Isn't that similar to what's been happening with collage tuition? Government helps you pay tuition and gives you some breathing room, so the collages raise tuition higher until you're back at the limit you can possibly pay, taking away your breathing room again.
Yes, in part -- though I'd say the better analogy there is home mortgages; in both cases, easy access to low-cost loans leads to risky debt. (Plus, college tuitions have gone up in part because government subsidies have gone down and in part because they have allowed their costs to go up, not necessarily because they have simply jacked up the prices.)
Exactly. What is also missing from the post on this test is any sense of if/how they plan on addressing this piece of the puzzle as it seems a rather large one. When your experiment group is small, it simply won't cause a big enough impact at a macro level to move the inflation needle, but that is what many predict would happen.
How can we measure that or get any sense of how realistic that outcome is before a large scale program goes into effect? Don't get me wrong, you have to start somewhere, so I commend this effort, but I have yet to see a good proposal for how to test and deal with this.
That's true, but making the basic income unconditional is going to change the population distribution drastically. There are a lot of nice, beautiful, cheap places in America where people don't live mainly because there's no work. If you have a basic income, that changes the calculus about where you can live. So those price increases will happen, but they're likely to happen in places where prices are already very low.
> The total money supply remains constant under UBI.
Well - it doesn't, actually.
A self-sufficient program would have to be self-sustaining via tax revenue, and unless the goal is to defeat the whole purpose of the program, the tax revenue will disproportionately come from the wealthy. However, the wealthy are less likely to spend every extra dollar that they have, which means that they're more likely instead to save (invest) it[0]. In other words, this proposal would transfer money that is currently being used for long-term investments[1] and put it towards consumption.
The velocity of money would increase, but the actual supply of money would almost certainly decrease, holding all else equal.
[0] Money stored in the bank is an investment; it is the source of capital for others who want to procure loans for investment and infrastructure projects.
[1] These deposits create money, thanks to fractional reserve banking
What you're suggesting would be true of all redistributive programs. Replacing means-tested welfare with a UBI which is equally redistributive would have no inflationary effect.
It's also not clear that it's true in general. Invested money doesn't stand still. You invest it in a startup and the startup spends it. You deposit it in a bank that loans it out and the borrower spends it.
So it could be that taking from the rich and giving to the poor causes inflation or, if startups and mortgage borrowers spend money faster than checkout clerks and bartenders, the other way around.
Depends what measure of money supply you're using. Under some measures the same "quantity" of money at higher velocity counts as higher money supply (which arguably better reflects the effect on the real economy). Under other measures money created under fractional reserve doesn't count.
> Under other measures money created under fractional reserve doesn't count
M1,M2,MZM,M3,and M4 are all affected by fractional reserve banking.
> Under some measures the same "quantity" of money at higher velocity counts as higher money supply (which arguably better reflects the effect on the real economy)
No, velocity is orthogonal to the money supply under all measures. Whether you use a constant velocity model or a variable velocity model, the velocity is a distinct factor altogether, the same way mass and acceleration are different concepts, even though they can be linked by an equation involving the sum of all forces.
In the US, probably. There are some other countries where the amount of money currently being spent on social security is already large enough that it could be reorganized to give basic income to the whole population.
But poorer people that receive payments will have a larger share of the overall wealth than they otherwise would have (even while everyone else receives exactly the same payment). BI is essentially about rebalancing wealth distribution.