Please, educate me

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Please, educate me Anonymous 08/28/17 (Mon) 12:41:29 No.65695

You have a country with high unemployment, low inflation and a relatively high Gini ratio like Spain or Greece.

Then you implement a basic income raised through taxation of the wealthiest people (let's say half the minimum wage or so). With that extra income people start consuming more and aggregate demand goes up. Since the producers of goods need to remain competitive they increase their production and hire previously unemployed people instead of raising selling prices and then the aggregate demand doesn't cause an excessive inflation. Et, voilà, the unemployment and deflation problem is gone.

I know this must be wrong from a libertarian perspective. Could you explain to me where is the flaw in my logic or my knowledge of economics?

Anonymous 08/28/17 (Mon) 13:11:34 No.65696

>>65695

>Then you implement a basic income raised through taxation of the wealthiest people (let's say half the minimum wage or so). With that extra income people start consuming more and aggregate demand goes up.

Here's your error. No, they don't start consuming more, and demand doesn't rise. Put simply, the poor consume more because the rich consume less, but total consumption stays the same. Of course, what is consumed changes; you will see a rise in the demand for potatoes and kool aid and a lowering in the demand for caviar and chardonnay. Most likely, you will also see an increase in time preference, as the poor always tend to save less and consume more in the present, and naturally also a decrease in the demand for capital goods, as the poor also don't buy them. You can expect productivity to decline as a result, especially in the long-term, or rather to rise more slowly.

Anonymous 08/28/17 (Mon) 13:38:18 No.65700

>>65696

Investment is based on long term profitability though. So Keynesians say it is fixed.

This seems wrong to me, since it's also based on present availability of funds.

But I do believe they hold investment fixed, meaning that redistribution really can cause an increase in aggregate demand and money can 'recirculate' to a greater extent based on propensity to consume.

Anonymous 08/28/17 (Mon) 14:28:35 No.65701

>>65696

>Of course, what is consumed changes; you will see a rise in the demand for potatoes and kool aid and a lowering in the demand for caviar and chardonnay.

And the market for kool aid and potatoes is much bigger than that of caviar and chardonnay so money in the hands of low classes boosts the economy more than the same amount of money in the hands of the rich. $100 can make the difference between eating or starving in the hands of a bum. $100 less in Bill Gate's account is like a rain drop in an ocean.

Anonymous 08/28/17 (Mon) 14:35:08 No.65702

>>65701

The size of the market has literally nothing to do with it. We're talking about marginal changes.

Anonymous 08/28/17 (Mon) 14:44:30 No.65705

>>65701

> the market for kool aid and potatoes is much bigger than that of caviar and chardonnay so money in the hands of low classes boosts the economy more than the same amount of money in the hands of the rich.

Redistribution doesn't "boost" the economy. Productivity does. What you would want is to allow for the most productive actors to possess sufficient capital. There is no other way for that to happen than to allow it to naturally occur. What you're doing is creating another bubble to pop.