pensions and natality

Francois-Rene Rideau
Thu, 15 Apr 1999 02:28:17 +0200

Dear Dr Quinn,
   I'm pleased that you join the debate.

> Well I am an American economist and I seem to agree with my French
> economist colleague.
It rather seems to me that you take a stance very opposite to theirs;
or at least very opposite to the very roots of the french social system
that most of them take for granted: state-management of pensions.

My analysis tried to be independent from any kind of (re)distribution system,
and focused on the _cinematics_ of riches rather than their _dynamics_
(about which I fully agree with you): whatever you do, people cannot spend
more than is available, and what is available is ultimately what people

> The thing utterly ignored by my friend Fare is the effect of
> the source and use of wealth on the relative quantities of
> production and consumption.  This is the same error made by
> supporters of communism.
I don't ignore this effect as such. Actually, I republish on my web site an
excellent paper by Turgot (1766, in french, translations must roam on the
web), that explains the effect you talk about in an extremely clear way.
However, that effect was essentially irrelevant to my previous argument,
that remains valid independently from the sources and uses of wealth.

Now, it is true that the very foundations of the french redistribution
system DO ignore this effect. And so do the economists that I'm criticizing:
their final conclusion is that to solve our pension problem, the only
measure is to promote birth of future pension-payers by having the state
levy taxes and redistribute it to parents.

My conclusion was that such measures could not be effective,
because independently from their possible _dynamic_ effect on demography
and economy (which I'm convinced are opposite to the advertised one),
do not change positively change the essential _static_ economic parameter
of equilibrium between production and consumption of wealth,
that is at stake in the pension problem: if we want to consume more
(in this case, by living longer), then we must also produce more
(by working longer and/or better).

> In other words, if I have to pay taxes to support a bunch of
> people I don't know nor care about, I will adjust my behavior
> with one of my goals being minimization of taxes paid. [...]
> We see the results [of this deresponsibilization]
> in America.  Our Social Security "system" is a huge fraud.

Deresponsibilization is indeed a great problem with all centrally managed
economies (whether country-wide or company-wide). Frédéric Bastiat,
in the middle of nineteenth century, already denounced the dangers
of replacing mutual funds with taxes.
I'm very conscious of this problem, and have recently denounced
the effects of the deresponsibilization induced by software hoarding
on computer technology:

> So how are the elderly to be supported otherwise?  By their own
> kin.  Ultimately their children and grandchildren.  If the
> children are economically productive, they will be able to provide
> the support needed.
In other words, they will be _self-supported_, which brings back
responsibilization and economic feedback: their own savings,
subscription to mutual funds, and breeding of a elder-respectful
new generation, are all ways for people to insure the safety
of their old days such that individual responsibility and feedback
be maintained.

> As a father I am now aware of how good it
> is for kids to have their grandparents around.  So these older
> people will return value to their families (unless perhaps their
> health is totally broken.)  In other words, there is a benefit
> to family togetherness that perhaps does not come through in
> certain economic analyses but is partially explainable by
> normal incentive-based analysis.
I fully agree your remarks. By either individual incentive analyses,
or more synthetic memetic system coevolution theories, there is
a definite justification towards the "traditional" kind of family
with close solidarity between members, love towards the younger,
and respect towards the elder.

> What if there are too many children and the population explodes?
> That's what Malthus asked and his theories have not yet been
> supported by observable evidence.
Well, the essential thing that Malthus did wrong was underevaluate
technical progress. He measured a linear progress in production techniques
and assumed that natural resources were essentially decreasing.
>From there, he concluded that birth control (natural or artificial)
was a necessity to maintain the equilibrium.
We now know that the fantastic progress of mankind during the modern times
was due essentially to technical progress and the exploitation of ever new
resources. There has always been a limit to known exploitable resources,
yet so far mankind has always been able to replace spent resources
(in quantity, though not in quality) with new ones.

Some people will argue that however high, there is a limit to earthly
resources, anyway, so that we must prepare to live in a world in recession
rather than expansion. Other people will bring quite interesting arguments
according there is no reason to doubt in the sustainability of technical
progress as far as we can foretell, so that there is no doomsday in sight,
and we should focus on much more important problems: see J. McCarthy's FAQ
on sustainability of progress, around his homepage at
Time will tell.

Although I think you saw disagreement between us where there wasn't,
I thank you for giving me the opportunity to develop more themes
pertaining to the cybernethics mailing-list: static vs dynamic study
of system evolution, individual responsibility as a way of establishing
the feedback necessary to dynamic system stability, the adverse effects of
deresponsibilization, savings and mutualization as risk insurance in time
and space, traditional family as a cybernetical extension to one self,
productivity as a major economical factor, and technical progress as the
key to sustaining economic welfare.

[ "Faré" | VN: Уng-Vû Bân | Join the TUNES project!  ]
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Proles of the 1800's in Europe and of the 1950's in Asia and in Africa,
are not former rich people ruined by capitalism. One could say they are
former dead people who do not die anymore. Their existence stems from
the suppression of famines by the progress of production techniques.
	-- Jean Fourastié, Open Letter to Four Billion Human Beings