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This is a really great question.
If we understand the effect of UBI and the economy, we should be able to loosely estimate how high UBI can go without beginning to bump up against capacity constraints and spur inflation.
Let’s give it a try.
#UBIEconomics https://twitter.com/FreeMars2020/status/1291242815805063168
If we understand the effect of UBI and the economy, we should be able to loosely estimate how high UBI can go without beginning to bump up against capacity constraints and spur inflation.
Let’s give it a try.
#UBIEconomics https://twitter.com/FreeMars2020/status/1291242815805063168
We’ll use Capacity Utilization, a measure produced by the Federal Reserve to quantify how much capacity is being used from the total available capacity to produce demanded finished products.
In Q2 2020, it was an average of 65.97%.
In Q2 2020, it was an average of 65.97%.
We’ve never seen capacity utilization above 90%. The highest it’s been is 89.4% in Jan 1967. So let’s assume 90% is the maximum we can take it to.
Comparing to annualized GDP of 19.4 trillion in Q2, and multiplying by 0.9/0.66, we get a max GDP of 26.4 trillion.
Comparing to annualized GDP of 19.4 trillion in Q2, and multiplying by 0.9/0.66, we get a max GDP of 26.4 trillion.
We have to take into account the multiplier effect of UBI, which has been estimated as high as 2.0 ( @scottsantens).
This means that the UBI money circulates in the economy, and will end up being spent up to 2 times within a year.
This means that the UBI money circulates in the economy, and will end up being spent up to 2 times within a year.
So to increase GDP by 26.4 - 19.4 = 7 trillion, we may only need to send out half that amount as UBI.
So 3.5 trillion in UBI divided by 235 million adults over age 18, which is $14,893 UBI per adult.
Dividing by 12 mos. per year, we should be able to afford about $1,200/mo/pp.
So 3.5 trillion in UBI divided by 235 million adults over age 18, which is $14,893 UBI per adult.
Dividing by 12 mos. per year, we should be able to afford about $1,200/mo/pp.
Keep in a couple of things.
1) Remember, the spending multiplier is 2, which shows up through non-UBI income, so effectively we should end up with a $24,000 raise in total *per person*, working or not, or $48,000 extra per two-adult household.
1) Remember, the spending multiplier is 2, which shows up through non-UBI income, so effectively we should end up with a $24,000 raise in total *per person*, working or not, or $48,000 extra per two-adult household.
2) This is based on *current* capacity, which is bound to be reduced by decades of under-utilization, and therefore *significantly* lower than potential capacity.
Companies don’t invest in increasing productive capacity when they can’t even keep current capacity busy.
Companies don’t invest in increasing productive capacity when they can’t even keep current capacity busy.
The result of implementing UBI would be a massive increase in aggregate demand, incentivizing companies to once again invest in increasing capacity (and innovating new products).
The resulting investments would sop up large amounts of capital out of the current idle-capital low-income (high-PE) financial bubble.
And the resulting increase in productive capacity will allow us to continue to scale up UBI as the economy grows.
#CalibratedBasicIncome
And the resulting increase in productive capacity will allow us to continue to scale up UBI as the economy grows.
#CalibratedBasicIncome
