Here's a short little powerful note by an AEI-affiliated econ professor at Penn
Ultimately it does not matter how a society structures its redistribution between workers and retirees, those who produce value and those who consume itUltimately it does not matter how a society structures its redistribution between workers and retirees, those who produce value and those who consume it
I've thought about these themes a good bit -- I'm not just an angry boomer hater... #867043 -- especially in an article series for The Daily Economy (here and here and here), #830458
Many economists forget that the first-order problem of an aging society, one with high life expectancy and low fertility, is how to redistribute income from workers to retirees. How fast output grows is, surprisingly enough, the lesser question.
If you have roughly as many retirees as workers, what each worker produces must be split in two, one part for the worker, one part for the retiree. At a basic level, it does not matter whether we do it through taxes, as in a pay-as-you-go social security system, or through capital income, as in a fully funded one. Workers will not be happy to see half of their income taken away, whatever the absolute level of that income.
"This redistribution will poison the political system and lead, with high probability, to dysfunctional policies.""This redistribution will poison the political system and lead, with high probability, to dysfunctional policies."
Yes, that's why I'm preempting it/doubling down on it by calling for WIDESPREAD SCALPING OF BOOMERS. Very neat, very fair.
This redistribution will poison the political system and lead, with high probability, to dysfunctional policies. We are already seeing it across Europe in the fights over retirement benefits. And much of the American unhappiness about the profits of large corporations, largely owned by the old, is the same conflict, only in the fetishized form of equity ownership.
Fernández-Villaverde follows up:
I am always amazed at how politically naive about human nature those in the more libertarian camp are on this simple point
Yup. I do wonder if this is at least a little bit fixed on a Bitcoin standard, where we can just hold money to move value (=purchasing power/command over economic goods) into the future. In a largely deflationary global economy, etc: by saving, I take value (and price level) out of the economy, and by dissaving I bring it back in?
Tldr: we need to fuck the boomers. Like seriously screw them over. Rug them (not the spammers!), take away their toys etc.
No it mustn't? Workers earn money, retirees spend money they had earned while working. What is this splitting of production about? Something seems to be getting overcomplicated to justify statism.
I hate how Keynesianism poisoned our discourse by elevating personal problems to societal problems. How about everyone just get a job and pay for their own shit? That solves age, race, gender, everything. Only enemies of civilization would advocate for anything else.
no, think through this properly.
And ignore money, because it's just a veil for real goods and services #737272, #839329
If one segment of society makes and creates everything -- let's call them "the labor force" -- and another segment of society consumes (kids, retired, out of labor force; but for now just think of retired), then the surplus of production (=what labor force creates) has to somehow be shared with those who only consumed.
Ergo, the dude's point.
That's a market calculation that requires no public policy solution.
The segments of society you outlined are only snapshots of a moment in time. Money solves the problem because it allows the worker to transfer the value he produced while he was working to himself when he retires. That's the redistribution. There's no need for a third party to take money from working age people and micromanage the flow of currency ahead of its voluntary market-appointed time.
If we're talking about disabled people who might go their entire lives as net consumers through no fault of their own, literally just go to a Bitcoin meetup and beg. That's the healthiest way to manage redistribution for people in desperate need, because we are 1,000x more generous and more efficient than the state. But statist programs target us as their source of revenue, so money that could have actually helped someone gets wasted on political activism.
I disagree with this point:
Bitcoin is commodity money. It is a real good, not a receivable, and holding it is a real service because you're doing the mental labor of making a wise investment while delaying consumption. The structure of the monetary policy and the lack of a viable alternative guarantees that people will be willing to trade for it so we can ignore the theoretical abstraction that says maybe someday nobody will want it and then it will be worth nothing. Being aware of this, at this stage of adoption, is effectively work and that's why Bitcoin "gains" are deserved compensation for being smart and productive.
no it doesn't. If you can't grasp this I don't have the time or energy to explain it to you.
Try sketching up the various people over time, and goods vs asset market -- where, for simplicity, the only asset is money. This is basic monetary economics 101.
At the end of the day, you're still exchanging work <-> pieces of paper (or in our bitcoin case, sats).
It does though.
I make a sandwhich and earn 10 sats. When I retire I trade 10 sats for someone else to make me sandwhich. I produced 10 sats worth of value, now I'm consuming 10 sats worth of value. There's no other redistribution necessary.
Unless we're concerned with everyone trying to retire at the same time? If there's an imbalance there it's probably because the state got involved in family planning.
OK, my short-sighted friend. tl;dr = real stuff comes from real production, regardless of the money we're using. If there's (increasingly) nobody around to create, the consumers' money will just fight over whatever little stuff there is. Prices bid up, money's value down, and we still redistributed value, only differently
Before I spend 45 minutes or whatever carefully sketching out a simple overlapping generations model, real-vs-nominal, and what happens when the age distribution gets top-heavy (fucksake, @Undisciplined is gonna make me do it, I'm sure): think through what happens in your example
My friend used to quip: at the end of the day you're still handing over Apple stocks for apples — only the relative exchange rate changes
But that kind of demographic crisis would only occur outside of a Bitcoin standard, so it is fundamentally a currency problem. Without statism and war, populations stabilize to a point where you wouldn't even think to consider the risk of such a problem.
In that situation, you just have to wait it out and cycle through famine until the debts due to the legacy system are cleared.
nice cop-out, defeding an incorrect statement with a handwavy, unprovable hypothesis. I don't particularly disagree, but do you honestly think our demographic stagnation/future decline is due to statism and war??
Ironically, libertarians tend to be naive on their own Public Choice insights.
very ironic indeed. I kindly thank Mr. professor for this observation
The thing is though that this question is much less answerable by economics and is more in the realm of moral philosophy.
hard to argue with that tbh. people care way more about who pays than the model itself
In fairness to the boomers they were already cooked by the prior generation... wasn't they who whacked Kennedy and installed LBJ
who wacked Kennedy???
The Zapruder film shows the driver take the finishing shot, the overall plot links back to the CIA / Allen Dulles
Point remains the deep state and broken money predates the boomies
https://twiiit.com/JesusFerna7026/status/2078848069970350169
kinda feels like every solution just ends up becoming a political fight.