Cato, you got this one wrong
Cato Institute is harping again on how we should privatize social security to increase its effectiveness.
They are correct, it would make it a more robust program.
They are incorrect, though, for the same reason Paul Krugman is incorrect so often. It doesn't matter if you're correct in theory, if the actual practice, when applied to humans, FAILS.
Keynesian deficit spending is correct in theory. In practice, you cannot ever stop and you end up blowing up the currency.
Saving for your own retirement is correct in theory. In practice, something like 80% of people loot their retirement money. It's like taking candy from a baby; it sits there looking attractive and you would enjoy the candy and so you take it. No harm done, you figure, the baby won't really mind, not compared to how much YOU would really enjoy it right this minute. The baby can get more candy someday.
This happens over and over and over and OVER again. I don't care if it ought NOT to happen, it's exactly what DOES happen. 20% of us view our excess labor as something to save for a day when we won't be able to produce enough labor to cover our needs. 20% of us see no need to ever produce excess labor at all, just work until you get enough to buy booze that night. 60% of us fall in the middle, and every one of them will access their 401(k) rather than ratchet down their lifestyle if they become unemployed at any point in their working lives, and MOST of them will access their 401(k) for no actual reason when they leave a job to go to another one.
20% of us save for our retirement. 1 in 5. The rest simply cannot be trusted with watching out for our own best interests.
Doesn't matter if it's unpalatable. It's true. Check out the studies in intertemporal choice. Actual people, ones who live on this planet, they just screw this up!
They are correct, it would make it a more robust program.
They are incorrect, though, for the same reason Paul Krugman is incorrect so often. It doesn't matter if you're correct in theory, if the actual practice, when applied to humans, FAILS.
Keynesian deficit spending is correct in theory. In practice, you cannot ever stop and you end up blowing up the currency.
Saving for your own retirement is correct in theory. In practice, something like 80% of people loot their retirement money. It's like taking candy from a baby; it sits there looking attractive and you would enjoy the candy and so you take it. No harm done, you figure, the baby won't really mind, not compared to how much YOU would really enjoy it right this minute. The baby can get more candy someday.
This happens over and over and over and OVER again. I don't care if it ought NOT to happen, it's exactly what DOES happen. 20% of us view our excess labor as something to save for a day when we won't be able to produce enough labor to cover our needs. 20% of us see no need to ever produce excess labor at all, just work until you get enough to buy booze that night. 60% of us fall in the middle, and every one of them will access their 401(k) rather than ratchet down their lifestyle if they become unemployed at any point in their working lives, and MOST of them will access their 401(k) for no actual reason when they leave a job to go to another one.
20% of us save for our retirement. 1 in 5. The rest simply cannot be trusted with watching out for our own best interests.
Doesn't matter if it's unpalatable. It's true. Check out the studies in intertemporal choice. Actual people, ones who live on this planet, they just screw this up!