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February 05, 2005

Social Insurance and Self-Sufficiency

Anderson on Political Economy, Elizabeth Anderson: February 5, 2005

Many people are troubled by social insurance not so much from considerations of justice as of virtue.  They worry that social insurance debases people by making them dependent on government.  It saps people's self-sufficiency and makes them a burden on others.  People should provide for their own futures and not expect other people to step in and support them if they haven't set aside enough to do so.

I think this view is fundamentally misguided.  Social insurance does not offend any worthwhile ideal of self-sufficiency.

It might be thought that self-sufficiency requires that each individual build their own personal savings and live exclusively on that.  The offensive feature of social insurance is the pooling of assets and risks.  But that can't be right.  Private insurance also pools assets and risks.  No one holds that it saps one's self-sufficiency if one purchases private insurance to provide for oneself and one's family in the event of disability, death, sickness, retirement, and the like.  The fact that one has pooled one's personal risk with others does not offend any reasonable ideal of self-sufficiency--even if it does mean that, if things go badly, one will end up drawing more from the pool of assets than one contributed in the first place.  So what is supposed to make social insurance any different?   One pays one's contributions--in the U.S., mostly in the form of wage taxes--thereby pooling one's risk with everyone else.  And one receives medical care, a retirement pension, income in the event of disability, etc., in return.

Perhaps the objection is that the contributions of the less well-off to social insurance yield benefits greater than what they could have obtained from willing private insurance providers.  They lack self-sufficiency and hence are a burden on other payers into the social insurance system, in that the benefits they receive are more than what private insurance would have given them for their contributions.  Note that this objection contradicts the more common argument on behalf of private insurance--namely, that it provides higher benefits for everyone than social insurance, whatever their level of contribution.  Note also that this objection does not condemn all recipients of social insurance for lacking self-sufficiency, but only those who would have gotten a worse insurance package under a purely private system.  More fundamentally, the argument ignores the distinction between virtue and luck, noted in my earlier post on Hayek.  If one's risk is known to be high, one may not be able to obtain private insurance at any price within one's budget constraint.  For private insurers need to guard against adverse selection, lest they fail.  But the fact that one's risk is known--say, one is older, has a pre-existing condition, or works in a dangerous occupation, such as firefighting, farming, or metal stamping--is typically independent of any considerations of virtue.  Being subject to a known high risk does not make one a degenerate dependent, but it may make one uninsurable on the private market.  That's why social insurance is needed: it's the only way to ensure that everyone has access to insurance.  Because social insurance is universal, it doesn't suffer from adverse selection.

Perhaps the self-sufficiency objection applies specifically to Social Security's pay-as-you-go system.  Each generation pays for the next, instead of putting away savings on its own account, and spending those savings upon retirement.  Hence, the older generation is objectionably dependent on the younger generation, when it ought to have provided for itself.   

Consider by analogy the Amish practice of community barn-raising.  When a young farmer starts out on his own farm, he does not build his barn all by himself, nor does he pay others to help him build it.  Instead, he enlists his community to build it without pay.  This is no offense against self-sufficiency:  he will reciprocate when other members of the community need their barns raised.  This system involves an intergenerational transfer from older to younger farmers, since the older ones got their barns raised before the younger ones had a chance to help them.  Nevertheless, no participant is a net burden on others over the course of an entire life, since each farmer receives and gives in turn.  So no participant lacks self-sufficiency.  The fact that the generation that gives is different from the one that receives is irrelevant to the virtue of self-sufficiency.

Social Security simply reverses the timing of the giving and receiving, with the each generation paying for the retirement of its parent's generation.  From the standpoint of intergenerational reciprocity, this is even better than the barn-raising case, since the parent's generation already endowed the tax-paying generation with most of its capital, human and fixed, without charge.

Why ask each generation to pay for the retirement of its parent's generation, instead of asking each generation to pay for its own retirement?  The immediate demands of relieving poverty among the elderly had to be met when Social Security began.  That locked the intergenerational transfer in place.  This has always been the intergenerational social contract.  When parents became too old to work, they relied on their children to support their retirement.  Social Security merely pooled the children's responsibilities in this regard, rather than leaving each family to fend for itself.  And we've already seen that the mere fact of pooling risks and benefits does not offend the virtue of self-sufficiency, since private insurance does the same thing.

One might think that the demographics of the baby boom retirement fundamentally disrupt the general pattern of intergenerational reciprocity inherent in demographically stable pay-as-you-go systems. The thought is that under today's system, current and near-future retirees are making out like bandits at the expense of their children, who will be left with a much poorer retirement than their parents enjoyed.  I agree that if this were true, a significant question of intergenerational justice would arise.  But it isn't true. Even under the Social Security Administration's pessimistic assumptions about productivity growth (without which there would be no projected "crisis" at all), the real value of the retirement benefits future generations can expect after the misnamed "bankruptcy" year of 2042 is higher than the benefits retirees enjoy today.  This doesn't settle all questions of intergenerational justice that arise under Social Security.  But it does suggest that they are much less urgent than has been made out.  (Medicare is different.  As I've noted before, I do believe that, unlike Social Security, the current Medicare system does raise gave issues of sustainability and hence of intergenerational justice.  That's due to features peculiar to Medicare, rather than to social insurance in general.)

It could be objected that the Amish system is voluntary, while the Social Security system is coercive.  But the Amish system isn't voluntary.  Ever been shunned?   Private associations have their own legal means of coercion.  One might object to the coercive character of both systems.  All right, but It's not clear why that would mark a difference between self-sufficiency and dependency.  It's not an objection from virtue.  (Later, I'll be posting on why the coercion involved in social insurance is no different in kind or character from the coercion involved in any private property system.)

Some people feel that relying on a check from "government" makes one dependent.  But in a democracy, government is nothing more than citizens acting together, through state officials functioning as their agents.  It's no different in principle from the barn-raising system.  It's just on a vastly larger scale that, due to its size, requires an intermediary administrative apparatus.  If the Amish aren't a bunch of degenerate dependents in running their barn-raising system, then neither are citizens at large in contributing to, and receiving from, social insurance.

Many important questions remain about the justice and wisdom of social insurance.  But worries about sapping the virtue of self-sufficiency are not among them.


P.S. Numerous comments and trackbacks to my post on Hayek suggest that I missed the boat, since the best arguments against taxation don't suppose that anyone morally deserves their income as a reward for their virtue. They claim that people are entitled to their income because they obtained it through a system of voluntary, uncoerced exchange.  I'm familiar with this argument, and never supposed or suggested that my post addressed it.  Readers, there's only so much one can do in a single post!  This isn't a scholarly paper, where one can blather on for 30 pages, much less a law review paper, where one can blather on for more than 100 pages.  I'll be posting on the entitlement argument soon . . . .



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Posted by: anon

Social Security brings a new dimension to such concepts as annuities, insurance and retirement. No long, complicated contracts. No actuarial tables to pore over. Social Security operates on a very simple principle: The politicians take your money from you and squander it. Allowing the politicians to boost Social Security's earnings by investing its reserves in the stock market would just give them more money to squander – and they'd still be back soon enough to increase your taxes again.

-Harry Browne

Posted by: anon | Feb 5, 2005 3:43:06 AM

Posted by: anon

>Social Security simply reverses the timing of the giving and >receiving, with the each generation paying for the retirement of its >parent's generation.

What about the ratio of workers to retirees? Doesn't that mean that those who are working when there are a lot of retirees must pay more than if there are a lot of workers and few retirees?

Posted by: anon | Feb 5, 2005 3:46:54 AM

Posted by: No Labels Please

Liz - this is utterly, incomprehensibly, stupefyingly embarrassing.

Really embarassing.


Not even worthy of comment.

Don't even know what to say.

Posted by: No Labels Please | Feb 5, 2005 3:49:17 AM

Posted by: John F. Opie

Hi -

I'm afraid that you are mixing so many concepts together that you really don't understand what you are talking about.

"Social insurance" doesn't exist anywhere in the form you seem to imply: that we all pay something in, spread the risk around, and then we all benefit from this in terms of health insurance, retirement income, etc.

Insurance is indeed the use of payments to guard against risks by pooling those participating into a single group. But it only works if payments, risks and the makeup of the group are balanced in such a way that the insurance works. This is how life insurance, fire insurance, etc all work. **If** the insured event happens, you get money.

But retirement income has **nothing** to do with this. Social security, government pensions, corporate pensions, etc are **not** insurance, but rather either a welfare program to prevent senior citizen poverty, an income transfer program to prevent senior citizen poverty, or a vested trust that pays an annuity *when* those involved reach a certain age or status.

Note the **if** and the **when**: it is the fundamental difference. I have life insurance that I hope that I never, ever get. I also pay into social security, which I damn well hope I get.

And your comparison with the Amish is specious: the Amish cooperate because they believe they should, it's a fundamental part of their religion and their religious lives. That is not the case with the government, not even remotely.


Posted by: John F. Opie | Feb 5, 2005 4:14:45 AM

Posted by: No Labels Please

Cant' resist - too easy - I have two barns:

"Consider by analogy the Amish practice of community barn-raising."

Lizzie - here's how it actually works - I help you with your barn, you help me with my barn. Fine, no problem. Here in the "Red" states we have quaint concepts like community charity, public radio fundraisers for sick workers, turkey bingo. Yesterday, in the real world, a bank account was opened for a guy who had a heart attack and left three kids. By his friends. Gummint didn't do it. No-one called the gummint. No one thought to. By the way, $25,000 was raised in two days.

Tell you what. Somebody comes over and says - raise my barn - i'll raise your grandkid's barn. I'll tell him to go to hell.

How many barns you guys built in Ann Arbor recently?

Posted by: No Labels Please | Feb 5, 2005 4:20:47 AM

Posted by: No Labels Please

Wow - just caught the latest - social benefits aren't entitlements - **personal income** is an entitlement granted by the gummint - you go girl!

"They claim that people are entitled to their income..."

Let's give They some chai tea and a nap before They have any more delusional thoughts.

Posted by: No Labels Please | Feb 5, 2005 5:38:10 AM

Posted by: Perseus

Prof. Anderson obviously doesn't pay too much attention to the comments on her own postings, so I'll repeat my argument from the previous post: Social Security is NOT social insurance. The purpose of social insurance is to protect people against the risk of a bad event that occurs relatively infrequently (e.g. unemployment, catastrophic illness, disability, etc.). If Social Security were a true social insurance program, benefits would ONLY be paid in cases where people become impoverished as a result of bad luck (or good luck such as living much longer than expected) in their own retirement programs. This is clearly not the case with Social Security since the overwhelming majority of people retire at some point in their lives and virtually everyone who pays into the system collects benefits for an extended period of time.

And precisely because Social Security is not a social insurance program, it has made most people excessively dependent on it for their retirements. After all, it is difficult for people to make Social Security only a relatively small "supplement" to their retirement programs (at least for most people as was originally intended) when they are taxed at a combined rate of 12.4%. Indeed, Anderson unwittingly admits this when she says that each generation pays for the retirement of the next.

The comparison of Social Security to the Amish practice of community barn-raising is just risible. The implication of Anderson's argument is that children OWE their parents for "endow[ing] the tax-paying generation with most of its capital, human and fixed." Talk about market fundamentalism. Most people, however, rightly believe that it is the duty of couples who bring children into the world to provide them with food, shelter, health care, and an education (human capital). Yes, children have reciprocal duties, but Anderson's model would make children, in effect, indentured servants.

I could go on, but I agree that the post is simply embarrassing for a professor of philosophy at a distinguished university.

Posted by: Perseus | Feb 5, 2005 5:42:01 AM

Posted by: No Labels Please

You haven't answered any of the objections that have been raised to current SS, except for just claiming that certain things are true that you want to believe. Here's a summary of what I think the "oppostion" thinking is:

-the primary obligation for retirement savings should be on the person who is going to retire and use those savings [pace David who wants to live his life like "Groundhog Day", arising each morning to a new himself]

-the most economically efficient, demographically robust way to do this is to compel savings for those who earn income, while they are earning income, and allow them to invest it,

-there is nothing inconsistent with these ideas and also providing for those who have been unable to save for retirement due to limited limetime income generation, medical expenses, etc.

-however, it should be transparent that those who work, earn and save more will have more finacially robust retirements than those who work, earn and save less.

Do you disagree with any of these premises? If so, how about a two sentence explanation of why.

Posted by: No Labels Please | Feb 5, 2005 6:12:12 AM

Posted by: S. Weasel

Hm. Leaving aside that all the programs are funded coercively, which makes the whole enterprise dodgy, I have a different opinion on different bits.

I'm offended by Social Security because it gives such an appalling return on investment -- for every dollar put in, slightly less than a dollar comes out. If that same dollar of enforced savings were invested somehow...

I'm inclined to approve of the idea of unemployment insurance, but think the current system is too much of a burden on employers, especially at the small business end. It discourages hiring.

I think an open-ended welfare/food stamp system, one with a bounty on extra babies and single parenthood, has an absolutely corrosive effect on the poor.

Anything else lumped into a social insurance program I've overlooked?

Posted by: S. Weasel | Feb 5, 2005 7:12:34 AM

Posted by: No Labels Please

Sweasel -

I think a compulsory individual savings program [with a floor] justifies the coercion. Not really feasible to have people opt out then claim benefits later, etc...

Posted by: No Labels Please | Feb 5, 2005 8:23:57 AM

Posted by: oliver

I think I'm not alone among lefties in regarding it as "unpatriotic" to wish social security to be privatized. Since that's a language that many conservatives speak, I think we might as well use it. "Starve the beast," meanwhile, is treasonous. The people who think the U.S. government is other than themselves strike me as people who would deny being captain of a container ship if he or she were the only person left on board. Nobody has to make you captain or make you a citizen. You're on the boat whether you like it or not.

Posted by: oliver | Feb 5, 2005 10:10:43 AM

Posted by: Jim Hu

Wake me up when Prof. Anderson finds the time to post on something other than straw men.

Posted by: Jim Hu | Feb 5, 2005 10:40:52 AM

Posted by: john t

I've given up on EA. A quick read of her post[all my stomach could take] displayed all the usual absurdities. WE may expect a spirited defense however from both David V and first I'm here now I'm not Don Herzog. If you wish to catch the essence,the foundation,of the thuggery invovled,and rather than wade thru reams of verbiage let me refer to Herzog's Tax Revolt post and a counter post of 2/5 5:35 am,I believe by NO Labels Please. Left/liberals should consider the implication to themseves as well as others.

Posted by: john t | Feb 5, 2005 10:56:24 AM

Posted by: D.A. Ridgely

Briefly (but only briefly) following Oliver’s admonition to play by the author’s rules, Ms Anderson continues to chip away at bad arguments and that’s fine as far as it goes. That is, insofar as people might be more concerned about the effect of welfare programs on the virtue of their recipients than they are about the justice of such programs, there are reasonable arguments to the effect that such concern is misplaced. Fine.

At the risk of having the scorn of my fellow libertarians rained down upon me, the naïve concept of self-sufficiency one does indeed often hear from many libertarians is just silly. No one is self-sufficient. No one doesn’t take advantage of the society into which she is born and few, if any of us ever manage to be so productive in our lifetimes that we “repay” society for what we inherit. Show me a “self-made man” and I’ll show you a naked, starving, non-linguistic animal and a soon-to-be dead animal, at that.

But none of that gainsays the fact that coercion is wrong or that incentives matter. I care less about the virtue of my neighbor than about his behavior and I care less about whether he is self-sufficient than I do about whether he makes illegitimate demands upon me to help support him. I also care about whether society is structured in a manner that is less or more coercive and in which people are less or more inclined to need collective support. I so far find Ms Anderson’s arguments entirely unavailing about those issues.

To that extent I thus conclude that, in the manner of an SAT analogy, her counter-arguments and proposed solutions are to the real issues at stake rather like the Amish understanding of technology. Herewith, an old joke:

An Amish boy and his father were visiting a mall. They were amazed by almost everything they saw, but especially by two shiny, silver walls that could move apart and back together again. The boy asked his father, "What is this, Father?" The father answered, "Son, I have never seen anything like this in my life. I don't know what it is."

While the boy and his father were watching, wide-eyed, an old lady in a wheelchair rolled up to the moving walls and pressed a button. The walls opened and the lady rolled between them into a small room. The walls closed and the boy and his father watched small circles of lights with numbers above the walls light up. They continued to watch the circles light up in the reverse direction. The walls opened up again and a beautiful 24 year-old woman stepped out.

The father said to his son, "Go fetch your mother!"

Posted by: D.A. Ridgely | Feb 5, 2005 11:25:15 AM

Posted by: Boiler80

EA's assumptions are quite breathtaking in scope.

1) Social Insurance and Private Insurance are equivalent concepts.
2) Brushing aside the concerns regarding an impending Social Security fiscal crisis.

I'll see your two weblinks that aren't worried about the fiscal crisis and raise you two.



I'm not going to argue about social insurance and private insurance being equivalent concepts. I would like to remind you that not everyone in the US shares the burden of social insurance. My wife is employed by the local library and she pays Medicare, but not FICA. She, like most other government employees, pay into a separate State retirement fund that replaces Social Security. Funny, but she gets statements every quarter showing exactly what is in HER account. I get these funny things that tell me how much I've paid into Social Security, and what I can be expected to get if I retire at age 62, 66 and 8 months, and 70 for the $150K that my employer and I have willingly "contributed" to my "account" between the years of 1973 and 2002.

By the way, do employees of the Univ. of Michigan have to contribute to Social Security? Some states have elected to be under the auspices of Social Security and I'm not sure if Michigan is one of those or not.

Posted by: Boiler80 | Feb 5, 2005 11:53:13 AM

Posted by: Terry J

Three economists were trapped at the bottom of the well. Escape was easy. They assumed a ladder.

Posted by: Terry J | Feb 5, 2005 12:23:43 PM

Posted by: oliver

D.A. Ridgely writes: "the naïve concept of self-sufficiency one does indeed often hear from many libertarians is just silly" and then in a display of the very same silliness writes "I also care about whether society is structured in a manner...in which people are less or more inclined to need collective support." Or if it's not the same silliness, I hope he will elaborate on the difference, as I believe such an explanation likely would be very much to Professor A's point.

Posted by: oliver | Feb 5, 2005 12:42:09 PM

Posted by: D.A. Ridgely

Actually, Oliver, it would probably be more relevant to her promised later “posting on why the coercion involved in social insurance is no different in kind or character from the coercion involved in any private property system.” So to the extent I have not already answered here and elsewhere why my position is at least a different sort of “silliness” from the "self-made man" version of self-sufficiency (and I think I have, in fact, largely done so), suffice it to say for now that it goes to the difference between minimal required coercion and coercion beyond that minimum on both moral and utilitarian grounds. Beyond that, let’s both wait.

Posted by: D.A. Ridgely | Feb 5, 2005 1:02:08 PM

Posted by: Achillea

Here we go again, with a dozen paragraphs arguing false analogies from false premises. Others have ably demolished the 'social security = social insurance = private insurance' myth, so I'll simply comment on the major flaw in the choice of examples.

Choice. The Amish choose to employ the system that they do, which is actually more a form of barter than anything else. If one of them chooses to opt out, he's free to do so. He may suffer some social coercion, and probably nobody will come help with his barn, but the contribution of his labor is not legally compelled. The same with private insurance (I'll get to the uneven cost structure in a minute). EA also here skips blithely from providing for myself and my family against possible misfortune, and providing for everyone against possible misfortune. I'm not one of the rabid libertarians who would flame DAR for pointing out there's no such thing as pure self-sufficiency, but saying that one has pooled one's personal risk with others does not offend any reasonable ideal of self-sufficiency is complete and utter rot. It's a strawman of the first order and, sorry to say, exactly what I've come to expect from EA.

As regards the increased costs of people in dangerous occupations, we have this little thing called 'workers compensation.' If you want to discuss its virtue and/or efficacy, great, but the fact remains it's the mechanism which addresses that issue. I don't have a problem chipping in to cover the possible on-the-job misfortunes of the firefighter who comes to stop my house from burning down, or the cop who busts the rapist lurking by my car, or the 'rough man' who puts enemies in the ground in foreign lands on my behalf, etc. That is 'a reasonable ideal of self-sufficiency.' (People who choose dangerous hobbies, on the other hand, are on their own. One pays for one's pleasures, and if you snowboard off a cliff, don't come crying to me. )

Posted by: Achillea | Feb 5, 2005 1:14:36 PM

Posted by: abad man

I find the source,CEPR, used to support your claims on 2042 benifits troubling. Their figures are produced from the SSA, CBO and the authors calculations. The math is not shown. This is especially troubling since the SS trustees report has the fund bankrupt in 2042 while the CEPR showes it solvent and providing increased benefits. Agian I'd like to see the math. Likewise the CEPR authors shift between 2005 dollars and future dollars depending on what they want to prove. Not a strong source. Why did you use it? How can I get a job at CEPR?

Posted by: abad man | Feb 5, 2005 1:43:39 PM

Posted by: abad man

I should add that the source for productivity growth seems equally weak. Musings on a blog.

Posted by: abad man | Feb 5, 2005 1:49:55 PM

Posted by: neal

Social insurance does not offend any worthwhile ideal of self-sufficiency.

Social Security is not Social Insurance. It is an enormous (15% including MedicCaid) regressive tax aimed squarely at the middle class that supports the general fund.

Posted by: neal | Feb 5, 2005 1:58:30 PM

Posted by: paul_c

It seems to me that many commenters are outraged, and I can't really see why. There are two kinds of objections that I'd like to say something about. The first is that Liz Anderson is attacking a straw man. I really have no idea if this is true. I have talked to people who seem to believe that programs in the nature of social insurance are bad because of some self-reliance based conception of virtue. Perhaps I'm wrong about what they thought. But then why not mellow out and wait for the next argument.

The second kind of objection is that Anderson's argument conflates too many things; say (i) pure risk pooling, (ii) saving and (iii) redistribution. Fair enough, but how do these different things have different implications for self-reliance? I imagine that redistribution might be the easiest one to pick off. Perhaps it is legitimate to consider that now. But I doens't seem crazy to leave that issue for another day either. And even if it is a little crazy, it isn't crazy enough to justify all the abuse Anderson is getting.

Posted by: paul_c | Feb 5, 2005 3:00:14 PM

Posted by: bakho

There are a number of missing concepts that need to be brought into the discussion.

For any person who is retired, the goods and services they consume will come from those who are working at the time. Whether the license to purchase those goods and services comes from individual savings or from an intergenerational redistribution system, the effect is the same. Goods and services are provided by workers to those who are retired.

SS was never intended and is not intended to be a person's whole retirement. Anyone who thinks this way may be disappointed at their purchasing power during retirement. SS is a supplement and it keeps millions of elderly out of poverty and millions of mothers-in-law out of their childrens hair.

Sure one can save for retirement, but the length of retirement is a crap shoot. A person could plan to live the average 10 years past retirement and end up impoverished at 95. SS is a way to provide resources for those who outlive their life expectancy. This feature of SS is truly "insurance" and something the Bush forced savings accounts and forced annuity purchases do not cover adequately.

An elephant in the room is SSI to pay disability or survivor's benefits. This can only be covered by an "insurance" program because private savings may not have enough time to compound. No private savings plan will address this problem.

The number of workers per retiree is a bogus argument. The critical number is the number of workers to non-workers. During the 1960s, the ratio of workers to non-workers was even lower than it is today and will be in the future. It is just that the non-workers of the 1960s were more likely to be children and less likely to be elderly. No one argued against the transfer of resources between generations then. Certainly the workers of the 1960s did well for themselves and accumulated wealth in spite of having fewer workers per non-worker than will exist in the future.

Because it is the goods and services produced by the current workers that support the elderly at any given time, it is important for the older generation to transfer to the younger generation the capacity for high productivity. The elderly pass on to the younger generations, infrastructure, businesses that have been developed, education, money, houses, etc. The younger generation is never a "self-made" generation. "Self made man" is one of the great myths of Americana. Of course the wealthy know that no such thing exists and are constantly using government contracts and services to further their wealth. The self-made-man myth is for suckers that are too proud to admit that everyone does better with a little help now and then. Why do parents pay for their kids to go to college? Why do governments subsidize education from K-12 to post secondary? Isn't this also an intergenerational transfer of wealth? If the older generation does a good job of educating its youth and leaving them with resources, its youth will be productive and easily in a position to give back to the older generation that gave them a boost.

Humans are social animals. We evolved within social groups that have a cultural environment that facilitates development. All social groups and cultures have a role for the elderly and a transfer of resources. The elderly can still make important contributions to society. Any argument about humans made from the POV of the individual without considering the social context is devoid of what truly makes us human- culture and interactions with other humans.

Posted by: bakho | Feb 5, 2005 3:14:10 PM

Posted by: Perseus

Creating straw men, conflating too many things, and using bad analogies demonstrate a lack of rigor in thinking and arguing that deserves scorn.

Posted by: Perseus | Feb 5, 2005 3:22:33 PM

Posted by: bakho

A message to those young people who think Social Security will not be there for them. The elderly of today were part of the generation that created Social Security. They created Social Security as a way to help their own parents in their old age. The created SS as a way to return some of the help that the older people imparted to them. They did not create Social Security to be a burden to their children. They created Social Security so all elderly people would be less of a burden on their own children.

Youth trying to get started and make their way in the world have to define their own life and establish their independence from their own family structure. However, as youth age and start their own families, they begin the process of sharing their resources and knowledge with their children so that the next generation will be even more successful. Whether or not Social Security (or any retirement program that can be devised) will really be there to provide a decent retirement for any generation depends on how well they have nutured the next generation and prepared them to be productive.

Wealthy sons have little asked of them by wealthy fathers. Wealthy sons of wealthy fathers can shun the social contract without much consequence. Wealthy sons of wealthy fathers may fail to understand what poor children with poor parents live through every day. Children of poor parents cannot shun their obligation without large consequences.

To our youth- Social Security will only not be there for your retirement if you fail to adequately prepare the next generation to fulfill their social contract.

Posted by: bakho | Feb 5, 2005 3:44:38 PM

Posted by: Robert Gressis

I agree with D. A. Ridgely that no one can be totally self-sufficient, and given this, it follows that self-sufficiency can't be a virtue, at least not for us humans. However, I think there is another cost to social security that other people haven't commented on, and that is the cost of having someone make certain of your decisions for you.

Imagine two people, Anita and Bart. Anita fills out her tax forms herself, buys her own groceries, exercises regularly, reads, and produces nice work for her employer. Bart, on the other hand, has an accountant do his tax-work for him, has someone buy his groceries for him, has a machine that keeps him fit, doesn't read but instead believes whatever this guru he knows tells him, and doesn't work. Moreover, he didn't even contact the accountant or the person who buys his groceries, he didn't make the machine or hook it up to himself, etc. Rather, these things have been supplied for him all his life by some mysterious benefactor, and it's the only life he's known.

Now, neither Anita nor Bart is self-sufficient. Anita, for all her hard work, relies on the existence of other people to write books, pay her money, etc. Despite their lack of self-suffiency, though, there's some important sense in which Anita is leading a better life than Bart's, and I think that sense has to do with autonomy; she's working and she'thinking for herself, and in so doing, she seems like a more virtuous person than Bart.

I think one objection libertarians and conservatives have to a strongly interventionistic/redistributionistic government, and therefore, to social security, is that it allows individuals to cede responsibility to other people, and allows them to get away without being as autonomous as they otherwise could be. Of course, we don't want to needlessly complicate individuals' lives either, but there's something responsibility-undermining about a cradle-to-grave government support system, too.

P.S.: I know I'm mixing up autonomy and responsibility. I wrote this post in haste.

Posted by: Robert Gressis | Feb 5, 2005 3:53:29 PM

Posted by: oliver

DA Ridgely writes: "...it would probably be more relevant to her promised later “posting ....So to the extent I have not already answered here and elsewhere...and I think I have...suffice it to say for now that it goes to the difference between minimal required coercion and coercion beyond that minimum on both moral and utilitarian grounds. Beyond that, let’s both wait."

I believe you pay your taxes willingly, if begrudgingly, as in the manner that lazy Amish participate in barn building, and I do not believe I've ever read anything I found compelling by you on the distinction you claim exists. To the extent your answer is scattered through various threads I would say you have no simple answer and that your statement about the straw-man silliness of Professor A's point about self-sufficiency is hypocritical. If I didn't hold you in such high esteem, then I'd be tempted to infer here that you're being a chicken.

Posted by: oliver | Feb 5, 2005 4:08:06 PM

Posted by: john t

D A Ridgley/Achillea, D A first,re 11:25 post "naive concept of self Sufficiency", "show me a self made man"etc. Your usual discernment is missing here. May a person be partly self suuficent? If so to what extent? Self made man? Yes we all know the story of Robinson Crusoe and we also know that man exixts in society. But,I guess ,is it tautological,that man also contributes to his making,unlike a heap of clay. Achillea, have you ever seen an argument you liked? Remember,your forbear did have an unprotected heel

Posted by: john t | Feb 5, 2005 4:23:53 PM

Posted by: rtr

I propose that leftist candidates, rather than kissing the babies of potential voters, do something useful to streamline the efficiency of the Internal Robbery Service. They can instead of shaking hands, introduce themselves as "Wallet Inspector" and demand society's cut at that point of contact. Tell each and every voter that it is not their income, they did not earn it, they do not deserve it, holding onto it and refusing to give it up is criminal, someone else is entitled to it, put the cuffs on and escort to the gulag those who might even impolitely hesitate. What? They don't want to or aren't going to be honest and open enough to do that? We can trust them to turn in the collection plate right, even if it might "reasonably" cost 70% for shipping and handling to deliver from point A to point B.

Thus, we know it is the same old tired socialists who are responsible for the current mess and divisiveness of the country. The bigger the mess they make by interfering the more they claim it is the fault of the market. Of course there's divisiveness. Nobody has any shame or guilt about taking whatever they please from their neighbors. A society of thieves has been born. The ancient philosophical "invisible ring" has come to pass in the form of democracy. We are all much worse off than we can imagine because of leftist social programs and general government interference. The ultimate insured outcome end of leftist socialist policy is gang banger slums like Detroit. They know all about taxation and collection and redistribution and bling bling cuts.

Posted by: rtr | Feb 5, 2005 4:57:18 PM

Posted by: Perseus

I would also like to provide a rebuttal to the attack on the notion of the "self-made man." The original philosophic progenitor of this idea was Machiavelli, who divided princes/principalities into three types: hereditary, mixed, and new. The self-made man is the "new" prince while the man who lives entirely off of his inheritance is the "hereditary" prince. Most people, of course, are "mixed" princes in that their own efforts are added to the efforts of their ancestors (the endowment of human and fixed capital mentioned by Anderson). Now it is true that we have largely ended hereditary aristocracies by abolishing entail and primogeniture. However, a modern form of the "hereditary" prince is the person who becomes dependent on "entitlement" programs because these programs tend to reduce the incentive to be relatively self-sufficient. Social Security is one such program in that people tend to overestimate the contributions they make to the system and underestimate the benefits they draw from it by wide margins. The counterargument is that old people subsidize young people with education and the like, but even a cursory glance at enormous costs of old-age programs--Social Security and Medicare--shows that the old are receiving an enormous payback for their “generosity” to the young. Indeed, the very fact that these programs are unsustainable in the long-run (people can quibble about when they will become insolvent, but they will become insolvent at some point) is evidence that we are not doing enough to make people be relatively self-sufficient (i.e. provide adequately for their own retirements). This is why even the left-of-center New Republic had a cover some years back with the title: "Greedy Old Geezers.”

Posted by: Perseus | Feb 5, 2005 5:46:36 PM

Posted by: noahpraetorius@hotmail.com

Once again I will point out the article in Policy Review which I believe if internalized by by all participating in these debates would force the realization of how picayune all these concerns are. Bottom line is that we can't pay for the promises that have been made and even if we could there will not be enough "boots on the ground" to make it work without some really incredible technological innovations. Like the economists in the well...assume a miracle.

Demographics and the Culture War by Stanley Kurtz

I know its a lot more fun to argue about SS. But basically its all but irrelevant.

Posted by: noahpraetorius@hotmail.com | Feb 5, 2005 6:11:21 PM

Posted by: neal

For any person who is retired, the goods and services they consume will come from those who are working at the time. Whether the license to purchase those goods and services comes from individual savings or from an intergenerational redistribution system, the effect is the same. Goods and services are provided by workers to those who are retired.

This isn't entirely true. I just took a bunch of my 401K money and invested it in an overseas investment fund. So the funds I get are from foreign workers.

Further, the whole premise is wrong. The US government is an enormous monopoly, and I believe monopolies are inefficient. So, today all the excess social security money is invested in government programs. As I see it, government programs have the following problems.

1. They do not have to compete with other business, so there is little competitive pressure to keep them efficient.

2. The test for the worthiness of a program is not whether it makes money, but usually other, often subjective criterea.

Let's say I would like to invest my money in biotechnology. As I do that, Biotechnology companies flourish and now the government has less money to run its programs. Perhaps there are drug improvements that solve important diseases, such as Alzheimers, that would make my life better as I get older.

Furthermore, I'm willing to bet that almost all of the productivity improvements are coming from the private sector. That's why Russia couldn't keep up with the US. That's why South Korea has been so much more productive than North Korea. That's why as China adds capitalist elements to its economy it is flourishing.

Posted by: neal | Feb 5, 2005 6:11:42 PM

Posted by: noahpraetorius@hotmail.com

And lest you think that Mr. Kurtz' piece is another right wing rant...I submit the cultural war aspects of the analysis which draws largely on the work of others is irrelevant to the basic point which is how will we will we deal with a world where depopulation is the problem?

I hope there is someone here who can poke holes in his arguments...personally I find them very depressing.

Posted by: noahpraetorius@hotmail.com | Feb 5, 2005 6:34:34 PM

Posted by: noahpraetorius@hotmail.com

And once you have read the article...consider how absurd it is for us to countenance abortion...we need all the babies we can get.

Posted by: noahpraetorius@hotmail.com | Feb 5, 2005 6:42:07 PM

Posted by: rtr

Where's Malthus? Depopulation and becoming more one with the state of nature is the environmentalist left wing agenda. It makes perfect sense. Wealth is "evil". It's "raping" the planet. As Jim Morrison sang, "they tied her with fences, stuck her with knives, and dragged her down." To the far left wing, violence exist only between man and the earth and its plants and animals. Oil is a non-renewable resource. Human life is. These are the socialist sentiments from which socialist "insurance" programs were born.

Posted by: rtr | Feb 5, 2005 6:50:35 PM

Posted by: noahpraetorius@hotmail.com

I am not a scholar and I admit that I'm not quite sure what 'historicism' means...my impression from usage is that it means...what insights might we obtain from taking a view of the present as if from a historical perspective?

I have read the analysis of the SS problem by Krugman and Luskin...take your pick...but neither or them as far as I can tell have much considered the larger issue of our demographic destiny...are we all in denial?

Posted by: noahpraetorius@hotmail.com | Feb 5, 2005 6:53:02 PM

Posted by: noahpraetorius@hotmail.com


Not advocating a future, whether left or right, just calling attention to a body of thought that describes the future...the methodology is similar to actuarial analysis...not pie in the sky.

Posted by: noahpraetorius@hotmail.com | Feb 5, 2005 6:59:09 PM

Posted by: noahpraetorius@hotmail.com

For instance consider Locke and his vision of society. At the last turn of the century the average woman had 8 babies (or more or less...precise statistics are not important to this argument). Currently in the US it is slightly less than 2. Is not this a fundamentally different situation? Do his prescriptions make the same sense now? Its like we are on a different planet.

Posted by: noahpraetorius@hotmail.com | Feb 5, 2005 7:13:50 PM

Posted by: neal

I submit the cultural war aspects of the analysis which draws largely on the work of others is irrelevant to the basic point which is how will we will we deal with a world where depopulation is the problem?

Well, if Bush's figures are to be believed, and I see no reason not to believe them, this has already happened with only 2 workers per retiree drawing on their work. Yet somehow the retiree's lifestyle continues to improve. How can this be?

There are two answers. One is that we continue to borrow money from other countries to prop up our lifestyle here, rather than paying for it with our own work. But perhaps more important is that productivity is improving. I read somewhere that it takes only two people to run the Gillete razor factory. It's an automated machine now, and the people are simply operators waiting for something to go wrong.

Posted by: neal | Feb 5, 2005 7:49:23 PM

Posted by: rtr

Yes, it's quite odd how classes and generations have been constructed by ideology to be at odds with each other. In a non-government interference natural state the young would have enormous incentives to trade for wealth by serving the elderly who have saved. What exists presently instead of that is a cycle of violence predicated on justification that an earlier had done to them what they are now doing to later generations. Nursing and doctor shortages will become an ever worsening problem as the baby boomers retire and have medical issues to deal with.

Hopefully, the law schools are teaching tomorrow's lawyers how to perform heart bypasses because the most talented of the younger generation are not going to medical school. You can make more as a lawyer without anywhere near the stress or hard work and long hours of a doctor. What's next, forced conscription for doctor's to serve specific populations with no chance to leave the profession except by imprisonment? The supply of medical care is being artificially constrained and demand is artificially shooting through the roof. It's a classic failure of central planning and it hasn't even been totally centrally planned yet, though it came close in the early 1990s.

Posted by: rtr | Feb 5, 2005 7:54:12 PM

Posted by: NeoDude

These little right-wingers and libertarians hate the the thought they are dispensible cogs in the vast market place.

They think they are such cowboys and frontiersmen when they walk into their financial institutions. Oh how their financial superiores think its cute that their cattle can scratch out numbers.

Posted by: NeoDude | Feb 5, 2005 8:10:50 PM

Posted by: rtr

Yippee-kai-ayyy. "Sell 'em!" "Sold!" Yeee-haaah! "What's here on the deeec 80s?" NeoDude's got the first round and dances at Scores tonight. "Green scratch. It's what's for dinner." Peace out. ^_^

Posted by: rtr | Feb 5, 2005 8:39:27 PM

Posted by: bakho

The Heritage Foundation and Cato Institute fixate on the concept of a "demographic imperative." In 1960, the United States had 5.1 workers per retiree, in 1998 we had 3.4, and by 2030 we will have only 2.1. Social Security opponents claim that with these demographic changes, revenues will eventually be insufficient to pay Social Security retirement benefits.

The logic is appealingly simple, but wrong for two reasons. First, this "old-age dependency" ratio in itself is irrelevant. No amount of financial manipulation can change this fact: all current consumption must come from current physical output. The consumption of all dependents (non-workers) must come from the output produced by current workers. It’s the overall dependency ratio—–the number of workers relative to all non-workers, including the aged, the young, the disabled, and those choosing not to work—that determines whether society can "afford" the baby boomers’ retirement years. In the 1960s we had 1.05 workers for each dependent, and we were building new schools and the interstate highway system and getting ready to put a man on the moon. No one bemoaned a demographic crisis or looked for ways to cut the resources allocated to children; in fact, the living standards of most families rose rapidly. In 2030, we will have 1.27 workers per dependent. We’ll have more workers per dependent in the future than we did in the past. While it is true a larger share of total output will be allocated to the aged, just as a larger share was allocated to children in the 1960s, society will easily produce adequate output to support all workers and dependents, and at a higher standard of living.

Second, the "demographic imperative" ignores productivity growth. Average worker productivity has grown by about 2% per year, adjusted for inflation, for the past half-century. That means real output per worker doubles every 36 years. This productivity growth is projected to continue, so by 2040, each worker will produce twice as much as today. Suppose each of three workers today produces $1,000 per week and one retiree is allocated $500 (half of his final salary)—then each worker gets $833. In 2040, two such workers will produce $2,000 per week each (after adjusting for inflation). If each retiree gets $1,000, each worker still gets $1,500. The incomes of both workers and retirees go up. Thus, paying for the baby boomers’ retirement need not decrease their children’s standard of living.

Posted by: bakho | Feb 5, 2005 9:16:33 PM

Posted by: Perseus

Bakho writes:

"To our youth- Social Security will only not be there for your retirement if you fail to adequately prepare the next generation to fulfill their social contract."

Sorry, but my generation will be the one to terminate the contract so we don't have to take large sums of money from the next generation to subsidize our retirements as the baby boomers are going to do to my generation to subsidize their retirements.

Posted by: Perseus | Feb 5, 2005 11:00:15 PM

Posted by: abad man

while I can see the point behind your argument, you ignore inflation. Even if inflation is held to low levels of one to two percent the cost of living will likely double in the same time as well, making the real buying power of the retiree the same, but the real buying power of the workers less.

Posted by: abad man | Feb 5, 2005 11:55:13 PM

Posted by: neal

These little right-wingers and libertarians hate the the thought they are dispensible cogs in the vast market place.

They think they are such cowboys and frontiersmen when they walk into their financial institutions. Oh how their financial superiores think its cute that their cattle can scratch out numbers.

These arrogant left wingers think they can understand the complex evolutionary based processes of the marketplace, and play god with the proles.

The annointed are so convinced they understand, with their 25 cent words, vapid ideology and self assured beliefs they steal, with no thought of remorse or introspection, the product of labor from a man's hand, to consume it in their God Appointed role as uber mensch in such worthy programs as "Diversity," "Welfare," and "Subservience to the God Almighty State."

"Replace your God with ours!" proclaim the annointend.

Here is what I think of when I think of Liberals:

Whole Language.
BiLingual Nation.
Destruction of the Universities and critical thinking.
Embracing of malignant social role models.
Downward pressure on the middle class in promotion of costly and damaging social programs.
Very confused belief that Monopolies are bad, except when applied to government.
Lottery mentality ideas such as "Low cost housing," which takes from those who actually produce.
Destruction of community with a power grab for compassion from a faceless inefficient bureaucracy, Big Government.

. . .

I'm sure there must be liberals out there that can explain to me the thinking behind liberalism. The only thing that I find I can agree with liberals so far is that monopolies are inefficient, be it in massively accumulated inter-generational wealth or massive corporations. Other than that, modern day liberalism reminds me of Modern Art, which is unpleasant to look at, Modern Classical Music, which embraces dissonance, and literature, which is trite.

Posted by: neal | Feb 6, 2005 1:51:31 AM

Posted by: Sebastian Holsclaw

"In the 1960s we had 1.05 workers for each dependent, and we were building new schools and the interstate highway system and getting ready to put a man on the moon. No one bemoaned a demographic crisis or looked for ways to cut the resources allocated to children; in fact, the living standards of most families rose rapidly. In 2030, we will have 1.27 workers per dependent."

Bakho, there is one problem with this analysis. Not all dependents consume the same level of resources. The aged consume more than 4 times the resources of child dependents.

The social insurance=private insurance analogy is breathtaking. Private insurance protects against risks by paying off only if the bad situation occurs. Under Ms. Anderson's description of Social Security as social not only pays off whether or not the risked situation (old age poverty in this case) occurs, but in fact pays off more to people who are least likely to experience old age poverty (those who earned much more money than others right before they retired). Her argument is excellent for Social Security as a safety net which gets triggered when someone is about to become poor. It does an awful job of describing why we should pay for rich people's Social Security.

Posted by: Sebastian Holsclaw | Feb 6, 2005 3:05:15 AM

Posted by: paul c

Two questions, before we totally give up on the conceptual issues.

Is it a waste of time to oppose (or defend) tax-funded risk pooling on the basis of virtue? Or has Robert G's reformulation given it legs?

What about virtue-based opposition to redistribution. Is this stronger? Or is it parasitic on an entitlement (rather than virtue) based view of obligation?

'Parasitic' in the nicest possible sense, of course.

Posted by: paul c | Feb 6, 2005 3:07:16 AM

Posted by: noahpraetorius@hotmail.com

Here we have a summit of small minds. If we could not borrow at all and had to pay for the elderly out of current "income" would it work? I submit the math doesn't work...please explain how it does.

Until recently I thought we could get out of the looming crisis by essentially hijacking the wombs of foreign women but that won't work either (for the world as a whole)...other countries are in the same boat.

I think Pres. Bush understands the crisis better than most with his stance on immigration policy. We need immigrants to pick our lettuce and to produce productive citizens for tomorrow. But it is ultimately a "beggar thy neighbor" policy.

Posted by: noahpraetorius@hotmail.com | Feb 6, 2005 6:05:33 AM

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