QoL has of course risen despite this, because rent can only demand the different between the worst available rent-free location and the location at hand—as technology improves, the productivity at the worst rent-free location (the margin of production) rises, and what people get to keep post-rent rises.
Your comment is very confusing to me, as it reads like a sort of “productivity theory of value” that doesn’t align either with basic microeconomic theory or with empirical data that has been gathered on this question.
Both demand and supply straightforwardly affect housing rent; it is not just “productivity” that determines what the cost of physically residing in a certain area will be. For example, if a different city close by suddenly becomes much more attractive, demand will (at least in the short-term) slightly go down in the initial city, which will push rent down a bit, even though the productivity in this city has stayed the same. It’s the reverse of Baumol’s cost disease: instead of wages in fields that haven’t experienced increased productivity nonetheless going up because competing jobs are getting more enticing and well-paid (and thus employers need to increase wages to induce marginal workers to stay instead of moving over to those fields), you have a situation where the rent in a city goes down despite nothing happening in the city itself, because landlords have to compete to some extent not only with other landlords in the city but also with other, nearby cities.
Even in a hypothetical word that looked like ours except there was no technological improvement, rents would still change over time because of demand & supply factors, governmental regulation and deregulation, etc.
I also don’t understand what “worst rent-free location” refers to? Do you mean homelessness here, or what? For most people, there is no way to obtain a house in a rent-free manner (given that mortgage payments, for all useful purposes here, can be modeled as equivalent to monthly rent).
ground rent sucks up all UBI due to its perfectly inelastic supply curve
(Emphasis mine) I’m not sure what you mean by this, honestly.
If we give all renters in a city $10k (say, by a tax cut, which is mostly functionally equivalent to UBI anyway, at least for our purposes here), are you predicting that this will not actually result in them retaining more dollars in their pockets after paying rent to their landlords? This is definitely not correct, and is what I was getting at in my initial comment: the elasticities, empirically measured, are not such that the entirety of the UBI is eaten up by the landlords (or whoever ultimately benefits through profit from “unearned value”).
And I’m not sure what the housing vs ground distinction is meant to do here, given that… renters obtain value as a result of this arrangement (in the fact that they retain more money than they counterfactually would have if the policy had not been implemented), so it is not the case that rentiers are the only ones who profit from this outcome. So I don’t understand what “UBI is simply a handout to rentiers” means, given all of the above...
I’m simply paraphrasing Ricardo’s law of rent. It’s pretty straightforward microeconomics.
Worst rent free location just refers to the next-best-alternative, so yes, homelessness, or subsistence farming in a marginal location, etc.
Both demand and supply straightforwardly affect housing rent; it is not just “productivity” that determines what the cost of physically residing in a certain area will be. For example, if a different city close by suddenly becomes much more attractive, demand will (at least in the short-term) slightly go down in the initial city, which will push rent down a bit, even though the productivity in this city has stayed the same.
Sure, I already said housing is subject to supply and demand.
Even in a hypothetical word that looked like ours except there was no technological improvement, rents would still change over time because of demand & supply factors, governmental regulation and deregulation, etc.
Obviously true. And?
If we give all renters in a city $10k (say, by a tax cut, which is mostly functionally equivalent to UBI anyway, at least for our purposes here), are you predicting that this will not actually result in them retaining more dollars in their pockets after paying rent to their landlords?
Landlords will raise prices until the value of living in that city with $10k tax cut = the value of living in the next city with no tax cut, modulo friction. People will want to move into the tax cut city, raising rents.
Local cafes, bakeries and hair salons etc. will raise their prices a commensurate amount, and the improved “productivity” of these local businesses will result in an increase in competition for those locations, raising rents for businesses as well.
The nominal incomes of renters and local business owners increase, but in the end the rentiers benefit.
The nominal incomes of renters and local business owners increase, but in the end the rentiers benefit.
Rentiers may benefit, but they need not be the only ones who benefit. That was the essence of my comment above, and why I objected to the statements above that “all UBI” is sucked up by rent and that “UBI is simply a handout to rentiers.” The nominal incomes of non-rentiers indeed increase, and I claim that for some of them, the real income increases as well.
I’m not sure if there is any leftover disagreement here?
Your comment is very confusing to me, as it reads like a sort of “productivity theory of value” that doesn’t align either with basic microeconomic theory or with empirical data that has been gathered on this question.
Both demand and supply straightforwardly affect housing rent; it is not just “productivity” that determines what the cost of physically residing in a certain area will be. For example, if a different city close by suddenly becomes much more attractive, demand will (at least in the short-term) slightly go down in the initial city, which will push rent down a bit, even though the productivity in this city has stayed the same. It’s the reverse of Baumol’s cost disease: instead of wages in fields that haven’t experienced increased productivity nonetheless going up because competing jobs are getting more enticing and well-paid (and thus employers need to increase wages to induce marginal workers to stay instead of moving over to those fields), you have a situation where the rent in a city goes down despite nothing happening in the city itself, because landlords have to compete to some extent not only with other landlords in the city but also with other, nearby cities.
Even in a hypothetical word that looked like ours except there was no technological improvement, rents would still change over time because of demand & supply factors, governmental regulation and deregulation, etc.
I also don’t understand what “worst rent-free location” refers to? Do you mean homelessness here, or what? For most people, there is no way to obtain a house in a rent-free manner (given that mortgage payments, for all useful purposes here, can be modeled as equivalent to monthly rent).
(Emphasis mine) I’m not sure what you mean by this, honestly.
If we give all renters in a city $10k (say, by a tax cut, which is mostly functionally equivalent to UBI anyway, at least for our purposes here), are you predicting that this will not actually result in them retaining more dollars in their pockets after paying rent to their landlords? This is definitely not correct, and is what I was getting at in my initial comment: the elasticities, empirically measured, are not such that the entirety of the UBI is eaten up by the landlords (or whoever ultimately benefits through profit from “unearned value”).
And I’m not sure what the housing vs ground distinction is meant to do here, given that… renters obtain value as a result of this arrangement (in the fact that they retain more money than they counterfactually would have if the policy had not been implemented), so it is not the case that rentiers are the only ones who profit from this outcome. So I don’t understand what “UBI is simply a handout to rentiers” means, given all of the above...
I’m simply paraphrasing Ricardo’s law of rent. It’s pretty straightforward microeconomics.
Worst rent free location just refers to the next-best-alternative, so yes, homelessness, or subsistence farming in a marginal location, etc.
Sure, I already said housing is subject to supply and demand.
Obviously true. And?
Landlords will raise prices until the value of living in that city with $10k tax cut = the value of living in the next city with no tax cut, modulo friction. People will want to move into the tax cut city, raising rents.
Local cafes, bakeries and hair salons etc. will raise their prices a commensurate amount, and the improved “productivity” of these local businesses will result in an increase in competition for those locations, raising rents for businesses as well.
The nominal incomes of renters and local business owners increase, but in the end the rentiers benefit.
Rentiers may benefit, but they need not be the only ones who benefit. That was the essence of my comment above, and why I objected to the statements above that “all UBI” is sucked up by rent and that “UBI is simply a handout to rentiers.” The nominal incomes of non-rentiers indeed increase, and I claim that for some of them, the real income increases as well.
I’m not sure if there is any leftover disagreement here?