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> Most basic economic theory will state that inflation is basically a monetary phenomenon. Uh, no, that's not true at all. Monetary policy is only one of many
by chimeracoder 10y ago
> Most basic economic theory will state that inflation is basically a monetary phenomenon.
Uh, no, that's not true at all. Monetary policy is only one of many factors that can drive inflation.
> Because claiming that UBI will cause inflation is not justified by an understanding of Economics 101
Uh, yes it is. MV = PQ is literally in introductory economics textbooks. Advocates of UBI talk about how it would encourage growth by "stimulating spending". Well, that's literally saying that it would increase both V and Q. And mathematically, we know that a redistributive policy cannot increase Q as fast as it increases V, which means that P increases. Hence, inflation.
You can make an argument that increasing the monetary supply at the correct rate would offset the increase in prices, or that the impact on unemployment rates would factor in, but at that point you're moving way beyond Economics 101 and far off into the realm of contested and unproven research conjectures.
- snrplfth 10y agoWell, I think advocates of UBI arguing that it would encourage growth by stimulating spending are ignoring the fact that a tax-funded UBI would take money from elsewhere. It doesn't necessarily matter what advocates of UBI say about its suppose growth-boosting effects or what have you - the parent post was saying that Econ 101 understanding affirms that redistributive policies increase inflation, and I disagree. I should definitely qualify that with the caveat that I'm talking about Monetarist Econ 101, where V is stable in the long run, and Q is determined by overall productivity. Therefore P is roughly proportional to M. Sure, there's short-term effects, but over the long run, by Monetarist Econ 101, a UBI, if funded out of tax revenues, shouldn't cause inflation.