Defining prices as % of income rather than discrete quantity of currency

[PyramidHead]

What would be the effect on society if the price of a gallon of milk was x% of the buyer's weekly income, rather than $x?

What if there were a hybrid pricing system, where a flat amount component and a % of income component comprised the price of a product or service? A gallon of milk would then be $x + x% of the buyer's weekly income.

What if a system like this were skewed towards % of income for essentials such as food, clothing, shelter, transportation, etc. and gradually became more skewed towards flat amounts for luxury items?

Would a progressive taxation system even be necessary if the prices were themselves progressive by nature (since the working poor and the CEO would both be spending roughly the same proportion of their income on essentials)?

 

[Tom Sawyer]

The result would be a lot of unemployed people making decent money going around shopping. Why would I pay $10 for a gallon of milk when I can pay $2 to have a poor guy buy me the same gallon of milk for $1?

 

[Axulus]

The result would be a lot of unemployed people making decent money going around shopping. Why would I pay $10 for a gallon of milk when I can pay $2 to have a poor guy buy me the same gallon of milk for $1?

Then we'd have to crack down on that Venezuela style. Also, every store would have access to everyone's personal income information.

 

[dismal]

What would be the effect on society if the price of a gallon of milk was x% of the buyer's weekly income, rather than $x?

What if there were a hybrid pricing system, where a flat amount component and a % of income component comprised the price of a product or service? A gallon of milk would then be $x + x% of the buyer's weekly income.

What if a system like this were skewed towards % of income for essentials such as food, clothing, shelter, transportation, etc. and gradually became more skewed towards flat amounts for luxury items?

Would a progressive taxation system even be necessary if the prices were themselves progressive by nature (since the working poor and the CEO would both be spending roughly the same proportion of their income on essentials)?

You mean different buyers would pay different prices? Off the top of my head it would be present some massive complications completing day-to-day transactions, create huge market disruptions, privacy issues, and large opportunities for corruption and graft.

Can't imagine how it would be an improvement over giving poor people money.

 

[Tom Sawyer]

The result would be a lot of unemployed people making decent money going around shopping. Why would I pay $10 for a gallon of milk when I can pay $2 to have a poor guy buy me the same gallon of milk for $1?

Then we'd have to crack down on that Venezuela style. Also, every store would have access to everyone's personal income information.

Just have the live-in housekeeper do all the shopping. No matter what you pay her, you'll end up saving money.

 

[Jayjay]

I'd arrange with my employer that I work every other week for free, in exchange for doubling my weekly salary for the rest of the time. Then do all my shopping during the volunteer weeks.

Or heck, it doesn't even have to be that often. I might take one week vacation in a year, and make years worth of purchases then.

 

[Tom Sawyer]

I think that yacht manufacturers will be surprised to see that 98% of their buyers make minimum wage or less. We'll need to stop referring to them as elitist.

 

[Loren Pechtel]

The result would be a lot of unemployed people making decent money going around shopping. Why would I pay $10 for a gallon of milk when I can pay $2 to have a poor guy buy me the same gallon of milk for $1?

Yup. It also makes income close to irrelevant, thus you're going to find very few people in the hard jobs.

 

[Duke Leto]

You know, I've seen some horrifically BAD ideas drift through this board, but this one earns the phrase "insanely idiotic".

As others above have noted, it creates bizarre incentives for the wealthy to have illicit shoppers, and forces a draconian police state into existence to monitor not just the incomes but the consumption of every to citizen to ensure that the system does not break in this laughably obvious way.

More importantly, even IF it were practicable, which it isn't, you'd very rapidly see everyone adjusting not simply their incomes but their productivities down to the bottom. In a world where a person making exactly one dollar a year has exactly the same purchasing power as one making infinity minus one dollars, income is completely worthless and exerting any effort at your job above what it takes to earn any amount of money foolishness.

IF forcing everyone to have exactly the same purchasing power were a desirable goal, which it isn't, enforcing mandatory equal salaries would be the obviously preferred means of doing so. You'd have to further maintain a mandatory constant real interest rate of zero to keep people who want to spend less than their incomes from having any advantage in doing so and to keep people who want to live beyond their means from borrowing money and never paying it back, which'd mean perfectly maintaining inflation at 0%, and in the absence of the option of a positive real interest rate to rein in inflation, that'd mean you need to run constant fiscal surpluses, and probably ever increasing fiscal surpluses if you also intend to keep everyone employed. End result, even if you didn't want the government owning everything and employing everyone, you'll reach that point in actual practice if not in law very, VERY rapidly. (ie., a place where the National Credit is several times the size of GDP because the taxpayers own all the stock in everything, but people still have to pay taxes because none of the corporations can be profitable. (If any stock had a positive ROI, people who wanted to spend less than their incomes could buy the stock and make a profit from doing so, which would ruin your goal of everyone having equal incomes.))

Keeping that insane system running would still be better than this plan, even if perfect equality of purchasing power were a desirable goal. (Which it isn't.)

However, there is one use of money where scaling costs to income might be an advantage: Criminal fines.

If the financial penalty for breaking the speed limit is 1/100th of income instead of $200, then millionaires might think twice before breaking the law. (And police would be less likely to selectively enforce the law based on income.)

 

[Duke Leto]

What if a system like this were skewed towards % of income for essentials such as food, clothing, shelter, transportation, etc. and gradually became more skewed towards flat amounts for luxury items?

Missed this part, which slightly reduces the idiocy of the plan, but not much.

 

[EricK]

However, there is one use of money where scaling costs to income might be an advantage: Criminal fines.

If the financial penalty for breaking the speed limit is 1/100th of income instead of $200, then millionaires might think twice before breaking the law. (And police would be less likely to selectively enforce the law based on income.)

Wouldn't it make police more likely to selectively enforce the law based on income?

 

[barbos]

Someone has been smoking something before starting this thread.

 

[Togo]

Isn't this what a progressive taxation system does anyway?

I don't really see the problem in terms of outcome. There are huge and terrible practical problems with setting it up and having it work and removing the loopholes, but if you handwave those, sure, why not?

There was a lot of science fiction around the 1970s or so that worked with a similar concept. You have a multiple currency system., Most people get paid in two currencies - luxury credit and subsistence credits. The latter are for the basics - food, shelter, computer access above a flat rate, and so on, and are a guarenteed income, although it may be higher or lower based on strictly practical difficulties. Luxury credits are for discrentionary spending.

 

[Duke Leto]

However, there is one use of money where scaling costs to income might be an advantage: Criminal fines.

If the financial penalty for breaking the speed limit is 1/100th of income instead of $200, then millionaires might think twice before breaking the law. (And police would be less likely to selectively enforce the law based on income.)

Wouldn't it make police more likely to selectively enforce the law based on income?

They already do. People who get traffic fines are disproportionately poor (and BlacK).

 

[Bronzeage]

What would be the effect on society if the price of a gallon of milk was x% of the buyer's weekly income, rather than $x?

What if there were a hybrid pricing system, where a flat amount component and a % of income component comprised the price of a product or service? A gallon of milk would then be $x + x% of the buyer's weekly income.

What if a system like this were skewed towards % of income for essentials such as food, clothing, shelter, transportation, etc. and gradually became more skewed towards flat amounts for luxury items?

Would a progressive taxation system even be necessary if the prices were themselves progressive by nature (since the working poor and the CEO would both be spending roughly the same proportion of their income on essentials)?

One of the critical problems of any safety net type social program is the threat to incentives. Any economic system would like for it to be possible for a person to have more, by doing more. A price control/rationing system tends to not only reduce incentives, it also locks a person in their current condition. It's the old joke about the welfare mother who is offered a great job, but can't afford to work.

It is a social imperative that any society must care for the helpless among them. Infants are not allowed to starve to death, invalids do not die of bed sores, etc. When this kind of social welfare is extended to able bodied people who cannot support themselves because of circumstances beyond their control, it becomes very difficult to engineer any real increase in the average standard of living.

It's sometimes called the "Band-aid" approach. You cover the problem and hope it heals.The money spent on subsidizing the poorest citizens is usually better spent on things like education, healthcare, and economic infrastructure. Instead of a band-aid, this produces a body more resistant to injury and infection, and has a reason to get up every morning and go to work.

 

[Loren Pechtel]

However, there is one use of money where scaling costs to income might be an advantage: Criminal fines.

If the financial penalty for breaking the speed limit is 1/100th of income instead of $200, then millionaires might think twice before breaking the law. (And police would be less likely to selectively enforce the law based on income.)

This would be fairer but it would make the cops target the rich.

I think a better solution is to abolish fines--punishments would be time based. That 1/100th of income would be 20 hours of trash pickup or the like.

 

[Loren Pechtel]

Wouldn't it make police more likely to selectively enforce the law based on income?

They already do. People who get traffic fines are disproportionately poor (and BlacK).

Look at it more carefully--the report seems to be saying that the disparity is based on reality, not racism.

 

[Bronzeage]

They already do. People who get traffic fines are disproportionately poor (and BlacK).

Look at it more carefully--the report seems to be saying that the disparity is based on reality, not racism.

Are you saying racism is not real, or there is no reality in racism, or what?

 

[Jayjay]

Whether the disparity is due to racism or poor people committing more traffic offenses, either way it doesn't seem to be very strongly based on income level per se.

On the other hand, if the cops new they could give a bigger tickets to richer people, it's a no brainer that they'd target more expensive cars.

 

[Loren Pechtel]

Look at it more carefully--the report seems to be saying that the disparity is based on reality, not racism.

Are you saying racism is not real, or there is no reality in racism, or what?

I don't know how you got either of these interpretations out of what I said.

What that report seems to say is that racial differences in traffic stops seem to match up with what the drivers did, not the race of the driver. For example, a traffic camera is inherently not racist--it's not unreasonable for cops to stop drivers in the same ratio as cameras no matter how that stacks up racially.