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In almost every country, social security payments go toward paying the current recipients, not to paying one's own way. This was, I guess, done in this way to m

In almost every country, social security payments go toward paying the current recipients, not to paying one's own way. This was, I guess, done in this way to make it possible to set up a social security net in a couple of years instead of in a couple of generations; unfortunately, it gives us the problems of too many old people for the active people to support that we have now.

barrkel 16y ago
Of course, even if it was "saved" for future recipients, it wouldn't necessarily be better: one way or another, the future recipients will consume a share of future production. Money is only a way of accounting for this; it's only a way of choosing how to divvy up wealth production amongst consumers. A thought experiment: imagine a hypothetical economy of 10 people with a bulge in it, but producing new young people at exactly the same rate that old people die off. Let's say current dependency ratio is 6 to 4: 6 people supported by 4 people's production. No matter what way you dice it, on average everybody is getting 4/10 of the average person's wealth production. At a later time, the dependency ratio may get worse; let's say it's 8 people supported by 2. Still, everybody needs to get by on average with 2/10 of the average person's production. Whether this is done by taxing current production, or because of a share of ownership of production via capital saved earlier, it doesn't change the fact that there's only so much wealth to go around amongst all the people. Of course, productivity is increasing over time, so it's not like everybody is going to starve. But if anything, using a tax on current production to fund current dependents is more flexible than relying on capital ownership to fund future dependents (who will become "current dependents" in the future). If that 8/10 people own enough capital that they really try to put the squeeze on the 2/10 people creating wealth, that productive minority will revolt. With taxes, a political solution can be found.
- JoachimSchipper 16y ago
  That's a very good point, although it assumes you cannot "store" production surplus at all. Still, a good point.

barrkel 16y ago

Of course, even if it was "saved" for future recipients, it wouldn't necessarily be better: one way or another, the future recipients will consume a share of future production. Money is only a way of accounting for this; it's only a way of choosing how to divvy up wealth production amongst consumers. A thought experiment: imagine a hypothetical economy of 10 people with a bulge in it, but producing new young people at exactly the same rate that old people die off. Let's say current dependency ratio is 6 to 4: 6 people supported by 4 people's production. No matter what way you dice it, on average everybody is getting 4/10 of the average person's wealth production. At a later time, the dependency ratio may get worse; let's say it's 8 people supported by 2. Still, everybody needs to get by on average with 2/10 of the average person's production. Whether this is done by taxing current production, or because of a share of ownership of production via capital saved earlier, it doesn't change the fact that there's only so much wealth to go around amongst all the people. Of course, productivity is increasing over time, so it's not like everybody is going to starve. But if anything, using a tax on current production to fund current dependents is more flexible than relying on capital ownership to fund future dependents (who will become "current dependents" in the future). If that 8/10 people own enough capital that they really try to put the squeeze on the 2/10 people creating wealth, that productive minority will revolt. With taxes, a political solution can be found.

JoachimSchipper 16y ago
That's a very good point, although it assumes you cannot "store" production surplus at all. Still, a good point.