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Comment by mech1234 | Hacker News Reader

There is a large risk of inflation under UBI. You cannot make an honest argument about UBI without accepting this risk.

1. On the margin, UBI reduces employment and production. This contributes to inflation.

2. On the margin, UBI increases consumption of consumer staples. This contributes to inflation.

3. On the margin, UBI increases the velocity of money. This contributes to inflation.

4. Under most assumptions, UBI increases government spending. Either taxes will rise, increasing the real cost of goods and services, or the money supply will increase, contributing to inflation.

UBI advocates should not dismiss these effects outright but should argue that they are small in comparison to the benefits of UBI. The lack of proper consideration of these arguments (and other arguments) by UBI advocates is pretty dang spooky.

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1. Early evidence of UBI reducing employment actually shows the opposite.

2. Increased demand for consumer staples, if met with increased supply won't lead to inflation, if suppliers and entrepreneurs see the increase in demand as stable, they will make investments to increase supply. As long as we allow the price seeking mechanism of the market reach equilibrium, inflation will be at most momentary.

3. Velocity of money doesn't, by itself create inflation. Said another way, it's not a sufficient condition to bring about inflation. Sometimes a massive increase in money is just hoarded and doesn't enter the economy in any real sense.

4. Taxes don't necessarily have to rise in a regressive way such as sales tax and instead could be redistribution. I suspect what we would see is less inflation in the luxury art and real estate market if taxes were increased and the proceeds redistributed.

1. Below is a summary of evidence that UBI reduces employment. The reductions of working hours are substantial, even in studies widely spun as "no change". Below that is also HN debate about it.

https://www.chrisstucchio.com/blog/2019/basic_income_reduces...

https://news.ycombinator.com/item?id=22493537

2. Assuming that the equilibrium point remains at the same price level is difficult. It requires assumptions about the elasticity of demand and the elasticity of supply. Generally, if UBI has disincentivized work, you would expect less work, less supply, and a higher equilibrium price.

3. Under a constant money supply, increased velocity of money does create inflation. This is fairly standard economic theory. Increased hoarding is definitively a decrease in the velocity of money.

4. Fair enough, but it requires you to trust the politicians to pass a tax that impacts only the extremely wealthy. This is not guaranteed or even likely.

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