Universal Basic Income and Inflation: Reviewing Theory and Evidence

One of the most common arguments against universal basic income is the idea that it will cause inflation. In this paper I will review the theoretical interactions between an universal basic income and the price level, as well as emerging empirical price effects from cash transfer programs across the world. I discuss what type of macroeconomic shock universal basic income qualifies as, and I also characterize universal basic income through the lens of orthodox and heterodox monetary theories. Applying Milton Friedman’s Quantity Theory of Money, I theorize about under what conditions universal basic income may cause inflation. Finally, I dissect how public policy choices may affect the inflationary potential of universal basic income.

2021

Academic Paper

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