Ask HN: Would a universal basic income lead to inflation?

One of the arguments I’ve heard is that if you give $1,000 to everyone who has zero dollars, you’ve just raised the value of zero.

It's an important question.

A lot of the discussion around basic income takes place in the context of Modern Monetary Theory. I mean, it kind of has too, because otherwise basic income is pretty unaffordable. I've done the math, it is possible but really hard.

To significantly oversimplify one stream of thought in Modern Monetary Theory, the idea is that you grow the money supply through government programs and shrink it through taxation and that's how you keep inflation in check. (That's also why you don't have to worry about the cost of government programs. The government can print and spend as much money as it wants, because doing so is just growing the money supply. And if inflation starts to go up, you just raise taxes in response.)

If you look at what's happening with inflation right now, some of it is wage growth pressure. You could argue that some of it was growth in the money supply - although I would give serious side eye to that argument because not very much was given out in those stimulus checks. But if you really look at what's driving price increases, you have to look at what's happening internally to companies. Wages are growing, yes, but prices are growing faster than wages. Why? Because corporate profits are growing even faster.

So one of the primary factors driving inflation isn't the increase in the money supply, or workers wage increases - it's companies taking advantage of the inflation to raise their prices even more. If you look at the numbers, if worker wage increases would require a 5% increase in prices, companies are taking that and then raises their prices 10% and taking the difference as profits. Corporate profits were already at all time highs, so they absolutely do not have to do that. It's effectively price gouging.

So if we look at a basic income, if we implement it in isolation, it's reasonable to believe the same thing will happen. Companies will simply raise their prices so that the top 10% (who own the majority of the stock), walk away with all that new money added to the supply.

If we really want basic income to have the impact we all hope it will have, we have to implement it alongside income and wealth caps. Basically, if you actually want a more equitable (and healthier for everyone) distribution of wealth, then you have to put hard limits on hoarding. And that's how you manage the money supply to manage inflation. You implement basic income alongside 100% wealth and income taxes above a certain level.

Depends on implementation and what your definition of inflation means. If inflation means increase of money supply (printing and giving) and UBI uses that mechanism than Yes, I think inflation goes up. If UBI is implemented by a Tax than giving, then No because it is not an increase in the money supply. This does not mean prices will not fluctuate. Its a complex system after all and the altering flows will affect it.

If I save a dollar and tomorrow you print 10 more dollars out of thin air is my dollar worth the same amount?

Inflation happens due to more money appearing in the economy. Universal basic income doesn't mean creating money. It just means redistributing existing money. So no, there is no connection between UBI and inflation.

It depends on what you believe about how prices are set. Many opponents of UBI claim that a UBI will cause inflation and reduce the value of money because the supply increased. Proponents reject this, pointing to MMT and the concept of fiat currency. The truth is probably in between - opportunists and highly sought-after items will raise prices to offset UBI gains, while most commodities should be relatively unaffected. There will definitely be more opportunity for tiered services so that rich types can avoid UBI peasants sharing their activities.