A new study debunks one of the biggest arguments against basic income
As someone who writes frequently about universal basic income — the idea of giving everyone enough money to live on, no strings attached — the most common argument I hear against the proposal has nothing to do with its cost, or the potential that it’ll discourage people from working, an attack that former Vice President Joe Biden used this week.
The most common criticism I hear, rather, is that basic income would cause massive inflation.
This idea has some intuitive plausibility to it. Imagine the government printed and handed out $1 billion for each person in the country. It seems obvious that this wouldn’t actuallymake everyone billionaires — that is, it wouldn’t let everyone live in Four Seasons suites and fly Gulfstream jets everywhere. A lot of people would just stop working because of their newfound riches, corporations would have to jack up wages dramatically to keep their labor force, those higher wages would lead to higher prices, and the resulting inflation would wipe out most or all of the gains.
So what does this mean for basic income? Extrapolating from the Mexican case to other countries, particularly richer ones like the US, is tricky. But this research is perhaps the best evidence we have on the inflationary effects of cash programs. And it’s pretty sanguine: While there are interesting differences between giving out cash and giving out food, what definitely doesn’t happen is a cash-provoked inflationary spiral. The research suggests that basic income and related policy really do leave individuals better off, rather than just making goods more expensive.