Would a Universal Basic Income Lead to Inflation?
7th April 2022
I’ve seen quite a bit of discussion on inflation, as a result of an increased supply of money in the system. Some have suggested that the stimulus checks increased the supply of money which may have, in part, led to inflation. I’m curious, if the government instituted a universal basic income, would this lead to inflation?
PhD in econometrics speaking, here’s my handy guide to macro-economics:
– The main variables of interest are (aggregate) real production / income (GDP/GDI), unemployment and inflation (arguably in that order)
– Nobody knows much wrt the causes, effects and future trajectories of any of these. Not professional Ivy League economists who publish in journals like AER, QJE, JPE or Econometrica, nor traders getting paid millions at hedge funds or prop trading desks, nor fringe bloggers, gold/crypto-bugs or neophytes from different fields (traditionally from physics, but probably increasingly from CS/AI/ML). Especially beware when they sound very sure of themselves, often using correct wonky economic jargon or details like the plumbing of money flows. Top academic economist are at least (usually) somewhat honest that they know very very little.
– Even if someone did know anything, 3rd parties like you or I can’t distinguish the Real Truth from quackery.
– The root cause of this knowledge deficiency is the inability to run proper controlled experiments. Pretty much no theory about macro-economics is convincingly testable/falsifiable, except banal trivialities like we can’t make everybody rich by sending everyone a $10M check. This will not change in our lifetime, if ever.
– All the writing on macro-economics is story-telling and catering to their specific audiences. Academics write foremost for other academics to gain a position at a prestigious faculty (and incidentally to influence politics). Crypto-bugs write to sell you crypto-coins. Fringe bloggers like Shadowstats write to get newsletter signups and ad-dollars. Most of them employ the effective mechanism that the reader is initiated to advanced/semi-hidden knowledge, which makes the reader feel better about themselves.
Given this, the answer to your question is: maybe, maybe not, who knows?
The YCombinator Hacker News site often has more than the tech-related stuff you might expect. Highly recommended.