Milton Friedman also advocated a universal minimum income.
The thing is, he advocates a minimum income, not a minimum set of social services. There's a huge difference in the economics between goods or services that are (ideally) competitively purchased on an open market and good and services that are delivered by a monopoly (whether the monopoly is in the market or is government itself) or monopsony (in the case of some govn't welfare programs, which can be thought of as single entities that negotiate pricing for arrays of goods and services).
A hybrid between Milton Friedman-style minimum income and more socialist notions of welfare is something like the US food stamps program, where you have to spend the money on food-related goods, but where you can shop at a larger set of providers and still deliver the benefits of competitive purchasing to the food market.
I think you'd need a combination of both minimum income and minimum services that goes beyond your food stamps example to be successful. If you only have a minimum income, then monopoly/oligopoly providers will raise their prices to absorb the entire minimum income. This is already happening in the form of healthcare prices rising significantly faster than inflation.
You're quite correct about them raising their prices, but then again, healthcare is competitively purchased only the loosest and least meaningful way. There really aren't strong competitive forces emanating from the demand side - it's more like a demand-side oligopoly of buyers setting prices. In healthcare, we are arguably seeing the expected outcome of a lack of meaningful price competition.
The government could take action to enable competitive individual purchasing of care instead of monopsony or group buying. It could provide cash incentives for people who shop around for basic, easy-to-understand care. It could fund patient education for more complex care. And if this model proves successful, it could be expanded to harder-to-understand care gradually and with caution to see how consumers react.
In other words, competition can only work if it's allowed to. Today, food prices are raised for various reasons, but I am not aware of a school of economics that faults this on a demand-side government-funded competitive individual purchasing program (not that you said that either).
> If you only have a minimum income, then monopoly/oligopoly providers will raise their prices to absorb the entire minimum income.
Uncompetitive markets are a different animal. Even if you had the government making the purchasing decisions, non-competing suppliers could still just charge monopoly prices that increase as additional dollars become available. The only real solution to that is to make the market more competitive, e.g. busting up the cartels and adopting policies that inhibit them from forming.
But you're almost onto something. The issue is that when your goal is to increase the number of transactions in a market (e.g. the number of people who can buy a home), increasing the demand by increasing the cash in peoples' pockets is only an indirect method to accomplish that. In order for more people to be able to own a home, there have to actually be more homes. If you give people money then they bid up housing prices, which causes new home construction to be more profitable and so more new homes are constructed. The trouble is that the large bulk of the money doesn't make it to the people constructing new homes, it goes primarily to the sellers of existing homes (who comprise the bulk of the market), and so only a small fraction of the tax dollars expended go toward promoting new home construction and therefore to increasing the number of people who can buy a home. Directly subsidizing supply is a much more effective way to accomplish specific goals like that, e.g. by providing money when a newly constructed home is purchased. Then the subsidy is distributed between the buyers (making the purchase more affordable) and the new home builders (increasing the incentive to build more new homes) and cuts the existing home owners you didn't intend to subsidize out of the subsidy.
This is basic supply side economics. The key is to recognize how this sort of thing has been corrupted into not accomplishing its goals in the past: If the market being subsidized is uncompetitive then the suppliers can fix prices so as to take most or all of the subsidy as profit and cause little or no increase in supply at all. In other words, you should never, ever subsidize a cartel. Subsidies for oil exploration come to mind as a good example of this sort of preposterous stupidity. But again, the solution in those cases is to make the market competitive. Either bust them up or, if you can't (e.g. because OPEC is outside your jurisdiction), promote new competition like alternative energy.
TL;DR: You don't have to have the government supply the services, you just have to have the government make sure the market stays competitive.
The thing is, he advocates a minimum income, not a minimum set of social services. There's a huge difference in the economics between goods or services that are (ideally) competitively purchased on an open market and good and services that are delivered by a monopoly (whether the monopoly is in the market or is government itself) or monopsony (in the case of some govn't welfare programs, which can be thought of as single entities that negotiate pricing for arrays of goods and services).
A hybrid between Milton Friedman-style minimum income and more socialist notions of welfare is something like the US food stamps program, where you have to spend the money on food-related goods, but where you can shop at a larger set of providers and still deliver the benefits of competitive purchasing to the food market.