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Inflation is a result of the money supply growing faster than the national wealth it represents. Example: US goods & services increase in value 5% but the Fed i

Inflation is a result of the money supply growing faster than the national wealth it represents. Example: US goods & services increase in value 5% but the Fed increases the money supply by 8% leads to inflation - the money/value abstraction is out of sync in such a way that money represents less value. Wealth redistributions don't cause inflation. The money abstraction still represents the same amount of wealth, it just changes who can choose how to use that money to consume. That said, you'll probably see some radical pricing changes in the market from the new system, but probably not as much as you would expect because UBI will be so limited at first, the money will be spent on absolute necessities that people are already consuming under the current system (ie demand won't go up for toilet paper and basic consumables, and UBI isn't enough for luxury goods).

bduerst 9y ago
That's one cause of inflation. Another cause is raising the income for everyone (i.e. minimum wage, etc.). There exist goods and services with prices that are a function of income-elasticity, meaning that they inflate with the more money that people make (e.g. housing). This is one of the reasons that many welfare programs are targeted spending, like food stamps or medicaid.
- billmalarky 9y ago
  Arbitrarily raising wages for everyone is the same as increasing the money supply without increasing the underlying value it represents (which causes inflation). UBI does not do this. It doesn't "increase" the amount of money floating around, it simply redistributes a portion of the created wealth from one population (the rich) to the total population. UBI money isn't pulled out of thin air, it's taken from one group (via taxation) and distributed. Of course prices for certain goods and services will change as a result of this wealth distribution, but to suggest global inflation will occur (ie the value that money represents decreasing within the complete system) is incorrect. Furthermore, while I obviously can't say for certain, I imagine prices for fundamental goods will not change drastically simply because UBI doesn't provide enough money for real discretionary spending. The goods/services you consume under a UBI program you already would be consuming at the same rate under the current system.
  - Helmet 9y ago
    Sure, what you're describing is the quantity theory of money, but there are other reasons why you could see inflation given a universal income, depending on the circumstances. If you consider the velocity of money, you will almost certainly see inflation on consumer goods if the money to be redistributed would have otherwise just sat in some rich guys's savings account. There are also inflation expectation to consider, liquidity traps, the actual demand for money, etc.
    - billmalarky 9y ago
      I expect prices to change in order to reflect the new system, but I think people's "sky is falling" concerns about the price of consumer goods shooting up is way off base and sensationalist. UBI alone simply won't provide enough discretionary income to cause sharp increases in demand of goods. Not to mention, the type of goods that a basic income affords are those that are already scaled out and are easily scaled out - ramping up supply would happen relatively quickly in the unlikely scenario that demand for these goods does go up drastically. As I've repeatedly said in other comments, I believe demand for these simple goods will stay relatively flat since they are such fundamental necessities people are already consuming them and won't necessarily increase demand significantly (UBI won't cause demand for toilet paper to go up significantly).
      - deleted 9y ago
        [deleted]
tbrownaw 9y ago
Regardless of what dollar prices do, real prices should go up as total production decreases from people exiting the labor force.

bduerst 9y ago

That's one cause of inflation. Another cause is raising the income for everyone (i.e. minimum wage, etc.). There exist goods and services with prices that are a function of income-elasticity, meaning that they inflate with the more money that people make (e.g. housing). This is one of the reasons that many welfare programs are targeted spending, like food stamps or medicaid.

billmalarky 9y ago
Arbitrarily raising wages for everyone is the same as increasing the money supply without increasing the underlying value it represents (which causes inflation). UBI does not do this. It doesn't "increase" the amount of money floating around, it simply redistributes a portion of the created wealth from one population (the rich) to the total population. UBI money isn't pulled out of thin air, it's taken from one group (via taxation) and distributed. Of course prices for certain goods and services will change as a result of this wealth distribution, but to suggest global inflation will occur (ie the value that money represents decreasing within the complete system) is incorrect. Furthermore, while I obviously can't say for certain, I imagine prices for fundamental goods will not change drastically simply because UBI doesn't provide enough money for real discretionary spending. The goods/services you consume under a UBI program you already would be consuming at the same rate under the current system.
- Helmet 9y ago
  Sure, what you're describing is the quantity theory of money, but there are other reasons why you could see inflation given a universal income, depending on the circumstances. If you consider the velocity of money, you will almost certainly see inflation on consumer goods if the money to be redistributed would have otherwise just sat in some rich guys's savings account. There are also inflation expectation to consider, liquidity traps, the actual demand for money, etc.
  - billmalarky 9y ago
    I expect prices to change in order to reflect the new system, but I think people's "sky is falling" concerns about the price of consumer goods shooting up is way off base and sensationalist. UBI alone simply won't provide enough discretionary income to cause sharp increases in demand of goods. Not to mention, the type of goods that a basic income affords are those that are already scaled out and are easily scaled out - ramping up supply would happen relatively quickly in the unlikely scenario that demand for these goods does go up drastically. As I've repeatedly said in other comments, I believe demand for these simple goods will stay relatively flat since they are such fundamental necessities people are already consuming them and won't necessarily increase demand significantly (UBI won't cause demand for toilet paper to go up significantly).
    - deleted 9y ago
      [deleted]

tbrownaw 9y ago

Regardless of what dollar prices do, real prices should go up as total production decreases from people exiting the labor force.