starting from the same point, Jane and Jo have equal chance to increase their
ability to create wealth.

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dm319
We need to await the results of the Finnish study[1]. As an aside, I wish all
politics would take an experimental scientific approach as the Finnish are
doing. They are randomly selecting 2000 unemployed in a specific area and
trialling the basic income for two years. I hope they have also selected a
control population. At the end of two years they will assess how the scheme
affects cost and employment status of that group.

[1][http://basicincome.org/news/2017/05/finland-first-results-
ba...](http://basicincome.org/news/2017/05/finland-first-results-basic-income-
pilot-not-exactly/)

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specialist
"Economy" is the movement of money.

Of course wealth redistribution via progressive taxation, in this case via UBI
(or negative income tax) increases the economy.

Conflating wealth growth (aggregation, transferring, hording) with economic
activity is how we got into our current mess (accelerating inequity).

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RickJWag
Giving people money they did not earn will have exactly the same effect as
giving people paper fans, bottled water, rain ponchos, etc.

The given commodity becomes an oft-wasted resource. (i.e. inflation is a
result.)

