Why would distributing money per se cause inflation?
So-called "helicopter money" is very good at inducing inflation, because it shifts the equilibrium between "holding money" and "buying stuff". This is the principle behind quantitative easing. But basic income isn't simply a matter of distributing money; the money also has to come from somewhere, and raising taxes (or cutting spending elsewhere) in order to fund BI has a disinflationary effect.
That said, the inflationary and disinflationary effects are likely to not apply equally across all goods; if you raise income taxes in order to fund a basic income system, you'll likely see increased inflation on low-end goods (since the people who purchase them have more money to spend) and decreased inflation on high-end goods (since the people who purchase those have less money to spend).
> That said, the inflationary and disinflationary effects are likely to not apply equally across all goods; if you raise income taxes in order to fund a basic income system, you'll likely see increased inflation on low-end goods (since the people who purchase them have more money to spend) and decreased inflation on high-end goods (since the people who purchase those have less money to spend).
This is true, but it's worth pointing out that it applies equally to anything that transfers wealth from the rich to the poor. You get the same effect from a significant increase in charitable giving from the rich, or a reduction in apartment rents, or an economic boom that reduces the unemployment rate.
And it's assuming that a basic income would actually do that. You could have one that simply replaces the existing tax code and welfare system without inherently being any more or less progressive on net. You could have one that does the opposite -- you could lower the effective tax rate on the rich and have a very small UBI.
How progressive you want the government to be in terms of income redistribution is completely independent of whether a UBI is preferable to means-tested welfare.
Right, I was just taking raising income taxes as an example to illustrate that policies could create zero net total inflation while still resulting in some people seeing an increase in inflation and other people seeing disinflation.
I think the inflation argument is that distributing more dollars would mean more buying power overall, increasing demand, and therefore cost of living increases.
That only makes sense when supply is inelastic, which is not a valid assumption, imo. I can imagine certain things, though, like housing, might be more successful as extracting additional rent from across the board income bumps.
That only makes sense when supply is inelastic, which is not a valid assumption, imo.
No, it makes sense whenever supply is not perfectly elastic. And time scales matter -- most supplies are inelastic over the short term but elastic over the long term, so "helicopter money" will tend to produce a short-term spike in prices due to more money chasing a limited supply, which then levels off at different rates depending on the goods as the supply catches up.
More money?
> I agree with @aswanson, this is headed for inflation, or an even worse financial disaster.
Why would distributing money per se cause inflation? Does inflation go up any time money goes from one entity to several?