Brian Caplan tweeted that the GMU prof was wrong and the MIT prof was right. Is that your personal view? I am not impressed by the futuristic MIT gadgets, as they won’-t necessary correspond to people’-s needs. Hence, I don’-t buy their argument that the real problem is not being capable of “-keeping up”- with the pace of technology. We don’-t care about technology we don’-t need.
I don’t think Cowen failed to appreciate these points, but explaining the rate-of-change in productivity, mean income, asset returns, etc. in terms of a technological slowdown is still mainly a “story” that we are telling ourselves. We could also tell a story in terms of demographic structure and population growth. Both narratives are plausible, but difficult to show rigorously. Regardless of how we try to explain what has happened, it is uncontroversial that it is becoming harder to retire, and that fact has a large bearing on quality of life. It is difficult to quantify the gains from radio to television to color TV to Youtube on IPhone (where one might take pleasure in watching cigarette commercials from the ’60s and ’70s), but having to work or not seems a lot more straightforward, and stagnation on that front is more tangible. Of course, you will probably live longer in retirement, but can you afford that longevity? That is the more concrete issue here.
His post, “-The Myth of the Social Security Shortfall”-, here, but if you don’-t want to defer thinking, read Mish Shedlock on pension underfunding instead. Yes, taxes will have to go up, but it’-s not as though sunsetting the Bush cuts and tacking on a couple percent here or there will stem the entitlement spiral, of which social security is a single piece. Thoma is quoting Michael Hiltzik, whose message, when you strip away the authoritative tone is basically, “-don’-t worry so much, it’-s in the future and stuff.”- That strategy hasn’-t worked out so far.
Deferral, abetted by private and public conflicts of interest, is the essence of the problem and is at the root of both the corporate and sovereign credit crises. Now, it’-s one thing when you have an impaired balance sheet propped up by good cash flow, but there are reasons to believe that prospective growth and public income will also be lacking relative to the 20th century. These reasons of course are swept under the rug by at least one liberal economist. Paul Krugman chides someone for rambling on about demographics one day, and tells us we are turning Japanese the next. Why are we turning Japanese? Krugman sees this, but thinks we must defer that issue to deal with unemployment and deflation. To what extent, however, are unemployment, deflation, and the series of booms and busts over the last 30 years symptoms of demographics? If that’-s the case, if pension rate of return assumptions are off for this or other reasons, things could get late early.
– out of your titles if you aren’-t going to have any real discussion. If everything is quoted, the quotes lose their meaning and everything is implicitly endorsed.