3 ms·
This concept would simply create inflation. Image everyone has $10 on island A. Island B sells coconuts and the going rate for a coconut is $1. Based on other
by ascotan 10y ago
This concept would simply create inflation.
Image everyone has $10 on island A. Island B sells coconuts and the going rate for a coconut is $1. Based on other bills the islanders need to pay for, $1 fits the average budget and is what people are willing to pay for coconuts.
Now make everyone on island A have $100. The demand for coconuts rises but people on island B soon realize they can make more money by raising prices even though they sell less units. They eventually increase the price of coconuts to $10 because that ends up being the price point at which the Island B people are making the most money.
Therefore by increasing the income of everyone by a factor of 10, you end up increase the prices by a factor of 10. There is some lag time where prices will balance out though, so if you just kept doing this every month you might have a period of faux prosperity but you would also be creating runaway inflation.
- Chinjut 10y agoWe would not be increasing everyone's income by the same factor. People with less money would see their income rise by a larger factor than people with more money. Thus, for example, if you have $0 pre-BI and $X post-BI, with X > 0, there's no amount of inflation that will cancel out the fact that you've benefited.