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Adam Smith is flawed. His work assumes that people behave as rational decision makers who maximize their own welfare. This is incorrect, as we know from more recent work in behavioral psychology as well as through common sense and observation.
I have a degree in psychology particularly towards behavioral psychology, attended MBA school in economics (before I switched disciplines ) and read Adam Smith's original works. Do you think I am in a position to address this?
Rational expectations is "neo-classical" economics, not classical economics. Such a thing was never particularly proposed by Smith. That is 20th century theory.
This error is general throughout classical economics. That's why classical economics is so much more like philosophy or theology than science. Most real scientists find the discipline of economics to be primitive and unreliable. The simplest models don't work, because they are deduced from incorrect assumptions, and then held to dogmatically. Contrary evidence means nothing, because the models are not, and never were, evidence-based. There is no attempt to experiment or observe and then use the outcomes to refute yesterday's dogma.
It was in the classical era they called it political-economy and for good reason. So its a bit off to accuse them of that mischief of an apolitical economic concept. Funny you mention it seeing as I am very hostile to current economic dogma due to my behavioral psychological back ground where I was trained to do research by defining an action by results and reality and not expectations. I also read lots of history and it does not agree with economic mythologies. Of course Marx said the same in his point of primitive accumulation. What was the Norman primitive accumulation? Motte and Bailey castles .
Oh and then if you believe in what you just said, why did you make a stupid assumption about my educational back ground? I computed Pearson R and did split half reliability testing on field data. I did not make stupid assumptions. We called those a hypothesis.
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This is why you and others so schooled are so incapable of meaningful analysis. Classical economic theory is essentially useless in understanding today's economy.
Even more so you are not capable because you conflate neo-classical with classical economics. Classical economics was an opposition movement against landed gentry particularly the Physiocrats while Smith attacked Mercantilism aka "the companies". The neoclassical took and twisted his trade theory leaving out some rather very important contexts.
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As a result, we have evaluations like "Economists exist to make weather forecasters look good," and "An economist is someone with a Phi Beta Kappa key on one end of his watch chain and nothing on the other end (Harry Truman)." For some reason, the following assessment also comes to mind: "an economist is someone who is good with numbers but doesn't have enough personality to be an accountant."
Preaching to the choir but try again. I said classical, not neo-classical.
You don't need government involvement, except for safeguards.
Each State should set a minimum requirement based on the cost-of-living in that State, and then everyone is required to pay into the plan of their choice. The only thing that needs to be done is periodically review and adjust the minimum requirement to account for changes in the cost-of-living.
If you did that, then you wouldn't have the stupid thing where one person gets $1,200/month but due to the cost-of-living that $1,200 has a buying power of $1,800, while some other poor sap gets $1,200 and due to the cost-of-living it has all the buying power of $650.
The only role of the federal government would be granting the same protections that exist now --- for example your Social Security benefits cannot be assigned, meaning a creditor cannot take them, you can't lose your Social Security benefits in a divorce, or in a civil law suit, and so on.
And then because it represents future payments to the individual, you cannot allow them to borrow against it either, or use it as collateral (especially since that would defeat the whole purpose of having income insurance).
Wait until April.
I've always argued against privitizing Social Security so I'm trying to understand your points here.
I see some benefits from having the states run SS, but I'm not sure they outweigh the the administrative costs of 50 separate SS administrations. The SS Administration could easily implement could easily implement cost of living adjustments that would be based on smaller increments than state borders. Medicare does something similar with their payment system where they use a wage index. What would be the other advantages?
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Originally Posted by Mircea
Fidelity handles like 60%-65% of all 401(k) accounts that are through employers as part of a benefit plan. They publish an annual report, with some interesting commentary. For example, in 2012, the average 401(k) account was a measly $60,000. And then based on the number of account holders who borrowed against their 401(k) plans, they estimated that 21% of all 401(k) account holders have borrowed against their plans.
The point is that it would seem many people will be using Social Security to supplement their retirement plans.....or maybe I have that backwards....a lot of people will be using their retirement plans to supplement Social Security.
Anyway, the sooner you privatize it, the better off you'll be in the long run.
Eliminate the cap an raise the FICA tax rate and you'll be able to get all the Boomers through, but you'll cause mild harm to your economy in doing so. Raise FICA to the 10%-12% range (20%-24% for both employer and employees together) and you can get all of the Tweeners through and a good chunk of Generation X, but then you'll have moderate to severe economic damage. You could probably get all of Generation X through, but it won't be pretty.
Generation Y, forget it. They need to be transitioned to a private insurance plan.....yes, insurance, not 401(k) or any other bizarre investment scheme. Just plain old ordinary insurance.
What I'm looking at now, is determining what each 1% in FICA payroll taxes will cost you in terms of job losses.
When you look at the high tax States in Europe, you can't help but notice their employment to population ratios are very low, at least lower than the US. They generally range from 41% to 55%.
I noted that the three oil States -- The UK, the Netherlands and Norway have higher employment to population ratios -- UK 57% and the Netherlands and Norway 61% and 63% effectively, buy those countries also have higher numbers of government employees as a percentage of the population as well.
These schemes all revolve around the number of workers per beneficiary, wage levels and tax rates. You end up in a vicious cycle where raising the tax rate results in job losses which reduces the number of workers per beneficiary, which then necessitates higher tax rates, which cause more job losses reducing the number of workers per beneficiary, requiring raising taxes even higher to make up for lost or reduced revenues. If you want the good news, it eventually bottoms out, but that's of little consolation to those who don't have jobs.
Anyway, whatever you do, do not under any circumstances allow them to push Social Security off into some 401(k) or other investment type scheme.
You need two sources of retirement income, your personal savings and your employer-based package, and then you need insurance -- Social Security -- as an hedge against both of those to give you at total of three -- or at least one if the first two fail.
If everyone gets pushed into some kind of 401(k) or investment scheme, I can tell you exactly what will happen --- employers will lobby Congress to dump their plans and you'll end up with with only two sources of retirement income, your personal savings and your new government investment scheme without any insurance plan to back it up in the event one or both don't pan out.
Not on the band-wagon...
Mircea
Interesting points about Fidelity's 401(k) accounts. I agree with your comment about, "do not under any circumstances allow them to push Social Security off into some 401(k) or other investment type scheme."
I'm confused when you state, "You need two sources of retirement income, your personal savings and your employer-based package..." For most people, their employer-based package is their 401(k). Few people who work for private corporations and hospitals have defined benefit plan pensions today. What you state in your last paragraph has already happened to most people except for teachers and government employees.
For those saying that if they invested it themselves they would do better, look no further than 401K plans.
Those were set up exactly as you propose and they have failed.
We've even gone so far as lax the rules so that people can still get at that money as a "loan".
FICA today needs to be shored up because tomorrow's seniors won't have any retirement income by the looks of things. The older boomers are the last breed to live "beneath" their means and save while everyone else jumped on the DEBT WAGON (a/k/a credit).
That's reality folks, like it or not. FICA is your retirement annuity so you better fight to keep it and get it funded even if your just entering the workforce tomorrow.
I was wondering if anyone could tell me what shoring up financially means in a world of financial fraud. What will materially appear by FICA withholding? FICA withholding takes buying power away from labor. What will be purchased to support retirement infrastructure in lieu of leaving buying power in the hands of labor? What purchases are coming from "the lock box"?
I have a degree in psychology particularly towards behavioral psychology, attended MBA school in economics (before I switched disciplines ) and read Adam Smith's original works. Do you think I am in a position to address this?
If you don't know the difference between "higher" and "hire" in the context of labor economics, then you don't know much about anything in my estimation. Are you still a student?
Sucking money out of the SS fund just to make people feel richer was a huge error to begin with--along with the Rx Medicare bill the dumbest economic move of the W admin. If people want benefits when they retire they need to pay for them while they work. The end.
If you don't know the difference between "higher" and "hire" in the context of labor economics, then you don't know much about anything in my estimation. Are you still a student?
Deflection(n + 1). People whose arguments are rank with error frequently turn to spelling and punctuation in a desperate attempt to save face. You already scored your cheap point on the malapropism. No double dipping. Now you look for irrelevant demographical information while you accuse me of muddying the waters? Stick to the subject and stop deflecting and babbling like I asked. You have completely butchered the subject matter into bloody steaks as it is. Clean that up that slop before you do my editing.
Sucking money out of the SS fund just to make people feel richer was a huge error to begin with--along with the Rx Medicare bill the dumbest economic move of the W admin. If people want benefits when they retire they need to pay for them while they work. The end.
Deflection(n + 1). People whose arguments are rank with error frequently turn to spelling and punctuation in a desperate attempt to save face. You already scored your cheap point on the malapropism. No double dipping. Now you look for irrelevant demographical information while you accuse me of muddying the waters? Stick to the subject and stop deflecting and babbling like I asked. You have completely butchered the subject matter into bloody steaks as it is. Clean that up that slop before you do my editing.
No, it's not a matter of spelling. Rather, your error is a sure indicator that you don't read or write frequently in the field. If you did, you would be instinctively familiar with the difference between the two terms and would not make this kind of slip-up.
So I wonder: Are you still a student? Have you published any of your work? In what field? Why did you drop the MBA (often, people do this because they can't handle the quantitative aspects, even such as they are).
By the way, anyone with a background in statistical analysis recognizes immediately that computing a coefficient of linear correlation is nothing at all special, which leads me to ask where along the way did you learn your math and statistics? Surely not in a psychology program or in an MBA (presumably unfinished).
More generally, where are we going with this discussion? Seems to be quite unfocused (witness your comments about Marx and the Norman primitive accumulation; castles? OK).
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