ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Universal Basic Cash

A critique of the notion of universal basic income is presented, using a basic microeconomic model. While the monetary authority can implement the golden rule of consumption for its citizens, the consequences for work, saving and investment are ambiguous, and the price level is indeterminate.

This article arose from a visit to the Goa Institute of Management. The hospitality of the school is gratefully acknowledged.

Where does a student encounter the concept of income? It is product, the output of inputs labour, capital, and land. It is divided between wages and profits. These notions do not drive the advocates of universal basic income (UBI). Indeed, the proposal is fostered by an environment of listless output growth and depressing prospects for work. Can money be a substitute? In basic economics, it is introduced through a bank. Money is cash plus deposits. The former is given short shrift, more so of late, when wallets do not have to bulge with the wherewithal to effect shopping plans. Deposits, along with reserves by commercial banks held with central banks, make up the money multiplier. In recent years, the questionable status of that ratio, long known only to the cognoscenti, has become widely accepted. However, we have been looking at the wrong side of the balance sheet of banks. Money emerges as a liability written up by a bank when it originates as a loan to an entrepreneur. At any rate, the institution of commercial banking is not part of the operation of UBI schemes.

A Model

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Updated On : 23rd Jul, 2019
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