From social insecurity to social security: the genius of democratic politics

Abstract

Modern attempts to 'save' the US Social Security System are futile. Any such unfunded system has already provided an intergenerational redistribution to the founding elders from subsequent generations. Starting from an initial perfectly competitive equilibrium, these later generations cannot rationally expect to be fully compensated. The numerous economists who have been arguing for financial reforms to prevent such systems from damaging anyone have thus been participating in a widespread deception of the working public. Nevertheless, the democratic political representatives who created and maintain this unsteady sequence of redistributions have been ingenious, not only for selling a system of insecurity-inducing intergenerational redistributions as a system of 'social security' but also for choosing a method of redistribution that, despite the misdirected objections of economists, minimises the losses of the subsequent generations by successfully eliminating an important parental malincentive that had, prior to social security, led most parents to educationally exploit their children.