Eric Tymoigne writes that "Half of surveyed U.S. individuals saved 5% or less of their income."
Saving large amounts of denomination units? Does that make any sense at all?
Why should a dynamic electorate try to "save" EXCESSIVE amounts of their fiat? Citizens can't save Aggregate Public Initiative any more than they can individually save personal initiative. Initiative can only be invested when it appears ... or it's lost forever.
The only alternative is sacrificing teamwork by trying to hoard units denominating the personal initiative of other people, including emerging citizens (grandchildren). In other words, slavery, indentured servitude or sharecropping.
Yet hoarded fiat currency units are unproductive liens on other people's initiative (and your grandchildren's options). Savings beyond basic liquidity needs inevitably undermines current & future teamwork. That's why it's CALLED a "demand leakage." It's financial sharecropping, pure & simple. Otherwise, we would have called off D-Day back in 1944 and "saved" all that munitions output ... and those human lives as well.
If NeoLiberals (those promoting every man for himself) were remotely honest (or intelligent), they'd urge us to save lives and teamwork and other things, not just fixate on saving excessive amounts of fiat denomination units (which is what they secretly crave). NeoLiberalism is merely a psychological disorder. One of endless flavors of obsessive-compulsive behavior.
Why do voters preferentially elect OCD patients who obsess over saving excessive amounts of fiat? Why not elect people obsessed with saving other things? Lives? Democracy? Real output? National capabilities? Cultural Adaptive Rate? Our grandchildren's options? What's so uniquely special about nominal accounting numerals?
Maybe only an association of sports coaches can save us. After all, there's no "i" in teamwork. Only in unregulated capitalism.
To pursue the absurdity, is there no "i" in teamwork ONLY because most "me, me, me" is hoarded in politics? If we reform politics, will all sports teams fall apart? What are we afraid of? Cross contamination, or cross training?
Do we have to amend Jefferson's maxim, and insert a clause into our Constitution requiring that we formally regulate the ratio of personal greed to teamwork, to keep that ratio within survival tolerance limits for our social species? Shouldn't that be obvious, after the last 100K years? Or is homo sapiens regressing into homo saps?
Preamble to a Constitutional Amendment banning financial Benedict Arnolds:
"[NeoLiberal capitalists] have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their [stolen, fiat liens]." Thomas Jefferson
Hell, I'd vote for that amendment.
I must admit, for the life of me Roger, I cant understand your problem with the public saving purchasing power for their retirements. Even if we expand SS to include payments equal to 2X or 3X the poverty level for every man and woman in America over the age of 63????, that still will not be enough income to satisfy the lifestyle of every person, and those that werent satisfied with the standard of living that that amount of retirement income provides will still need to save money.
ReplyDeleteIOW there is no realistic possibility or scenario wherein saving for retirement will not and should not happen.
its far easier to legislate a bigger Govt deficit to offset the demand leakages than it would ever be to minimize financial savings of the electorate.
IOW there is no realistic possibility or scenario wherein saving for retirement will not and should not happen.
ReplyDeleteHow about when a significant portion of a population doesn't earn enough to save at all, let alone "enough for retirement"? Most of the rest who are able to save something are not able to save "enough for retirement" either. That brings up the question of what "enough" is. Subsistence, security, basic comforts, the lifestyle to which one is accustomed, keeping up with the standard of living?
There are good arguments to support putting retirement in the same bag as education and healthcare as a comparable right of every citizen in a developed economy under the rubric of equal opportunity and equitable share in the commonwealth. The social purpose of an economy is to create not merely subsistence but prosperity in terms of the prevailing standard of living. Sharing equitably in the standard of living is based not only on effective and efficient use of available resources to create prosperity but also distributive policy. In rich countries especially, it's a distribution issue, and markets under neoliberalism have shown themselves to be ill-suited to distributed prosperity in spite of resources and opportunities, because power and rent. Prosperity is distributed based on status, power and rent rather than social participation and contribution. In a society those that contribute little collect the most because rent, which includes externalities that capitalize gains and socialize losses.
This is not so much an economic issue as a social and political one. It won't be solved as long as the fiction that distribution is accord with just deserts remains in place, and this is due to marginalist economic ideology in large measure. There is good historical reason to conclude that marginalism was designed to dispense with the centrality of economic rents in classical economics, Marxism, and Georgism. Marginalism is a myth used to justify the use of socio-economic power to extract economic rents.
Marginalism assumes perfect competition, which is based on assuming symmetry, which assumes away economic power and therefore the ability to extract economic rent. That is a fictional world, not the real world. It is not even possible to achieve in a modern economy owing to the conditions for perfect competition. The attempt to achieve it by limiting the role of government as an economically significant institution is either stupid or interested.
This is fundamentally an institutional issue that politics enabled, and it can be changed politically. This is a key difference between neoliberalism and social democracy, for instance, let alone socialism.
The proper role of the govt in this case, like many others instances as well is to provide the universal baseline. Therefore the goal of SS payments should be to provide someone with no other source of income, some basic level of living standard. I submit that 2.5x the poverty rate per individual is perfectly reasonable ( ~$3000 per month per person) if you want a higher level of loving standard than that, you will have to save for it yourself.
ReplyDeleteAuburn,
ReplyDeleteBy your logic, we can't fund any other public policy either ... without previously taxing citizens to get the currency.
There is a better way, and we use it for EVERY other public policy except baseline elder pensions.
Where's the borderline between mandatory/free K-12 education, mandatory/free food/housing for parents, and mandatory/free food/housing for grandparents (so they can care for kids/grandkids, so they can make it to free/mandatory K-12 education)?
Biological evolution is premised on a race to fully invest in offspring. That's the best investment in known history. As long as parents/grandparents retain residual value for evolving offspring, those offspring will ALWAYS generate enough capabilities to keep elders around as long as is useful.
There's no evidence that it can be any other way. Hermits can't win by stockpiling assets. That experiment was concluded millennia ago. Hermits lost the adaptive race to social species. See the mention of tribal societies.
And you're missing my point completely. People are free to save or mis-invest all they want (no matter how bad the investment). It's just stupid & counterproductive to TAX their lifelong labor earnings as part of a political agreement to allow minimal Elder Pensions as a Public Policy. FICA taxes are simply a forced, bad (fake) investment, selectively applied.
Aubern,
ReplyDeleteCan you follow the straightforward network math here?
http://mikenormaneconomics.blogspot.com/2013/12/conflating-current-fiat-with-future.html
Beyond that, it's a simple question of directness and parsimony.
To paraphrase the wording of Hendy Ford & Thomas Edison:
If an aggregate can generate the fiat needed to offset nervous hoarding (demand leakages), then they can certainly also guarantee the fiat necessary to alleviate the need for EXCESSIVE hoarding.
At the end of the day, the consumption of the non-working elderly has to supported by transferring some portion of the output generated by the people and firms that actually produce it from those people to the non-working elderly.
ReplyDeleteIn our society, we don't literally transfer burgers, beans and gasoline canisters to the elderly. Rather, we give them the money to buy those things; that is, we bestow on them some share of purchasing power over the total national output. However, in an economy running at full capacity, we can't bestow increased purchasing power on some without decreasing the purchasing power of others. We could do that in two ways: we could simply add aggregate currency units to the economy by creating them and handing them to the elderly. That will dilute the purchasing power of the other currency units already in existence as prices increase, and redistribute that lost purchasing power to the elderly. Or we could simply tax away currency units from one part of the economy in amounts roughly equal to the amount given to the elderly. This also redistributes purchasing power but maintains price stability.
Another thing we can do, and do do, is to allow people to accumulate claims on future output in exchange for forgoing consumption in the present, and investing their wealth rather than consuming it. That expands the volume of future output.
Roger-
ReplyDeleteI would never say that FICA was necessary to "pay for" SS, because thats crazy talk I cant understand where you got the idea that I believe that or inferred that from.
Dan-
ReplyDeleteYour hypothetical full output scenario is highly unlikely. The entire world is effectively in the US supply chain, US domestic consumer demand would never outpace supply capacity at the levels a reasonable SS payment system as I described would provide, (~$3K per month per person). There is absolutely zero evidence of high, sustained consumer demand led inflation in the USA, at least since WWII. Furthermore, if we had reasonable control of the amount of private credit creation per year, then there would be even more room deficit spending. So basically, I have no idea what your talking about wrt inflation danger and universal retirement incomes.
So Auburn, your view is that we can always and at all times economically support the retirements of the elderly by just printing money and giving it to them, and increased aggregate supply will automatically appear to match the increased nominal demand, while keeping prices stable?
ReplyDeleteColor me skeptical.
Dan-
ReplyDeleteIts not my view Dan. Its an empirical fact that never in 70 post WWII years there has never been high sustained inflation caused by too much consumer demand. The burden is on you to explain how increasing SS payments a couple hundred billion dollars a year (2-3% of GDP) we would be consuming more than we are capable of producing or importing.
And yes, as a matter of fact, new supply does get created to feed increased demand. It happens every day all over the world. Its this system called market capitalism where these people called entrepreneurs start new businesses to satisfy unmet demand, and business owners invest and expand there companies to produce more to meet increasing sales.
I dont know, color me skeptical.
And yes, as a matter of fact, new supply does get created to feed increased demand. It happens every day all over the world.
ReplyDeleteBut I asked you to assume full capacity. What is the effect of monetary injections in those circumstances? One way or another it has to bring about a shift in consumption from some people to other people, or else a reduction in investment.
The classical view is that supply is the constraint. The Keynesian view is that demand is the constraint.
ReplyDeleteIf the US were experience strong demand on reaching full capacity, then investment in capital goods would continue to increase and H-2 visas and green cards would abound in order to meet the demand. The only closed economy is the global economy.
If there would ever be a global shortage in skilled workers, then two things will happen. First and immediately, ramping up of technological solutions to increase productivity, and secondly expansion of the educational system and training facilties to produce more of what is needed to grow.
The real constraint now is externalities, and more intense growth pressure would force adoption of ways of dealing with them either through market forces or regulation.
The problem with the global economy, which means most national economies, is over-supply and lagging demand. There's a long way to go before that changes.
Auburn,
ReplyDeletePerhaps we're both misreading each other. I'm specifically saying that there are too many incentives to unproductively increase aggregate demand leakages past the point of utility and into the realm of an excessive aggregate Output Gap ... and that FICA taxes add insult to injury.
If teamwork always trumps personal hoarding, it follows that too many incentives to personally hoard vs invest in coordination skills (teamwork) eventually backfires.
This topic is wrapped in the fallacy of scale. Something that is marginally good for individuals can be pushed past the limits of utility, by the scale of overuse alone.
Dan-
ReplyDeleteWhy dont we assume income equality while we are at it, or that people will stop using the dollar, or any other crazy unrealistic thing while we are at ti, because assuming full capacity is just as far fetched