The Social Contract?

[Kidlicious]

Originally posted by Imran Siddiqui

I don't think so.

Why don't you read Aggie's last post saying that economic efficiency is best described using HDI and not traditional economic measures.

Just because you aren't aware of how this all started doesn't mean everyone is.

Yeah, I read it. You may not understand it, but Aggie was explaining the difference between the HDI and measures of economic growth. He was not claiming that HDI is a measure of economic growth alone.

Measures of economic growth are chosen the same way.

Yeah, because there are people who think more consumption and investment is bad for a country. And I wasn't aware economists like Adam Smith and Ricardo were in the business to say their countries were the best in economics and then created the system to say that... in fact Smith was very critical of English policy.

Sorry, try again. And do better next time, hmm?

Hehe. Don't mess with my mad Smith skills. Smith was describing the wealth that was created in England as a result of the industrial revolution.

[Imran Siddiqui]

You may not understand it, but Aggie was explaining the difference between the HDI and measures of economic growth. He was not claiming that HDI is a measure of economic growth alone.

He was saying that in determining economic efficiency we should look to HDI. Look at the quoted portion of the post: "inefficent economies". The differences between HDI and economic growth & efficiency have no meaning when talking about what is more economically efficent!

mith was describing the wealth that was created in England as a result of the industrial revolution

And decrying the mercantalist philosophy which was embedded. He definetly wasn't holding up England as an example of perfection.

[Berzerker]

Organized hierarchical societies have survived for thousands of years, and if anything have only become stronger and more organized with time. Liberterians are sad outsiders without much hope.

Yup...and I take comfort in Jesus' words when he said the path to heaven is narrow

[Kidlicious]

Originally posted by Imran Siddiqui

You may not understand it, but Aggie was explaining the difference between the HDI and measures of economic growth. He was not claiming that HDI is a measure of economic growth alone.

He was saying that in determining economic efficiency we should look to HDI. Look at the quoted portion of the post: "inefficent economies". The differences between HDI and economic growth & efficiency have no meaning when talking about what is more economically efficent!

And so you go on arguing that HDI doesn't measure economic growth. Duh! No one was saying that it did. That's plenty clear in Agathon's posts as well as mine.

mith was describing the wealth that was created in England as a result of the industrial revolution

And decrying the mercantalist philosophy which was embedded. He definetly wasn't holding up England as an example of perfection.

And economist today decry all the crap that they do today. So what? They also make the value judgement that the accumulation of wealth is to be measured as to be like the wealthy nations. That's why they use GDP.

[Dinner]

Originally posted by Ned
There is a third alternative:

Grow the economy.

That is Bush's plan in major part. The other part is to hold the line on new spending.

Then he's doing a terrible job plus his record Budget deficits and his introduction of new social programs will drag down the economy in the long run. At half a trillion dollars of new debt each year we can't borrow at that rate for very long. Remember we never paid off the debt from the 80's and 90's instead the much celibrated "suplus" was just the end of the current account deficit. It meant we stopped borrowing money for one year before Bush went on his made spending spree and now we have all of our past debt plus the largest yearly budget deficit of any country in the history of the world.

This WILL drive up interest rates even if growth slows and it likely will lead to higher inflation. Low growth and high inflation will likely be Bush's economic legency. A return to stagflation.

[Dinner]

Originally posted by Kidicious
Measures of economic growth are chosen the same way.

No they are not. Economic satistics try very hard to remain objective and to remove the subjective. That's why they do so much math and crunching of numbers because in math you can arrive at a completely objective conclusion. They compare total economic out put, out put per person, total number of jobs, the number of unemployed... basically they work hard to find things with real numbers which can be counted and then compared thus minimizing the subjective and concentrating in the objective.

The UN's Human Development Index does the exact opposite. They high light the subjective and only then do they sprinkle in a bit of the objective in order to justify their conclusions.

[Dinner]

Originally posted by Imran Siddiqui
were in the business to say their countries were the best in economics and then created the system to say that... in fact Smith was very critical of English policy.

Smith was Scottish and he was critical of British, nee English, ploicy.


That's my Scottish half speaking.

[Dinner]

Originally posted by Kidicious
They also make the value judgement that the accumulation of wealth is to be measured as to be like the wealthy nations. That's why they use GDP.

Wrong again. They use GDP as one indicator among hundreds because it is a hard number which can be compared and calculated completely objectively without any individual economist injecting bias into the results.

They want to root out subjective bias by dealing with hard facts and calculatable figures as much as possible. That helps economists make sure they are comparing apples to apples.

[Sandman]

I'd like to see someone explain why life expectancy is subjective.

[Tingkai]

GDP measures output, not productivity or efficiency.

Hong Kong and Canada have similar GDP per capita, but most Hong Kong people work more than 50 hours a week compared to the average of about 40 hours in Canada.

So Canadians are more efficient than Hong Kongers in general terms, even though the GDPs are similar.

Originally posted by Oerdin
Wrong again. They use GDP as one indicator among hundreds because it is a hard number which can be compared and calculated completely objectively without any individual economist injecting bias into the results.

Yes and no.

Most economists acknowledge that the GDP is not a true picture of an economy. The statistics used to calculate it may be based on questionable information. The choice of what to count as economic activity is subjective. The numbers that get reported are sometimes the figment of a politician's imagination (see China).

The commonly used PPP is based on a subjective selection of prices. And comparisons between countries can be distorted by exchange rates that affect the people of a country to varying degrees (some countries a lot, other countries very little).

Conversely, the HDI is based on "hard" facts: # of doctors, # of university graduates, average age at death, # of births, etc.

To suggest that the HDI is pulled out of thin air is simply wrong.

[Sikander]

Originally posted by chegitz guevara

This isn't actually true. Savings still require an input of living labor to be realized. Without new workers, savings evaporate in a vacuumme of inflation, stock prices fall, etc. As well, with more people invovled in caring for the elderly, less people are involved in productive labor, which further narrows the amount of input into the system, public or private. Unless productivity increases massively, you still have the same problem.

Which I alluded to when I said unless we had a really bizarre ratio of productive / unproductive. The labor will come from other sectors of the economy or it will be imported if necessary. Capital markets as well aren't stuck simply investing in one currency / one country anymore. Even if people managed to live as long after they retired as the worked before they retired and we ended up in a 1 to 1 ratio of workers to non-workers we could get by. It simply doesn't take one full time worker to do all the little things that a retiree needs done for them, even in a nursing home environment.

Such a situation is of course unlikely, and in any even unsustainable for practicle reasons. With such an elderly population the population of the country will be dropping unless of course immigration is stepped up. As the oldies die off their nesteggs become available to improve the situations of their heirs, and / or to be invested. At the end of the era the population will be smaller and wealthier than before.

[Sikander]

Originally posted by Tingkai


You're making a lot of questionable assumptions. You assume that people can save assets for their retirement while they are working and that thiese assets will not suddenly disappear.

Yet, economic history shows this is unlikely. Before social security, people struggled to make ends meet. Many people never had a chance to save money.

And yet many people, myself included manage to not only pay our inflated social security taxes, but also save for retirement. I make only about 45k a year, but save 20% of that (pretax), and pay my SS, Medicare, property, income, sales and excise taxes out of the remainder. And I live in one of the more expensive spots in the U.S.

Originally posted by Tingkai
Edit: and what Japher said.

In today's world, people's retirement savings have been savaged by stock crashes, or in the recent past, by massive inflation.

As for demand for eldery care workers, just because there are many old people does not mean people will enter the field. If the elderly have limited savings then they can't pay high wages so the supply of workers may remain low despite the high demand.

These days people are not limited to investing their money in their own currency. When inflation rears up locally they will invest overseas to protect themselves, which will reduce inflationary pressures. As places with populations that are falling (the situation we are talking about) face downward pressures on their economies, it makes sense that some of that capital is going to go to places where economies are growing faster.

A politically acceptable system will probably consist of:

1) A welfare component whereby people who for whatever reason have failed to retain enough capital to care for themselves will be cared for at state expense adequately.

2) A pre-tax managed savings program where people will contribute to their own retirement account. This should probably be managed in many smallish chunks by professionals (to spread and minimize risk), and should be regulated closely in order to prevent abuse, theft and incompetence without being so completely controlled by politicos that the programs can be co-opted for short term political gain. Think along the lines of the federal reserve system.

[Tingkai]

Originally posted by Sikander
And yet many people, myself included manage to not only pay our inflated social security taxes, but also save for retirement. I make only about 45k a year, but save 20% of that (pretax), and pay my SS, Medicare, property, income, sales and excise taxes out of the remainder. And I live in one of the more expensive spots in the U.S.

Your annual savings (20% of pre-tax income) = $9,000

You spend and pay in taxes $36,000 a year.

The average salary in the US is something like $36,000.

So someone earning the average income, and living your lifestyle cannot save any money.

Now, that's just average income earners. All of those people earning below average incomes, we could be talking 50 - 100 million people, are getting by with far less than you, and probably not saving any money.

[Tingkai]

Originally posted by Sikander
These days people are not limited to investing their money in their own currency. When inflation rears up locally they will invest overseas to protect themselves, which will reduce inflationary pressures.

If inflation increases, people move money overseas, but that pushes down the value of the local currencies. If the economy is highly reliant on imports, inflation could increase.

Also, increased outflows of money, in and of itself, do not necessarily put downward pressure on inflation.

[Sikander]

Originally posted by Tingkai


Your annual savings (20% of pre-tax income) = $9,000

You spend and pay in taxes $36,000 a year.

The average salary in the US is something like $36,000.

So someone earning the average income, and living your lifestyle cannot save any money.

Now, that's just average income earners. All of those people earning below average incomes, we could be talking 50 - 100 million people, are getting by with far less than you, and probably not saving any money.

I live in an area that has about the same cost of living as Manhattan. I'm not sure what the average income is in Boulder, but I'm sure that it's a good deal more than what I make. My property taxes alone are $2,500. Which is a fancy way of saying that I could live as well on $36,000 in most of the rest of the country as I do on $45,000 here.

Now imagine if we were able to reduce the regressive SS taxes on the working poor. These taxes constitute a much higher percentage of the poor working man's paycheck than they do for the wealthy man's check. In my case the cost for these taxes is approx. $3,400, which alone accounts for almost 10% of the money that I don't save for retirement each year.

Most people should be able to retire comfortably enough to require no additional input from the rest of society. After all, my savings rate of 20% is a pretty high mark to set. I'll easily be worth more than $1,000,000 (in todays dollars assuming an average inflation rate of 3%) when I retire.

Some people aren't going to be able to put away enough to retire, of course. This is why there would have to be a welfare provision, perhaps amounting to 10% or so of the current SS tax. This would be a general fund expenditure (in my scheme at least) which would fall more heavily on those who make more money just as the income tax does, and would be adjusted as necessary to take into account the current conditions.

The hardest part of the implementation will be to build a bridge between the two systems. The fact that I am personally doing so easily while only barely making more than average should be a sign that it is doable. If I never receive a penny from SS I'll still be fine. The advantage will be that the government and the economy won't have to undergo constant {challenges to find money / temptations to waste money} as the demographics change over time.