The good news is that, to take one of your examples, while the minimum wage does have a small effect on prices, the inflationary effect seems to be vanishingly tiny compared to the actual wage rise offered. (PDF link) https://mitsloan.mit.edu/shared/ods/documents/?PublicationDo...

not if you count the rise in unemployment because you're killing jobs

Some people think the price of going to college has gone up because so much money has been made available to students through financial aid. I don’t know if that’s been proven but it sounds plausible.

I'm actually in the higher education world (on the periphery, as a software developer). It's more complicated than that.

Over the same time period that loans have become easily obtainable (via US government backing), massive amounts of regulation has also been imposed on colleges/universities.

While people love to talk about football stadiums, luxury dorms, and other amenities, one of the largest increases in the cost of running a college is administrators to keep up with regulatory demands.

I'm not claiming administrators are solely responsible, only that it's not as simple as "Uncle Sam gives students money and college spend every penny".

Additionally, public funding of colleges has dropped over the same time period. As of 2018, state funding of public colleges was down ~$7 billion since 2008. It was slashed during the down economy, but never brought back up again.

To add a small bit of context for the last point about funding. A $7B reduction in funding sounds like a lot, but during that same period student loan debt increased by $760B.[0] On the balance, the reduction in state funding seems like an insignificant piece of the puzzle.

[0] https://www.experian.com/blogs/ask-experian/state-of-student...

There is a myth that administrators drive up the cost of colleges. The truth is that overall university headcount, including administrators, professors, etc. have all increased, and the costs along with that headcount has as well.

The rapidly increasing headcount growth, including professor headcount growth is driving the increased cost which is driving increased borrowing.

Universities need much bigger class sizes, many fewer professors, and many fewer administrators. Overall headcount at universities needs to shrink by ~70% to get the cost back inline.

No politician, or university president is going to say that because it would be so brutal to oversee. But... students are suffering with massive debt loads and someone is going to have to make the right choices to cut those costs.

They've all increased, but the rate at which administration positions has increased dwarfs that of professors and students. According to the figures in the article cited here, administration positions grew at 3.5x the rate that professors have, and 2x the rate that students between 1975 and 2005 [0].

[0] https://washingtonmonthly.com/magazine/septoct-2011/administ...

In what ways have regulations increased costs?

They stated "...administrators to keep up with regulatory demands."

I wonder, however, if administrations just take on a life of their own and grow bounded only by available budget. It seems like this happens in the private sectors with layer upon layer of management.

That's certainly been my experience; management and bureaucracy will expand to fill any available budget unless constrained. Since management almost always runs the show, there's almost never constraint.

Hiring bodies to perform the administrative work required by law. Lots of compliance - title 9, etc at the federal level, plus more at the state level.

We have several teams of developers pushing out state-level regulatory updates to our software (and these updates are frequent and often done on short notice), plus more teams doing annual federal regulatory updates.

And again, I'm not claiming this is the largest contributor, only that it's one of many reasons (easy access to loans included as well).

A good example is the parallel legal and law enforcement systems on college campuses. In the past, you'd call the regular police and you'd take issues to the courts used by all other citizens outside the university. Now universities maintain their own law enforcement and farcical "justice" system. This stuff is not cheap to operate and comes with tons of overhead.

The New York Fed did a study on exactly this question. They found that there was a correlation: https://www.newyorkfed.org/medialibrary/media/research/staff...

"We find a pass-through effect on tuition of changes in subsidized loan maximums of about 60 cents on the dollar, and smaller but positive effects for unsubsidized federal loans. The subsidized loan effect is most pronounced for more expensive degrees, those offered by private institutions, and for two-year or vocational programs."

I think if the increase in income is concentrated enough, you may find concentrated rent increase, i.e. silicon valley incomes and housing.

Sure, and I conceded that in my initial post. What I'm looking for is published work that indicates that changes in consumer prices equals the increase in income due to unrestricted cash grants/UBI.

I've looked, but all I see is conjecture. Nothing academic. The academic articles I do find tend to assert the opposite - that any changes in consumer prices are smaller than increases in income, granting the recipient more buying power.

they won't be equal because not all ubi income will be spent on consumption. it will stimulate consumption, however, which was the primary reasoning behind the op and that will lead to some form of inflation edit: inflation because based on the assumptions of the op, the supply side has stagnated and so there is less downward pressure on aggregate prices. the degree of that inflation is unclear and i'm not familiar with any empirical studies. either way inflation won't match one to one with the increase in income.

fwiw i noticed above you mentioned that there will be an increase in productivity, wellness etc. although i tend to agree with the wellness aspect (esp. compared to our current circumstances) the degree to which wellness would increase is also unclear. for some colinear studies, i'm thinking of finkelstein's work on medicaid expansion in oregon where they found exposure to medicaid increased reported well being of recipients.

and i don't think productivity increases under a ubi holds water on theoretical grounds.

you seem to be assuming large increases in productivity and wellness and other benefits and then asking if inflation will erode that, when we also need to consider that the possible benefits will themselves be attenuated, particularly for those already at lower incomes or those who will earn a ubi.

Housing is supply and demand. More demand for housing without an increase in supply will increase cost. That said, a guaranteed income may allow many people to safely choose to move out of an area that was hard to accomplish previously. If you're living paycheck to paycheck, how do you move far enough away from a high-cost area to actually reduce your housing cost while still allowing you to reach your job, since you can't quit it and still afford to pay rent? All you can usually do is trade commute time for rent cost, and then you pay in time and vehicle wear and gas.

UBI would allow an unprecedented level of freedom for people to relocate with little risk, and that would itself have a massive influence on city make-up and the housing market. If a lot of the unskilled labor in the bay area actually chose to move somewhere else, wages for those people would either have to increase greatly to meet demand, or the area would finally have to allow much more cheap housing.

I imagine other shifts like that would play out large in small in almost all aspects of the economy. UBI entirely changes everything.

If we assume that income reflects society's demand for an individual's labor/skills/knowledge, and we arbitrarily increase income with no concomitant increase in demand then we have to assume something else is going to shift. A couple of outcomes seem likely to me:

* employer wages for low-demand workers will drop, as competition for low-demand workers will not increase, and those workers will accept a lower wage reasoning that the UBI 'makes up the difference'

* if employer wages are not allowed to drop below a certain point (the minimum wage), then more disposable income will create increased demand for scarce resources (e.g., housing that is a bit better than currently occupied) thereby causing prices to rise.

I'm no Econ major, so happy to hear how my reasoning may be in error.

You have come to the correct conclusion.

The logical leap that you are missing is that prices don’t always rise quickly enough as a response to increase in wages. What a person is willing to pay is only part of the pricing equation. You also have to consider what competitors are charging and how much potential margin there is to play with.

Inevitably though, all prices consolidate and all players in the market will charge more to meet the increase in wages, it’s just a slow process.

The only time it happens quickly is if each business conspires to raise prices simultaneously, which isn’t going to happen or may be illegal.

So yes, increase in wages or handing out UBI inevitably raises prices after a period of time, necessitating the need for even more increase in wages and more UBI. It’s not a one and done thing.

Here's the thing though: typically, the market discerns that wages have increased slowly and incrementally, which is why it's only able to incorporate that information over a period of time. If we passed a UBI in this country, suddenly, my landlord, the grocery store, etc. would all instantly know that my wages have increased, and by what amount.

Because housing expenses are generally the single largest expense in any household budget, that means landlords are going to reap the majority of the benefit here. People selling homes also know that wages have gone up and by what amount, so this will impact the sale price of new homes. So, any amount of UBI would end up being a huge cash transfer from renters to landlords and other existing homeowners.

While land is constrained and should probably be dealt with separately, wouldn't the price increase in consumer goods, i.e. the grocery store to use your example, require collusion between every merchant?

Isn't the other part of Adam Smith's supply and demand stuff the idea that competition will drive down prices? Sure, everyone's got another $2,000, but if I can undercut the guy who's trying to mop it all up, wouldn't I? And wouldn't someone else try and undercut me?

Wouldn't that bring prices down? And if not, why not? If there's another larger force at work keeping prices high and keeping people in poverty -- and if poverty is something we want to do something about -- doesn't that suggest that we need to constrain sellers' behavior in some ways we aren't really doing now (like laws against gouging)?

> Inevitably though, all prices consolidate and all players in the market will charge more to meet the increase in wages, it’s just a slow process.

All prices? No. Clothing is now effectively free, for example. Prices of necessities are the only things you want to watch. Basic food products, healthcare, etc. Those prices have risen around the same as the rate of inflation or spiraled out beyond. Food prices cannot outstrip the inflation ever, because of food subsidy and/or ebt which is tied to it.

How is clothing free? Last time I checked I paid 50 bucks for a shirt. Food is cheap and no one cares if you waste it.

You could buy a shirt for $5 at walmart. And there is even a reasonable chance the material quality would be good. It almost certainly won't be fashionable. Purchasing quality second-hand clothing in North America is even cheaper.

For food, some people buy bulk staples and some buy high-end food at Wholefoods.

The degree of substitutes and variety available on the market is staggering for consumer items.

Inflation. https://en.wikipedia.org/wiki/Inflation

Dirt poor people being slightly less dirt poor and not having to worry about where their next meal is going to come from will not inflate basic goods that much.

We've seen this with higher minimum wages. The amount of inflation is much lower than than the wage increase, and poor people end up with more buying power.

A serious distinction is that increased minimum wages incur a burden on employers which they pass around to their customers and business partners. The increase of burden is directly proportional to the amount of work of an hourly employee. UBI does not come from an employer and is not tied to an effort. There is no direct market burden, but yet an increase of cash is available none the less.

It should also be noted that inflation is not immediately present following a cash stimulus. It takes time for inflation to set in as a response to market conditions and as such inflation is measured as an adjustable change over a given period of time. That said specific single time examples of UBI not adjusting inflation only demonstrates a faulty understanding of economics.

https://en.wikipedia.org/wiki/Inflation#Issues_in_measuring

>> UBI does not come from an employer and is not tied to an effort

Where do you think government's money come from? Financing UBI will require raising taxes.

Money at the government level is not a zero-sum game, so thinking it's as simple as raising taxes is an oversimplification, and while unchecked printing of money is problematic leading to inflation, how the monetary base grows would need to be part of a well-considered implementation plan.

For my thoughts on taxes please see my comment further down: https://news.ycombinator.com/item?id=24005134

the theoretical reasons for not increasing minimum wage is not inflation. it's a decrease in employment.

empirically, however, things are sticky and so we have not observed concomitant decreases in employment with (small to moderate) increases in the minimum wage. my other guess (not sure if this is supported by the literature) this can also be because not only is the market sticky, but because workers were being paid a lower wage than their employer could have afforded.

Sure, if UBI is implemented without a matching increase in government revenue, or reallocation of existing government revenue. Every serious proposal for UBI does one, the other, or both of those.

There is plenty of literature that contradicts your assertion. Here are a few links...

https://medium.com/basic-income/wouldnt-unconditional-basic-...

https://www.peoplespolicyproject.org/2020/03/18/understandin...

https://ubi.earth/basic-income-doesnt-cause-inflation

And time and time again, things that by conventional wisdom would increase inflation somehow don't. Macroeconomics isn't that simple, and posting a wikipedia article isn't an argument.

You'd think that employers would be all over UBI then because it means that they can instantly cut the wages of their workers by the amount of the UBI and that more people will have money to purchase their goods and services.

Companies that depend on underpaid workers will fight this tooth and nail.

Why? It means that they can pay less than they do now and still retain workers. How is it not a positive benefit for them? It potentially means that people working for them actually want to work and aren’t doing it just to survive.

Because the jobs they're offering are shitty, demeaning and menial, and most people who take them are doing so because they need to survive. Absent the survival need, the companies will have to dramatically improve working conditions to maintain the sheer quantity of labor they require.

Perhaps, but the reduced wages (since total income is now UBI + wage instead of 0 + wages) sounds like it will more than make up for whatever increased costs they may have to make the working environment less shitty.

Just saying “inflation” is both condescending and lazy. Billions of people have been lifted out of abject poverty over the past few decades while also dealing with inflation. We know it’s a concept and it has relevance to the discussion, so merely saying the word brings literally nothing to the table.

Discarding the term merely for its presense is by argument equally lazy. I didn't provide only a word, but also provided qualifying source material.

What the other replies have failed to consider is that UBI is just injection of cash. It isn't a voucher for a specific class of goods, such as rent. It is just cash that can be used for absolutely anything. If that means burning cash on a $5000 handbag then so be it. Inflation is literaly the injection of cash into a market.

The problem with inflation is lost value. Cash is an abstraction of value to conduct an exchange. The real world worth of that abstraction is variable. When the availability of that abstraction increases disproportionately to a real world value it will be able to purchase less. The most common reason is that prices increase to follow the increased availibility of cash, but there are other reasons as well.

When everybody equally has uniformly increased purchasing power the natural counter-reaction is to reduce availability of goods and services. That can mean raising prices. It can also mean removing goods from market to make them more exclusive. Any means of restoring value to the prior state will happen to lower disruption to the transfer of goods.

Had you read the wikipedia article it would have addressed everything I just said.

If you had a more well versed economics background, you might be more privy to how narrow of a view you have regarding inflation.

Australia currently has a program where anyone impacted from the effects of the pandemic, receives $1,500 a fortnight- and yet is experiencing deflation. The very fact of this debunks your argument, as it is a significant portion of the population who is now receiving a cash injection. This money is not exclusively for rent, nor is it tied to food stamps; it is $1,500 to spend as you wish.

Further, The Reserve Bank Of Australia is in favour of these payments. And it's also worth noting, many economies have an inflation target of about 3%, which indicates that inflation is healthy and to so staunchly avoid anything that may affect inflation is a fools errand.

Regardless, please read more than a wikipedia article before holding such a strong opinion. The other commenter called you out for being lazy, and I wholeheartedly agree with them.

The pandemic will deflate most economies. So much so that that attempts to correct for this by injecting cash, controlled intentional inflation, only lightly softens the blow. The US economy is expected to see a contraction of 35% to the GDP this year, which is huge. I believe the great depression only contracted the US economy by around 22%. This great deflation is even after several rounds of economic stimulus, which are largely comprised of giving people money from the government in similar spirit to a UBI.

In this case the goal of stimulus is inflation and it isn't enough to repair the economic disruption.

Despite the sharp and historic deflation this is not unusual though. Pandemics are historically known for economic deflation. Europe experienced a devastating pandemic about once a century for more than 10 centuries in a row yielding plenty of economic evidence to this.

The most important thing to learn from this is that a sudden economic deflation hurts poor people and corrections insufficiently help poor people. Wealthy people are not directly impacted, at all. Attempting to correct for that difference with an economic stimulus, such as giving poor people cash, does not at all balance that disparity.

If anything this current pandemic illustrates that a UBI is an insufficient control for balance. Instead of focusing on what to do about poor people if the goal is to balance the disparities of wealthy people against poor people then wonder what to do about wealthy people. Tax the shit out of wealthy people and use that increased government revenue to grow the economy directly in ways only business can: increased infrastructure (there is more to that than just roads and telephone poles).

As for taxing wealth I am a huge fan of a complete estate tax and not a huge fan of income taxes. Take everything greater than $10 million of estate value when a wealthy patron dies.

Inflation certainly is a curious animal and the Wall Street bailouts and the recent record-setting currency printing has primarily inflated capital markets rather than raw goods necessarily. Consumer price index is perhaps more important to consider than the general macroeconomic inflation figure used. Modern Monetary Theory gets a few things right showing how printing money isn’t necessarily going to result in inflation and that taxes can be used to offset spiking demand.

Australian deflation is false though, as the CPI has been impacted significantly by the free child care. Wait and see what it looks like in ~6 months time when the next figures come out without any influence of free childcare.

That the inflationary effect of a cash injection is not sufficient to counteract the deflationary effect of people going out less and buying less debunks nothing.

Come on, man. Linking to Wikipedia and expecting people to read a 12,000 word article to magically construct the ~200 word argument you've laid out here is almost a textbook definition of laziness. I stand by what I said.