Thanks. I can understand from the perspective of reducing bureaucracy and that through progressive taxation that richer folks benefit less from it, but I still don’t quite follow how this will not lead to inflation.
Imagine, I’m a food retailer. My goal is to make money, and I basically own the market. All of my customers plus some new ones suddenly have way more disposable income. Why wouldn’t I gouge my prices up?
I guess I’m still not getting it. If I’m being taxed more as a greedy corporation, isn’t that even more justification to jack up my prices on my customers who can afford a little more?
Because ultimately people don’t have much more to spend. Any competitor of yours that doesn’t jack up prices will win a lot of customers that way. You don’t want to price yourself out of the market.
Ultimately the same amount of money is in the economy, it’s just distributed differently.
The price jacking stops when all retailers start losing customers (simply cannot afford food). With UBI, they will gain new customers which will make them jack it up again
What makes you say that? Clearly food prices aren’t at the point of unaffordability now. UBI also wouldn’t really create new customers, as people already need food now, UBI just guarantees they won’t have to go into debt to afford it.
What you’re describing makes more sense in an economic context where food is scarce, eg once a retailer has enough customers, they could sell all of their stock. In this scenario, jacking prices makes more sense, because you’re not getting any more customers by lowering them. But food generally isn’t scarce (in the developed world at least), meaning you’re always going to have excess stock. Now, the way to earn more money is to find a delicate balance between lowering prices and gaining more customers (but less revenue per sale, but have more sales and less waste to handle) or increasing prices but losing customers (meaning fewer sales, but more revenue per sale).
UBI isn’t really a factor in that last calculation, because it’s mostly dependent on the prices of your competitors. Of course, in a monopolistic market things are different, but then the price jacking can also happen independently of UBI.
To show a real-life example, take a look at Belgium. The price of food there has been quite low relative to other countries. Why? Because Ahold-Delhaize entered the market and tried competing heavily with existing brands there. The way to do that was through lowering prices, which forced other supermarkets to follow suit. Ahold could afford this, because they own a very significant market share in the Netherlands, where they could in fact increase prices (which is the semi-monopolistic behaviour I mentioned) and offset the cost. Their competitors are less well established or cannot compete at scale, so customers have fewer alternatives (and in locations where they do the prices are lowered a bit again to retain customers).
Why not do it anyway without ubi. They have no competition I assume given the scenario you give. People can’t shop somewhere else I assume under your scenario.
Thanks. I can understand from the perspective of reducing bureaucracy and that through progressive taxation that richer folks benefit less from it, but I still don’t quite follow how this will not lead to inflation.
Imagine, I’m a food retailer. My goal is to make money, and I basically own the market. All of my customers plus some new ones suddenly have way more disposable income. Why wouldn’t I gouge my prices up?
It’s not really “way more”. They’re still only going to spend what they wanted to spend before.
The money also isn’t created out of thin air, it’s obtained through taxes on higher incomes and businesses.
I guess I’m still not getting it. If I’m being taxed more as a greedy corporation, isn’t that even more justification to jack up my prices on my customers who can afford a little more?
Because ultimately people don’t have much more to spend. Any competitor of yours that doesn’t jack up prices will win a lot of customers that way. You don’t want to price yourself out of the market.
Ultimately the same amount of money is in the economy, it’s just distributed differently.
I’d believe the competitor argument if I hadn’t just witnessed all food retailers world-wide jack their prices without cause
But then surely UBI doesn’t matter if you believe they’ll jack up prices regardless of a good cause?
The price jacking stops when all retailers start losing customers (simply cannot afford food). With UBI, they will gain new customers which will make them jack it up again
What makes you say that? Clearly food prices aren’t at the point of unaffordability now. UBI also wouldn’t really create new customers, as people already need food now, UBI just guarantees they won’t have to go into debt to afford it.
What you’re describing makes more sense in an economic context where food is scarce, eg once a retailer has enough customers, they could sell all of their stock. In this scenario, jacking prices makes more sense, because you’re not getting any more customers by lowering them. But food generally isn’t scarce (in the developed world at least), meaning you’re always going to have excess stock. Now, the way to earn more money is to find a delicate balance between lowering prices and gaining more customers (but less revenue per sale, but have more sales and less waste to handle) or increasing prices but losing customers (meaning fewer sales, but more revenue per sale).
UBI isn’t really a factor in that last calculation, because it’s mostly dependent on the prices of your competitors. Of course, in a monopolistic market things are different, but then the price jacking can also happen independently of UBI.
To show a real-life example, take a look at Belgium. The price of food there has been quite low relative to other countries. Why? Because Ahold-Delhaize entered the market and tried competing heavily with existing brands there. The way to do that was through lowering prices, which forced other supermarkets to follow suit. Ahold could afford this, because they own a very significant market share in the Netherlands, where they could in fact increase prices (which is the semi-monopolistic behaviour I mentioned) and offset the cost. Their competitors are less well established or cannot compete at scale, so customers have fewer alternatives (and in locations where they do the prices are lowered a bit again to retain customers).
Why not do it anyway without ubi. They have no competition I assume given the scenario you give. People can’t shop somewhere else I assume under your scenario.
Well they have done it anyway, but reached an equilibrium where they all might start losing customers
exactly. The price is based on if the customer can go get a better price somewhere else as opposed to if the customer has more money to spend.