Wednesday, March 30, 2005
A lesson from Sweden's private SS accounts
Richard Taler has done some research on the Swedish privatization of Social Security. Even though it strongly suggests that large groups can have a hard time finding an optimal solution (so-called collective rationality), it does not suggest that Bush's plan to privatize the U.S. Social Security will be for the worse.
And what did I do with my private account in this roulette, you may ask? Oh, I put everything on red. All my money went to Russian capital funds. (Risky, I know, but then again I am young, and I plan to switch as soon as the return rate goes below 80 percent...) During the past two years, my capital has increased by over 400 percent. (The U.S. capital funds (mainly Morgan Stanley) have not even been able to give back what you put in...)
Which leads us to the column by Robert Barro in the latest issue of Business Week. The problem with private accounts is that they create a juxtaposition where government creates institutional frameworks that will make it profitable for people (like myself) to take risks, but endanger the common welfare aspects of the entire program. (Hence, this is a classic collective action dilemma.) Tyler Cowen agrees with Barro - partial privatization is probably not a good idea at all. But then again, a fully socialized program migh even be worse.
And what did I do with my private account in this roulette, you may ask? Oh, I put everything on red. All my money went to Russian capital funds. (Risky, I know, but then again I am young, and I plan to switch as soon as the return rate goes below 80 percent...) During the past two years, my capital has increased by over 400 percent. (The U.S. capital funds (mainly Morgan Stanley) have not even been able to give back what you put in...)
Which leads us to the column by Robert Barro in the latest issue of Business Week. The problem with private accounts is that they create a juxtaposition where government creates institutional frameworks that will make it profitable for people (like myself) to take risks, but endanger the common welfare aspects of the entire program. (Hence, this is a classic collective action dilemma.) Tyler Cowen agrees with Barro - partial privatization is probably not a good idea at all. But then again, a fully socialized program migh even be worse.
