Do private pensions solve the “I hope I have money in old-age” problem better in a fundamental way? No.
Do they solve the “I want to pay more now to have more later” problem better? Probably in most systems.
Do they solve the “what is the fair value of grandpa’s pension this month” problem? Definitely yes.
If you want guarantees, the state can pull tricks to make you believe that the world is static… for a while. Eventually, reality will force the state to price pensions in line with demographics or suffer increasingly severe budget crises.
In the past, your children were your pension. This is a private system. When responsibility for old-age is distributed without accounting for monetary or demographic contribution, politicians can promise the moon. Stop eating the young.
You're mostly right, but production can only be stored for so long. If a young farmer produces more food than they consume, they can't save that specific food to eat when they retire. Likewise, investing in machinery to increase production later only goes so far without further reinvestment in the form of maintenance.
This time displacement of value service is exactly why the industry is financialized. Of course, the financialization creates a huge moral hazard and introduces middlemen that take more than they supply in many cases but the near universal demand for wealth preservation for old age is one of the few truly noble pursuits of finance. Now if only pension systems didn’t treat their beneficiaries as contemptible idiots who cannot be allowed to manage their own finances, the rampant corruption might stop.
investment is literally future labor expectations. and a risk.
in case of crisis the gov routinely starts bailouts and save the financial markets with interest rate operations or open market operations. those operations have deep re-distributive implications. don't think they are free.
Building a machine that does useful work is not "future labour". That kind of automatic production by machine is absolutely dominant today, none more so than in software.
If you redefine everything as deriving value from labor and labor alone, OK. Government intervention is not a given, is not universal, and its impact on labor isn’t unique.
There are other investment vehicles besides equity and other ways to take value from past into future that are neither garnishing the wages of children and grandchildren (most current state systems) nor investing in artificially inflated markets.
Just as a thought experiment, consider if all state pension contributions were just used to immediately purchase gold on the open market that was then put into a vault labelled with the year of birth of the contributor. Please explain how this (obviously naive) strategy is dependent on future labor. As far as I can tell, this system would be completely market-based and future labor would likely benefit as their “gold” might be cheaper as there would be less demographic demand.
> If you redefine everything as deriving value from labor and labor alone
"Alone" seems to be an unnecessary addition for the problem to exist.
And until the AI really can take all our jobs, it's not a redefinition, labour is one of several pillars alongside capital, though specifics vary depending on your school of economics: https://en.wikipedia.org/wiki/Factors_of_production
> Just as a thought experiment, consider if all state pension contributions were just used to immediately purchase gold on the open market that was then put into a vault labelled with the year of birth of the contributor. Please explain how this (obviously naive) strategy is dependent on future labor. As far as I can tell, this system would be completely market-based and future labor would likely benefit as their “gold” might be cheaper as there would be less demographic demand.
Consider this experiment on an island with just yourself.
You bury the gold. You reach pension age, and stop working. You dig up the gold. You now have gold. What do you spend it on? There's nobody offering services, regardless of how much you offer, therefore cost of goods, services, and other assets has a divide by zero error and inflation is asymptotically infinite.
Similar arguments work when the working population shrinks even if not becoming literally zero: unless technological improvements happen faster than the workforce shrinks, which is complex because tech affects different products at different rates, shrinking populations cause your model to get inflation even with gold as a currency.
In your simplification, you have removed everything that isn’t labor (i.e. demand for commodities) as well as labor. It is unsurprising that working to bury gold is a bad investment in this scenario. Instead, you should have invested in a farm and some robots. Sorry, there’s no free lunch if you can’t steal it from younger generations.
Edit: you’ve revised history and now added a bit about “similar arguments” and inflation. The answer is simple: yes, you might get back less real value than you put in. Yes, there might be inflation. This is fine and normal and would be preferable to the present system and is not dependent on future labor in the same way as direct redistribution. There are no guarantees. ‘Enforcing’ guarantees is a recipe for disaster as we are now seeing unfold.
> In your simplification, you have removed everything that isn’t labor (i.e. demand for commodities)
Incorrect, I'm definitely including demand in there.
I'm saying there's no supply.
It's n/0, not 0/0.
> Instead, you should have invested in a farm and some robots. Sorry, there’s no free lunch if you can’t steal it from younger generations.
(1) OK, but that's not what you were saying before
(2) (a) The AI to control those robots does not yet exist, (b) when that AI does exist, we can set the pension age to zero — doing so is called "UBI", and AI is often suggested as both a mechanism to enable it and as an economic transition requiring it.
> Edit: you’ve revised history and now added a bit about “similar arguments” and inflation.
It was intended for clarification, not to "revise history"; FWIW, the para in which you wrote this edit was not present when I clicked "reply".
> This is fine and normal and would be preferable to the present system and is not dependent on future labor in the same way as direct redistribution.
You asked "Please explain how this (obviously naive) strategy is dependent on future labor." — I believe I have demonstrated that it is.
You have demonstrated only that the thought experiment is dependent on the future market for a commodity and not on some future labor being exploited. Value in the future is dependent on demand and not on extraction from labor.
I demonstrated: without labour there is no value to be exchanged.
I did this by showing that your own suggested commodity asymptotically approaches buying zero of the available zero goods, services, and assets as the production of those also becomes zero.
Yes, a nonzero quantity of labor is necessary to avoid a pathological economy? This is not debated.
The question is how the future value is priced. The original assertion was that future value must come from labor and there is no difference between direct redistribution and private transactions (of which only rent extraction was given as an example). My counter is that there are alternatives that are neither taxation nor rent-seeking. In particular, the holding of assets to be later sold is a store of value that notably does not depend on future labor any more than any functioning economy depends on labor as an input.
We have pretty robust systems for deciding what (most) things are worth via supply and demand. Claiming that future value must be extracted from future labor is just false — a system with some backpressure on the payouts to retirees is much more sustainable than one without backpressure. In your simplified thought experiment, you must agree that there is no dependence on future labor as none exists! The pension is also not effective, of course, but that is to be expected — essentially no pension is effective when stranded on a desert island.
(To be clear, I don’t advocate storing gold by birth year as a practical way to run a pension scheme.)
I thought your basic argument was sound, but having read through the conversation twice, you might not be putting it in the best light. Your point seems to be that value can be extracted from capital and that is a substitute for value from labour. Seems good to me. But you then went with a gold-based example. Gold is money which is not really a productive form of capital because there is almost literally no way to extract value from gold. It is inert.
The value of gold is it makes the holder indistinguishable from someone who had enough resources to procure yea much gold. A useful signal in a healthy economy. But it was asking for the literal on-an-island example where there was no otherwise healthy economy. Since your argument depends on productive investment of capital IMO you should have hammered on that a bit more rather than trying to bring gold into the picture.
I'm seeing a lot of misconceptions about debt in this thread. It isn't possible to "burden" "unborn generations" with debt, they can always just renege on paying. The problem is what we see in the US, where the debt in financial markets is reflected in the real world by ... massive capital formation overseas in China. So the damage has already been done, unborn generations won't have access to the capital needed to live the lifestyle of their debtor parents. This is because the parents never built the capital to sustain their own lifestyle and eventually the capitalists will stop donating free stuff to debtors. IE, debt isn't a future problem to be paid back. The problem is always in the capital formation of the present and past. It is the future consequence of what capital got invested in, where & why. In that sense high debt can be good or bad depending on how much went in to capital formation and whether the capital is productive. But typically high debt matches to poor choices deploying capital.
I agree with you. The island simplification came later. If the economy is broken, gold is not a good investment. This doesn’t change the fact that it is also non-extractive of future labor, though, which was the purpose of the thought experiment.
The problem with productive assets or non-inert commodities in this thought experiment is that they are much more dynamic — inert commodity prices are much easier to reason about.
You are fundamentally correct about capital accumulation, though. If you want future value, you should accumulate something (dynamic or static) that is valuable in the future — extracting rents or expropriating labor via force in the future are not pro-social behaviors.
The future labour must be willing to accept that gold for their labour. And likely they would ask more of it as there is more demand for their labour and less supply.
It could be that as labour is constrained the inflation in price of labour is higher than investment gains.
Yes, it could be! Life is risky. Nothing is guaranteed. I’d rather have the market set the rate of redistribution than have it done by fiat in a completely unsustainable way.
> investment is literally future labor expectations. and a risk.
This is simply Marxist crap and outright untrue.
> in case of crisis the gov routinely starts bailouts and save the financial markets with interest rate operations or open market operations. those operations have deep re-distributive implications
This is a rather new phenomenon and not at all necessary for profitable private investment.
It's really completely irrelevant to the discussion.
Not only but also. Adam Smith counted labour this way, along with capital and natural resources.
Until we're all rendered unemployable by AI[0], there's still human labour doing stuff in the system — the bedrock foundation for all the rest.
[0] 2^(1 + roll a D4) years? I expect it to be relevant on the timescale of me reaching pension age, but between Scylla[1] and Charybdis[2] I'm not at all certain.
I contributed improved ipset support to this project. As far as I know, it’s one of the few off-the-shelf DNS servers that can insert result records into Linux ipsets to enable domain-based firewall policy. I run it on OpenWRT and use the ipset support to open the default drop firewall from my “smart” projector on my IoT subnet to NetFlix and YouTube. It sets the ipset entry expiry to the DNS TTL. Now, the only way for the machine to connect to the internet is to resolve a whitelisted domain and it can only access while the record is fresh. I haven’t encountered any issues so far. I take it that some Chinese users use this same functionality to selectively VPN domains to evade GFW.
To me the distinction is not important. It is possible to write programs that take too long to execute in non-Turing complete languages, and when a program hangs, you just terminate it. I think what people really want is for their configuration to remain simple, but not being Turing complete does not guarantee that. For RCL I added a limit on the number of evaluation steps, because without it some programs trap the fuzzer.
We agree. You don’t want universal computation in your configuration. Your “gas” approach is the right one and very weak computationally. I further posit that you don’t even want to offer gas fuelled TC and everyone would be happy with a provably total primitive recursive language fuelled by gas. Why? Accidents happen. I’d rather have my configuration tool tell me statically that some construct isn’t provably terminating than wait to find out later when someone imports my config snippet library and uses it in an unexpected way.
I recommend creating a pyclass over a struct that stores the converted data. Instantiate it once and then repeatedly call a function on it in a pymethods impl with the parameters that differ.
Do private pensions solve the “I hope I have money in old-age” problem better in a fundamental way? No.
Do they solve the “I want to pay more now to have more later” problem better? Probably in most systems.
Do they solve the “what is the fair value of grandpa’s pension this month” problem? Definitely yes.
If you want guarantees, the state can pull tricks to make you believe that the world is static… for a while. Eventually, reality will force the state to price pensions in line with demographics or suffer increasingly severe budget crises.
In the past, your children were your pension. This is a private system. When responsibility for old-age is distributed without accounting for monetary or demographic contribution, politicians can promise the moon. Stop eating the young.