So query: the proposed patch for this is to give everyone a certain minimum amount of money they get regardless of employment. This at the surface appears to fix the problem above. It means that since each actor has a finite amount of money to spend still, they are disincentivized to buy bread in favor of corn when there is a wheat shortage (unlike the ‘free bread’ case where they always have an incentive to take the bread), or to use electric heat all the time (since they don’t get “free” heat but have to pay for it) and so on. You would also have small fees for healthcare for the same idea—to signal not to overuse it unnecessarily.
What are the problems with it, other than “political”? This disincentivizes employment tasks that provide minimal gain—if the amount is an arbitrary $1000 USD per month, very low end jobs don’t provide enough gain to bother. (because even if the job paid another $1000 monthly, the diminishing utility of the second $1000 isn’t enough to do the worst jobs on the market)
The same problem would apply in theory—you’d still have a weakened price mechanism because of the taxation used to fund it. $1000 dollars a month is just a lot.
It might still be worth is obviously—the point of this post isn’t to say that welfare spending is bad just that there’s a tradeoff, outside of the special cases of efficency enhancing taxes for stuff like pollution.
So query: the proposed patch for this is to give everyone a certain minimum amount of money they get regardless of employment. This at the surface appears to fix the problem above. It means that since each actor has a finite amount of money to spend still, they are disincentivized to buy bread in favor of corn when there is a wheat shortage (unlike the ‘free bread’ case where they always have an incentive to take the bread), or to use electric heat all the time (since they don’t get “free” heat but have to pay for it) and so on. You would also have small fees for healthcare for the same idea—to signal not to overuse it unnecessarily.
What are the problems with it, other than “political”? This disincentivizes employment tasks that provide minimal gain—if the amount is an arbitrary $1000 USD per month, very low end jobs don’t provide enough gain to bother. (because even if the job paid another $1000 monthly, the diminishing utility of the second $1000 isn’t enough to do the worst jobs on the market)
The same problem would apply in theory—you’d still have a weakened price mechanism because of the taxation used to fund it. $1000 dollars a month is just a lot.
It might still be worth is obviously—the point of this post isn’t to say that welfare spending is bad just that there’s a tradeoff, outside of the special cases of efficency enhancing taxes for stuff like pollution.