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That's basically why Social Security was first introduced, and I think it still makes some sense. Looking at it in the other direction, it's more or less a fact that a large proportion of people won't save for retirement. Therefore, you have three choices: 1) a bunch of destitute and possibly homeless old people; 2) some sort of after-the-fact spending to provide emergency services/shelter/care for destitute elderly; or 3) some sort of mandatory pension system to make sure elderly don't become destitute in the first place.

People generally find #1 unpalatable, so the practical choices are #2 versus #3: do we set up some sort of general pension system to make sure elderly make at least a bare minimum income to stay off the streets (currently $20k/yr or so), or do we instead set aside money to spend on housing and caring for destitute elderly, e.g. through government-run nursing homes?

We also have government run nursing homes and plenty of destitute old people live in them. But, even for a selfish person SS is not exactly a terrible idea. Consider, pensions and SS have a huge benefit over traditional forms of investing.

Imagine setting one up a pension for a group of savvy investors. As you near retirement you pool your money with 10,000 other people and all split the dividend each month (based on what % you put in). As people start to die off there is a smaller pool of receptions who keep getting a larger monthly check. Granted you lose the ability to give money to your spouse/children when you die, but you don't need to worry about outliving your savings. (Assuming the fund is not mismanaged etc.)

PS: There are many problems with SS, but when you consider it's inflation adjusted it represents a vary large and vary safe investment. (Run a Monte Carlo Analysis assuming you are only willing to accept a 1% risk of running out of money at 100 and a safe retirement takes a huge nest egg.)

That structure is often called a Tontine. It's illegal, because after a while it's basically a massive monetary reward for offing your fellow investors.

Hah, just watched the movie Charade last night where exactly this happens.

Yep, that's a major bug with the simple implementation.

The simple solution is to cap the benefit and and use a large enough pool that no single death ever makes a big difference on it's own. Which gives you something like "Long Term Care Insurance" is basic a bet that you will live long enough to need it, which is subsidized by those who don't. The benefit is also fairly small so a reasonably large company is not going to try and collect.

> Therefore, you have three choices:

You missed the one that was used for all of human history:

4. Family ties, raise your kids well and establish that they should support you in old age. Bonus: Also gives an incentive to keep strong, healthy families together.

Downside: using children as your old age insurance policy gives an incentive to have as many children as possible within your means on an already overpopulated planet.

> ...as many children as possible within your means on an already overpopulated planet.

I did some casual research on this - long story short, I think the planet will support at least around 600 billion people fine. You need to speed up nitrogen cycles for food, which we can already do. Energy is the big bottleneck right now, but fusion or whatever comes afterwards will likely make energy almost-free. Further out, molecular engineering and nanotechnology looks incredibly promising...

...anyway, the world isn't really so densely populated. I couldn't find the exact paper while googling, but you could fit all of the world's population in a fairly small state (Maine?) with the same population density as present-day Paris.

More people means more great people, more innovation, more good stuff happening faster. Nitrogen cycles, food, pollution are the bottlenecks. But population 600 billion should be fine and the world will be prosperous if we get there.

Advocating the past's policies with the future's hoped for or even expected technology is not really what I'd call responsible. At the current time we're not close to having the technology that would let a metropolis the density of Paris feed itself without depending on a comparatively sparsely populated area at least thrice again the size.

That position is a reasonable one and I respect it, but I disagree. Necessity is the mother of invention, and technology is usually developed in response to need. Thus, "don't expand until the technology is there" is a bit of a catch-22: Population growth will drive demand and funding for new ways to solve the challenges that come with it.

Also, population 600 billion doesn't happen overnight - we're almost certainly in good shape for the next 50-100 years, I'd argue the decline in population in some Western countries is a much greater threat to prosperity, health, and happiness than any increase in population could be.

> Necessity is the mother of invention, and technology is usually developed in response to need.

This is some position I respect but disagree with. For one reason: it is pure observation bias.

Those who fail to invent at the face of Necessity take the hit, hunker down and die in anonymity. On the other hand, the ones who prevail have their names written in history as legendary inventors and innovators. Rinse a repeat over a couple thousand years and everybody knows that "Necessity is the mother of invention, and technology is usually developed in response to need".

Malthus is highly misunderstood as having stated that doom in unavoidable. What he actually said is that unconstrained population growth will eventually be forcibly constrained by hard physical and ecologic limits. I'd rather have rational planning or cultural taboos limit the max human population in any given region.

I don't disagree with invention and creativity and a role of a problem in motivating the two -- I can't, really, having ended up writing a couple of odes to it on HN in the past.

However, I prefer my necessities not to involve potential humanitarian catastrophes. The steam engine, the rapid advancement of powered flight technology, and Google were all created in response to a need, but none of these needs were of the "young people will starve and old people will be left desolate if we don't come up with something" variety.

We're not short on need for cheaper energy right now; I don't think we ever were. (More efficient agriculture is a slightly more complex subject due to political reasons.) Maybe someday we will be at a point where we can safely adopt a policy of encouraging lots of children, but right now it seems a little irresponsible.

I don't want a planet where most of its natural resources are dedicated to maintaining a massive population. I'd much rather have a world where human influence is strong within its own sphere but leaves most ecosystems as pristine as possible.

Greater human population is antithetical to biodiversity and low pollution. That should probably be a greater ethical imperative than maximizing population numbers.

I would love to see a blog post on this.

There's another historical alternative:

5. When an old person becomes useless, drug him senseless and throw him off a cliff.

Allegedly this was customary among the ancient Sardinians in pre-Roman times. The drug they used on the elderly before killing them induced a sinister grimace, giving root to the expression "sardonic grin":

http://www.telegraph.co.uk/science/science-news/5344257/Myst...

Facetiousness aside, that's a neat anecdote, but the point stands. Original commentor said there were three options - destitute and possibly homeless old people, after the fact emergency spending, or some sort of pension system. That ignores family/community ties, which is in my opinion a much better solution. You can disagree, but not even presenting it as an option is either being disingenuous or missing a really obvious potential solution.

The government can't mandate interdependent families and communities. Those either happen or they don't. They can mandate social security.

Interestingly, the government can also mandate compulsory euthanasia for the elderly.

> Interestingly, the government can also mandate compulsory euthanasia for the elderly.

I can't see it happening with short-term elections to office.

I guess I tend to group that with the other missing fourth option, "hope everyone saves for retirement". I agree that yes, ideally, people would all find some way to take care of themselves for retirement, whether out of savings, or with family, or some other method. But empirically, in modern societies a lot of elderly end up penniless and alone, so the question is what we do about that.

In Thomas Paine's Agrarian Justice, he uses similar logic was well (in part; his main argument is that improving land doesn't entitle you to the land, but only to the improvement, and that a reasonable land-tax can address this). He also anticipates Malthus by considering a future steady-state population.

http://www.thomaspaine.org/Archives/agjst.html

I'm curious why you'd be eager to trust the government with this big responsibility when you used a government-caused period of hyperinflation as an example of why this is hard for people to succeed at on their own.

Government provision does not have to be based upon savings. In its simplest form it is just an obligation (of the current working generation towards the elderly), and if this is not tied to monetary figures then it is much less vulnerable to financial turmoil and trickery.

What happens when there are many more elderly than current working people?

The article suggested planning for 30 years in retirement. If that follows a working life of 40 years which follows a childhood of 25 years, then each working person is supporting 1.5 dependents. Assuming a steady-state population; if you have a baby boom followed by a baby bust followed by another baby boom, it gets worse. That's a big obligation.

I find it useful to remember that finance can only solve problems to the extent that it changes what people do in the real world. What is retirement savings, but a way for older people to convince younger people to do work for them? Money is a persuasive way of doing that, but regardless it's older people depending on younger people to take care of them.

Compare these scenarios: - people save for retirement, so many old people are have money to spend. Lots of young people go into occupations that help old people because that's where the money is. - the government provides pensions, so many old people have money to spend. Lots of young people go into occupations that help old people because that's where the money is.

Either way, the real-world effect is the work that young people do.

There are always risks and they can't be wished away. The government could change the pension plan. (But note that in the U.S, social security is very well defended in Congress, and more older voters makes it more secure.) Or the price of services that old people need could go up because there are fewer workers or because they dislike the work.

As an individual, having above-average savings helps, but by definition everyone can't be above-average. If all retirees double their savings and supply is fixed then inflation is inevitable. To a first approximation the only real-world solutions are to increase the number of workers (immigration or increased birth rate) or to to increase productivity so fewer younger workers are needed.

As has already been said, private finance simply does not fix this problem, although it does increase the scope for the working generation to avoid their obligations - through stock market crashes and bouts of inflation.

In fact that is pretty much what all such crashes are - savers losing out to the producers. Although not widely acknowledged it is practically policy to promise (in both the state & private sector) gravity defying returns and then let savers down with short sharp shocks. The actuarial assumptions for pensions are returns in the region of 6-8%. The only way savings on average can reach these returns is if there is amortized monetary inflation of 6-8% or 4-6% in real terms if you generously give 2% for productivity. This is of course significantly more than the modal average inflation rate, whence the need for 'corrections'.

The unaddressed issues are do pensions perform better than worse than average (consider during the boom private equity was routinely making 20% returns leaving less on the table for everyone else)? And what about borrowers who borrow not to invest, but because of urgency (not a significant amount of money after houses became state backed investments, which leaves gamblers, current accounts and cash in circulation to try to balance that see-saw).

It's not so much that I trust the government a lot, it's just the best option when looking on a large scale.

Governments, and other people in general, can always screw you over. By "trusting" the government, you are just cutting out the middle men who give you a false sense of security and imperviousness to other people's actions and take a commission.

The problem with having the government do it is that they can be collectively less responsible. Think about it: instead of having a system you trust, you need to have a system that 51% of the voting public trusts. When that voting public consists disproportionately of old people, that means a system that pays out more than it can afford to, and redistributes income from young to old.

In other words, you get what we've got, which doesn't even work.

But many of those same factors affect public pensions. The existence of defined benefit schemes, as opposed to defined contribution schemes, itself causes economic problems, including the bankruptcy of large firms. While there is risk in any investment, defined benefit simply imagines that it doesn't exist. Even traditional Ponzi scheme style public pensions are susceptible to drops in population growth.

Any plan that is not fully funded, in cash, is not a pension - it's a bet - a bet that someone (else), somewhere, sometime, will assume the risk if it goes south. Those who offer "public" pensions are the worst offenders - everyone knows the taxpayer will be on the hook for it - it's easy to promise the world to a public employee when it's not coming out of a bottom line.

Then again, a plan fully funded in cash is a bet that you have enough money, skill, and/or luck to keep its real value, after any inflatiatory and investment influences, equal to or above what you will need when you retire.

We'll the alternative to personal responsibility (that is, being personally responsible for your own retirement funds) is a massive ponzi scheme.

There is no chance that people could be "forced to save" as that has always turned into another tax in every place it's been implemented.

And who wants to retire? I'll retire when I'm dead, until then I'm gonna be busy doing stuff(work or otherwise). And I'm saying this as someone who's got no money.

And governments are not good at this sort of thing. Take the Irish government for example(my home country), ran a massive surplus for years during the boom, saved a nice little nest egg. It was supposed to be for public pensions(actually not supposed to, it WAS).

Then in 2008 they gave it to the banks. THEY GAVE IT TO THE BANKS!!!!!

edit: I concede that not everyone wants to work until they're in the grave.

> I'll retire when I'm dead

Unless you die prematurely, no... You'll retire when you're too tired to do stuff, or when your health doesn't allow you to, or when you become unable to care for yourself in many other ways. Mostly it's not up to you when you stop "doing stuff" - even less if it's about earning money (who would hire an able and willing to work 60-70-yo these days? - realistically).

I accept that not everyone else has the same outlook as me, but I plan to do the sustainable thing.

What old people who can't do anything anymore have done for millenia before social security and "retirement". Have my children take care of me.

Well that's plan B, plan A is to become very wealthy from the things I create and live off that.

And who said someone has to hire me? There are plenty of people here who work for themselves (or at least their customers). With webapps they don't even know what you look like, you could be a 90 year old dressed as Gandalf and it wouldn't matter as long as the sites good.

You're assuming that your children will be able to, will be wealthy enough to, will be willing to, will be alive long enough to do that. Also you're assuming that you will be mentally capable of working in your 60's. That's a lot of assumptions which I wouldn't be comfortable with in my life.

Not trying to say everything bad will happen, but that's a lot of assumptions... at some points you might be left with no support from yourself or family - and a lot of people find themselves in situations like that.

I was with you until the last bit, that's pure bullshit.

The bank bailout is really a bailout of people who took on mortgages they couldn't afford. People like your neighbours. Maybe even YOU. The alternative was to let nature take it's course: call in a million mortgages. Voters wouldn't like that...

No sorry your wrong, I didn't(and a huge number like me) take on a mortgage I couldn't afford, and we shouldn't be asked to pay for others mistakes (I'm not anyway, emigrated last year).

It did not bail out ordinary people who had borrowed a little too much, these people are getting doubly screwed over. Paying extra taxes (which the governemt is raising, a large part of which is going to the banks) and they still have to pay back the loans on homes that are now in negative equity, on which rates have risen.

If nature were allowed to take it's course, the people who lent the money(other EU countries as it turns out) would have to take a hit(accept that they won't be getting all their "investment" back.

You can't just call in a loan, you know, contracts and all that, and why would the lender even want to do that? Who wants an unsellable thing like a house in Ireland(you can't sell them nowdays, no ones buying) instead of SOME of their money back.

So the current state of things in Ireland is homeowners that are in negative equity(everyone who borrowed since 2000 essentially) are prisoners. They can't sell, can't leave, they just have to take it(and both the government and the banks know this). And I'm sure the voters don't like that.

The bank bailout is the Irish government, instead of going double or nothing on bank loans to property developers, going half or nothing. They prevent the banks balance sheet from collapsing while at the same time taking on discounted bad loans that they think might make a profit. Evidence: http://www.irishtimes.com/newspaper/commercialproperty/2010/...

The houses haven't been built yet, and the guy has the loan out for them before he had permission for the plan, nevermind to build, and will now seek permission to build after the loan has been transferred to NAMA.

3400 homes at 2007 for sale prices is 3,400 x 300,000 = 1,020,000,000 euro.

This looks to me like they are building 3400 houses using government bailout money in the hope there will be some return on the initial investment. The property developer doesn't seem to be giving the original investment back. I am no expert, so my impression may be incorrect and the cheerleading tone of the article really confuses me.

I do not think people who took out mortgages they could not afford are blameless in this, they helped to drive the ridiculous prices. Property snakes and ladders.

To get back on topic, I can't imagine where the Irish Government, banks included, can expect to safely store money enough to provide for the retired population.

While it may not be the best of ideas, you have to balance it with freedom and the value of self-reliance. Social Security as it is only helps further the growth of the nanny state while also limiting our freedom to do with our own money as we see fit.

As a side note, Government should never be in the business of "Public Good" projects. Time and time again, government has shown that it cannot be trusted.

Do you consider mass vaccinations of mid 20th century a public good project? Do you consider them a failure?

Public safety.