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Comment by snrplfth | Hacker News Reader

Yes, an increase in real value of redistribution should raise the reservation wage and suggests increased wages for those people in the (somewhat smaller) labour force, but it will require higher taxes on those income-earners, reducing their real after-tax income. The money has to come from somewhere. I'm not saying that no prices for particular baskets of goods will go up, I'm just saying that general inflation will not occur if UBI is not funded through monetary expansion.

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There is another issue besides the labor/wage effect on price, that aggregate demand is increased and therefore at current prices aggregate supply does not meet demand. Aggregate price levels should increase (keeping it at econ 101 since we could speculate about investment at this point).

edit: consumption increases despite the distribution being balanced since it's assumed that the transfer is from a minority of tax payers with significant income/assets to a majority that sees a substantial increase to their minimum guaranteed cash flow.

Yes, aggregate demand is increased but aggregate savings, which are the source of investment, are decreased. Those assets of the minority, we're assuming, are also productive. So the prices of the assets purchased by those with 'significant income' go down. So this might manifest as increased prices on low-end staple goods and decreased prices on durable assets. Still doesn't imply general inflation. (Of course, this is a major bone of contention of the whole Monetarist vs Keynesian debate, so if you think the Keynesian account is more convincing, then that's a sticking point.)

Many if not most Americans have investments, so the effect is not exactly balanced. Households that could do so would adjust their portfolios taking into account the additional guaranteed cash flow.

Investment also reacts positively to the expectation of inflation, though that's getting more speculative. I think I've reached the limit of what I can do with Econ 101, but I hope to have shown that there's at least a principled claim to UBI being inflationary. Rising consumer price levels alone is inflationary under some definitions, and the effect on investment is not straightforward.

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