Dependency Ratio

Jeremiah sees red whenever he reads about the dependency ratio. China must engineer a baby boom, so that they will have enough young workers to support a billion retirees. Europe must admit hordes of migrants, in hopes they will pay into the retirement fund. Economists talk about the dependency ratio as if it were an iron law of demographics, and it’s not. It is merely the artifact of a badly designed retirement program.

Despite the term “trust,” the Social Security system contains nothing that remotely resembles the common law trust. It is merely a system of taxation and appropriation sprinkled with trust terms – John Attarian

The dependency ratio only matters because Social Security, and other systems around the world, are passthru systems. Workers paying into it today are paying directly to those who have already retired. These retirees, in turn, have spent their working lives supporting someone else. The system needs at least two workers for every retiree, which means an ever-expanding workforce.

This is an absolutely insane proposition on which to base a retirement system. If the workforce actually doubled every generation, the population boom would overwhelm the planet. More likely, some generation soon will decide to stuff it. That will leave Jeremiah, having paid into the system all his life, holding the bag. It is literally a Ponzi scheme.

The correct design, of course, is to accumulate the contributions over time, so that the cohort drawing benefits in any given year is roughly the same cohort that paid in. This decouples the system from the vagaries of demographics. Whatever boom or bust in the workforce today, will be matched to the later demands of their retirement.


This design would also allow the fund to invest in high yielding projects over long timeframes. A national retirement program should be a big winner, not the bankrupt loser we have. For comparison, look at Singapore’s Temasek, the Ontario Teachers’ Pension Plan, or Berkshire Hathaway.

Far from being “worthless IOUs,” the investments held by the trust funds are backed by the full faith and credit of the U. S. Government – Social Security Administration

The solution for China, just starting down the slope with a 1:3 ratio, is to implement an accumulating system instead of a passthru one, and not plan on a workforce of 3 billion. For our Western welfare states, the old system must be phased out – so as not to strand Jeremiah – and replaced with a new one.

This means America will need political leaders who can handle a trillion dollar fund, and resist the temptation to pillage it for “emergencies.” Our track record is not promising.

See also: For the Last Time, the Social Security Trust Fund is Real

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Demonize Sloppy Accounting

The Economist describes Bernie Sanders’ candidacy as the biggest-ever student prank. It was certainly amusing watching his interview with Bill Maher, wherein both tried heroically to “undemonize” socialism. Regular readers know that Jeremiah takes a nuanced view of socialism, allowing for redistribution but debunking the statist agenda.

Mr. Maher made the point that Social Security, Medicare, et alia are “socialist” programs – and we like them, so socialism is groovy, right? Well, no. These programs have epic problems, which could be fixed using free market methods. See How to Control Health Costs, for example.


The important thing is to talk about specific policies, regardless of the demonic label, and this is where Sen. Sanders went badly wrong. He repeatedly used the charlatan’s formula, “we can pay for X by taxing Y,” where X is a free pony and Y is something we don’t understand. Like, we can pay for free college by taxing speculation on Wall Street. Yes, he actually said that. Cue cheers from the college kids (except the finance majors).

The right way to analyze this proposal is by splitting it, just as you would split a transaction in double entry accounting. If free college is a good idea, then the funding side can be considered separately. If taxing “speculation” is feasible, then we should do it anyway and reduce the deficit.

Free college might not be a good idea, if costs continue to rise and quality continues to fall, as they have been doing under the current subsidized (but not free) system. The likeliest outcome is that employers will respect a state college degree even less than they do today, if such a thing is possible. This is not to pick on free college, but merely to show that universal free stuff is not always a good idea.

Turning to the funding side, we should definitely tax those bad speculators on Wall Street. They’re the folks who make the price of heating oil go up in the winter. We should put a big fat Tobin Tax on them. What could go wrong?


Filed under Economy

Eating the Golden Goose

SwedenThe Mises Institute has a rundown on Swedish socialism. It’s a good example of why policy should be informed by the whole picture, and not tabloid stereotypes. The article shows that the Swedish economy had historically been very successful, and was harmed by its socialist policies.

It is a mistake to draw conclusions from any nation’s experience at a point in time, without considering the trend. Sweden’s past success carried it for many years after the fatal policies were implemented. The comments to the article are good, too, from many people with firsthand experience.

Nordic Socialism has frozen a once entrepreneurial and prosperous people in time.

This line about freezing the economy at a point in time is reminiscent of Jeremiah’s Freeze-Frame Economics. Socialists implicitly believe that the nation’s productive capacity will run on unchanged, and unimpeded by their redistribution program.

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Syrian Hypocrisy Roundup

Hungary is getting a lot of flak for closing its borders to Syrian refugees. Never mind that Austria closed its own border, creating the backup in Hungary. Never mind that Greece, which has a treaty obligation to control the European border, waves them through.

Although you [The Economist] clearly understand the difference between refugees and economic migrants, you continually elide that distinction – Simon Diggins

People have noticed that the migrants are mostly able-bodied young men. From a humanitarian perspective, this means that the women and children, the old and the weak – the people most in need of help – are abandoned in Syria.

Best practice is to settle refugees near home and temporarily, with the goal of resolving the crisis and keeping families together. Transplanting a nation’s labor force is a different project entirely, and of dubious humanitarian value.

For the effort, however, Angela Merkel was tipped for the Nobel Prize. Never mind that Turkey is already hosting 2.5 million refugees, and never mind that Europe has no common immigrations policy.  This prize offer, like the one inflicted on President Obama, is intended to be a bribe.


Finally, we note that our own inept policy in Syria (as in Libya) is what changed a harsh but stable dictatorship into an anarchic hellhole, causing the refugee crisis. It also ended decades of American dominance in region.

Speaking of Russia, has anyone noticed that the “axis of common sense” led by Hungary is all the old Warsaw Pact nations? Hmmm.

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That Old Time Religion

Camille Paglia says that an empire is ripe for the fall, right around the time its citizens gain total freedom of sexual expression. We may assume that hers is not a moral judgment, but an empirical one – correlation, not cause.

There [comes] a time when these fine gradations of gender identity—I’m a male trans doing this, etc.—this is a symbol of decadence, I’m sorry.

The correlation model holds up pretty well, for falling empires in general. Rome is a favorite example. Paglia adds Egypt and Babylon. America, as we have shown, started going to hell in the 1970s, and has declined pari passu as our society has become more liberal.

The reactionary right believes there is a causal link. America’s military and economic might depended on the “moral fabric” of our society, which was frayed by evils like abortion, gay marriage, and women’s rights. Plenty of evangelists take this line, along with moralizing enemies abroad.

Policies are being pursued that place on the same level a multi-child family and a same-sex partnership … This is the path to degradation. – Vladimir Putin

Jeremiah rejects all this, of course. We define morality in purely civic terms. It means going to work, paying taxes, serving your country, and being politically active. The sexually repressive definition, which goes by the name of “family values,” is spurious.

Here, then, is a scary thought. What if there is a causal link, and the link is repression? What if the kind of regimentation that produces good soldiers and engineers, also produces bigotry and discrimination? That would mean that a liberal society is always a weak society.

We disregarded the old institutions and the old values, including some we should have kept – like fortitude and self-reliance.

There are counterexamples, like northern Europe, but circumstantial evidence weighs heavily in favor of the reactionaries. We must understand that these people see “good old American values” as a package deal. Gays were in the closet, and we had 5% GDP growth.

Social liberals have made the same conflation. We disregarded the old institutions and the old values, including some we should have kept – like fortitude and self-reliance. Once again, we have arrived at the set theory definition of centrism. The right wants all of the old values back, including the bad ones, and the left wants none, overlooking the good ones.

America needs social norms and institutions that reinforce productive behavior. We need families (of any kind) that stick together, and kids that stick with math. People are saying that we will fail because we have forgotten our values. Let’s not fail.

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Filed under Center Field, Education

Best-Looking Nobel Laureate

rosalindfranklin2Slate perennially runs this piece about why a woman should receive the Nobel Prize for physics. It is easy to focus on the “societal” aspect, especially if you don’t understand the science.

Instead, we look at race and gender, and what kind of shirt the scientist is wearing. This allows social scolds, with no credentials, to set themselves up as judges.

Dr. Taylor’s apology … was like a scene from Mao’s Cultural Revolution when weeping intellectuals were forced to confess their crimes against the people. – Boris Johnson

A real controversy, if you must have one, might be whether neutrinos are more Nobel-worthy than dark matter or quantum entanglement. Here are some fun ways for non-participants to seek vicarious glory:

  • Nationalistic hubris about Olympic medals
  • Civic pride attached to a private sports franchise
  • Nationalistic hubris about Nobel Prizes for science
  • Race and gender identification of Nobel Prizes
  • Race identification of some silly award for pop music

Science is supposed to be a cooperative effort for the greater good of humanity, not a petty competition. The woman who cured malaria said, “[this] is a gift for the world’s people from traditional Chinese medicine.”

It would be nice if scientists received recognition (and funding) comparable to, say, movie stars. Jejune reporting like Slate’s shows us why that will never happen.

See also: Obama “Wins” Nobel Prize

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Save the Ta-Tas

October is breast cancer awareness month – as you must know, unless you are color blind. The Indiana Hoosiers went down to defeat yesterday, trimmed in the hot pink of the awareness campaign. The World Health Organization, however, is not a believer. See their chart, below. No cancer at all is in the top ten, let alone breast cancer.

WHO ChartAccording to the World Health Organization, cardiovascular disease is by far the world’s biggest killer. Stroke and heart disease account for three out of ten deaths. So, where is the black ribbon of heart attack month?

Of course, people respond emotionally to disease. If someone you know suffers from, say, Multiple Sclerosis, then for you that is the world’s worst disease. Public policy, however, must be informed by the numbers. Here is the WHO again:

Cause-of-death statistics help health authorities determine their focus for public health actions. A country where deaths from heart disease and diabetes rapidly rise over a period of a few years, for example, has a strong interest … to help prevent these illnesses.

The breast cancer campaign is a lot of fun. The pink ribbons are fun, the slogans are fun, and the ads feature … healthy breasts! If it were just about getting more women to have mammograms, it would all be good fun. Even early detection is discredited, however. See Our Feel Good War on Breast Cancer.

For every 2,000 women screened annually over 10 years, one life is prolonged but 10 healthy women are given diagnoses of breast cancer and unnecessarily treated, often with therapies that themselves have life-threatening side effects.

This emotional response to health policy is emblematic of what’s wrong with all policy in America today, from identity politics to economic policy. No one makes an effort to think critically. We just climb aboard the bandwagon with the ribbons and the celebrities.

See also: My Disease Isn’t a Cutesy Slogan

Update:  Now trending on Twitter is #NoBraDay, which embodies everything tacky and offensive about the campaign.

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