In a country with it's own currency, wouldn't this just raise prices until finally the effect would be being back to step 1 but with huge inflation.
I.e. I'm selling bread for $3. Now I get $1500 free money every month and I know you do too. I'm selling bread for $6 because I know everyone has extra money lying around and since I have extra money I don't really care if people buy less from me.
There's this side concept called competition. If you sell your bread for $6 because you think the market can afford it, but the vendor next door continues to sell for $3 you go broke.
I didn't always see eye to eye with Milton Friedman, but I think we can give him credit that he'd thought through the obvious problems with this approach before he proposed it.
Except that your costs go up as well. There will be an added tax burden, for one. Since only one in three Americans works, you'll have to pay for a lot of taxes. Then you've got to buy the flour. Your next door neighbor didn't just walk in one day and raise his prices to $6.00. The costs of the flour rose. The eggs. The yeast. The labor that creates the bread increased in cost as well, since nobody wants to work for minimum wage when there's all this free income now and the increased cost of labor shuts out newcomers, thereby reducing competition. Eventually, you have to raise prices not out of greed but because if you don't you'll be losing money and then you'll need to rely on your basic income and so will all the people you used to employ.
If prices == amount people are willing to pay, then your analysis would be spot on, but it's basic economics that this isn't the case. The elasticity of bread demand is high (because of the wide variety of substitutable goods, including other bread brands). So you would not expect to see the price change much.
You are missing the point here, in your example when new money is created (to be able to hand it to everyone) you simply devalue currency and create inflation.
Universal income is not being generated out of thin air by the government, it is being generated by tax. Therefore you will not find hyper inflation of the form you suggest.
Well, the point I was getting to is how to approach such an effect through a thought experiment. I agree that my scenario is very different, but it's about the short and long term effects. You're right, my example would probably devalue the currency and create inflation, but what would happen as a result. Would prices go up within days, weeks year. What about wages and tax. How long would the rate of increase last.
Emigrate? I guess that could be the problem with universal income as well. You get £20k p.a. for doing nothing, so maybe you'll be doing nothing on a beach in Asia?
If you're successful at it you will then pay much higher taxes which will in turn fund higher basic income... More likely to happen is that your competitor will not also raise prices to $6 and you will soon yourself be relying on the basic income to live.
