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Originally Posted by wufwugy
Here's a good way to conceptualize what's going on here in regular terms.
Let's say you make $100k and we break that up into 10 slices of $10k each and apply a marginal value to each slice. Which slice of $10k do you value having more: the first $10k or the last? The way we find the answer to this is to compare the things you would buy with your first $10k and last $10k and compare your subjective assessment of how much those purchases mean to you. For example, most people, with their first $10k, pay for things like food, shelter, electricity, transportation, clothes; and with their last $10k pay for things like 4k TVs or extra video games. Those people, if they don't have food, shelter, etc., rate themselves as significantly worse off than if they don't have 4k TVs, etc., which tells us why they buy food, etc. with the first $10k instead of buying 4k TVs with it.
This can be more deeply examined when acknowledging that total income also informs these marginal assessments. For example, if somebody makes $100k, that person likely buys more expensive food, shelter, clothes, etc. than he would if he only makes $10k. This is where differences in the shapes of utility curves (personal preferences) between different people come into play. For example, some people value expensive homes a lot more than others, enough that if they make $10k they still prefer to work more to make $100k so they can buy those expensive homes. But other people don't feel this way and feel that working enough to make $100k doesn't satisfy them as much. They might rather live in trailer homes, in cheap apartments with lots of roommates, in hostels, crashing on friends' couches, or even on the street altogether.
With that in mind, if we make a UBI $10k per person per year (the rate most seem to think it should be set at), the person who values things like expensive homes enough to do the work he is able in order to get to $100k will still do it even though his first $10k is "free". But the person who doesnt mind living in really cheap circumstances and doesn't mind eating cheap frozen burritos and wearing cheap clothes and who doesn't like working, well that person is the type who would take that $10k UBI and not work. However, if he received no UBI, no welfare at all, he would have no option but to work to get up to his preferences of $10k. And he WOULD work to do it since he would prefer it over not doing it.
Further, in this economy, there is $110k of money, $100k to the one guy and $10k to the other. The $10k UBI for each is paid for by the $100k earner, yet he is actually producing $110k of goods/services while the other guy is producing $0. This shows that the UBI (and welfare) is inherently unfair. And it gets worse because the same type of marginal assessment we did above applies to the $100k guy's desire to work as much as he does, work more, etc.. He's going to actually produce less than he otherwise would because each unit of production provides him less value than it otherwise would since some of it goes to the $10k guy. So, we might have a scenario where if the $100k guy wasn't subsidizing the $10k guy, the $100k guy might choose to work for $105k. Also, the $10k guy would choose to produce $10k since he's not subsidized. We then end up with a fair system and a more wealthy system that produces $115k of goods/services instead of $110k
I hope this makes sense.
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