Why macro-economists never win the Nobel prize
Alvin Roth and Lloyd Shapley have won the Nobel Prize for economics. It's another kind of gane-theory award. You might as well award the Nobel prize for economics for showing the optimal strategy with two draws to come and a Kxxx badugi against one opponent who is drawing one
( Read more... )
To explain the source of the contradiction. I was actually writing about two different things, and failed to spot this.
1) Those who have retired on final salary schemes (many of whom do indeed receive an indexed increase every year) are almost certainly getting more out of the economy than their rentier status is generating in their pension funds. They are, therefore, net winners. If their pension funds were accumulating extra cash, and disbursing this elsewhere (e.g, if the companies operating them took pension holidays) then retired final salary scheme members would be net losers.
In addition, inflation is currently staying low (but higher than interest rate returns which are being artificially suppressed by QE) so the "absolute loss" to retired final salary scheme members (and indeed to those who bought annuities a few years ago) is less than for other members of society.
Finally, this is income without economic production. It's theoretically possible (and, in many cases, such as retired police officers, army generals, etc) to become economically productive while still cushioned with retirement income.
2) However, those on fixed incomes with assets are likely to be "big losers" over the next 10 years if and when QE has the effect of reducing the value of money. Here, the "big winners' will be those with no net assets at all or those with long-term debts fixed to the base rate. Real interest rates are likely to be negative for these people. meanwhile, QE continues to support asset prices.
PJ
Reply
Leave a comment