----- Original Message ----- From: "David B. Shemano" <[EMAIL PROTECTED]>
Just so I am clear, why would social security be treated as a form of savings? Worker Peter is taxed, which money is sent to Retired Paul, who presumably expends the money on consumption. Why would the net effect be any different on the economy than if Peter was not taxed and expended the money on consumption? In my ignorance, doesn't savings mean an investment that has an effect on capital formation? ----- Under one model of economic time, the periodization of monetary flows under SS is a simple intergenerational transfer from current workers to current retirees. Under a different model of economic time, one that is implicit in the libertarian literature for example,* I'm paying into a fund, to receive the benefits of that saving in my own future. All the privatizers are really saying is that if we conceive of economic time on the libertarian model, then the government approach to intergenerational transfers over multiple, yet open-ended electoral cycles is an inefficient way of providing incentives for intragenerational savings because it anonymizes the monetary transfers and undoes the sense of an individual's responsibility for his/her own well being. Each generation [singly and collectively] should be responsible for it's own savings for the sake of it's own future[s]. That is to say, intergenerational obligations are a non-starter for the State to be imposing on citizens when the issue is one of retirement. It's a libertarian approach to internalizing the externalities of the so-called unintended consequences of the lack of savings [responsibility] by workers. For that model of economic time tacitly asserts that current workers should not be responsible for the irresponsibilities of either their cohorts or the workers that came before them when the issue is one of saving for retirement because it's considered an unjust transfer of wealth. > I assume the overwhelming percentage of the citizenry is capable of preparing for retirement. We allow people to self-finance and self-insure their cars, homes, life, etc., and the system generally works pretty well. You are implicitly assuming adults should be treated as children. David ----- Well, we compel citizens to save enough of their annual income to insure their vehicle[s] precisely because they can't bear all the risks/costs of a serious accident themselves. That's paternalism on a libertarian model as I understand it, even as it is a clear cut case that an individual can't internalize all the externalities of his/her driving behavior. To exist is to unintentionally pose a slew of risks to other citizens and ourselves. Economies of scale in the pooling of risk to mitigate the inability to internalize the externalities at the scale of the individual works. That's precisely one of the principles behind Medicare. It also creates the added benefit of social solidarity as we let go of libertarian models of selfhood; that responsibility isn't just an individualistic affair. Yes there's always going to be the in principle risk of free riding, but Margaret Thatcher was wrong. The overwhelming percentage of citizens would be quite capable of preparing for retirement if they were paid a wage that enabled them to do so along with owning their own homes, cars etc. and still have enough left over to live about as well in retirement as they do when they are wage earners. The tragedy of our time is that nowhere near that number of citizens in the US or elsewhere is being paid sufficiently for their labor so that they could individually internalize all the externalities of the unintended consequences of the current division of labor. Nor do those who, via our laws of property and contract, own the means of production have any intention of changing that situation because of the politics of inflation and rising expectations. And privatizing SS would create sufficient diseconomies of scale to exacerbate rather than mitigate the externalities problem as it relates to saving for retirement. The slogans of 'individual responsibility' and 'it's your money' do nothing but obscure that fact. Don't get me started on all the forms of paternalism the State engages in that have nothing to do with intergenerational equity! :-) Ian *See "Equality, Responsibility and the Law" by Arthur Ripstein [Cambridge University Press, 1999, esp. ch. 1-4 & 9]
