Business Week has a short blurb on the comparison between Madoff’s investment scandal and Social Security. While it acknowledges that Social Security has the general structure of a Ponzi scheme, paying off the oldest investors with the funds that the new investors put in, Michael Mandel still tries to salvage some dignity for the Social Security System.
[Social Security is] very similar to the structure of a Ponzi scheme, where new investors pay off the original investors. As long as enough new ‘victims’ are brought into the scheme, it keeps growing and growing. But when the new investors runs out, the Ponzi collapses. Analogously, the slowdown in population growth puts pressure on Social Security finances.
But there is one enormous difference between Social Security and a Ponzi scheme: Technological change. Over the past century, new technologies have enabled the output of the country to grow much faster than its population. To be more precise, the U.S. population has more than tripled since the early 1900s, while the U.S. economic output has gone up by more than 20 times.
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But here’s the rub. Ultimately our ability to make good on the “Ponzi-like” nature of Social Security depends on the continued march of technological progress—and in particular, innovation which boosts output and living standards. If we leave the younger generation a good legacy—a sound scientific and technological base, combined with an innovative and flexible economy and an educated workforce—then Social Security is not a Ponzi scheme. The economy grows, and there’s more than enough resources for everyone.
But if instead we—the current generation—invest in homes, flat-screen televisions and SUVs, then we don’t leave the next generation with the technological “seed corn” they need. If the technological progress slows, then Social Security does turn out to be Ponzi-like—with unfortunate consequences for everyone.
So Social Security is a Ponzi Scheme if it fails and it’s not if it succeeds? That’s not how it works. A Ponzi Scheme is a Ponzi Scheme regardless of whether or not it’s successful. Mandel could be right that unbounded exponential growth in economic output would make the scheme viable. But that doesn’t make it not a Ponzi Scheme.
The flaw in the reasoning here is that all Ponzi schemes must fail. While it’s highly likely, and I believe it will happen in the case of Social Security, these schemes don’t fail because they’re Ponzi Schemes. The fail because there are rarely enough resources to keep providing for new investors. Mandel is right to point out that there is a series of events that will result in social security not failing. He is wrong to conclude that this makes social security not a Ponzi Scheme.
Last week, for example, Lesley Stahl of 60 Minutes did a breathless segment on Saudi Arabian oil exploration that would have done credit to a nine-year-old. She went out to Shaybah, a drilling project that’s been three decades in the making, and spent ten minutes gushing over the almost impossible odds the Saudis overcame to get the project up and running. 135 degrees in the shade! Hundreds of miles from nowhere! One hundred million cubic feet of sand! 400 miles of pipeline! Oil that didn’t want to flow! Storage tanks with roofs that move!
But she never asked the one question she should have: if Saudi Arabia really has as much easily extractable oil as they say they do, why are they building projects like Shaybah? Why not just sink a few holes into the easy stuff instead?
Almost certain answer: because there isn’t any easy stuff left. It’s either Shaybah or nothing. And that’s pretty much the story in the rest of the world too. There just aren’t any easy sources of oil left. It’s almost all in desolate wildernesses, deep underwater, in polar regions, or locked up in tar sands. And just to make it worse, projects to extract this stuff are risky too. At least half will come up dry after tens of billions of dollars worth of test drilling.
This is why the chant “Drill, Baby Drill” is such absolute nonsense. How about a carbon tax, an end to oil subsidies and tax breaks, and streamlining processes to develop non-oil and carbon based energies, please?
I was an officer that ran interrogator teams in the Marine Corps from 2001-2004.
Reuel Marc Gerecht uses the biggest fallacy in all of the torture debate–the ticking time-bomb fallacy. He assumes that an ideologically driven terrorist like KSM or Abu Zubaydah would answer the questions truthfully even under torture when all he had to do was withstand for 4 days to let 9/11 happen. This is absurd.
They would withstand because they are so close to the “finish line.”
Even more likely though, assuming that KSM was captured on 7 September, would be to give us thousands of leads (which he did anyways when he was captured) with a little truth at the core and we would go ragged chasing them all down while the terrorists boarded the planes without a problem.
Bottom line, the ticking time-bomb scenario is just not a justification for torture of an ideologically motivated person who has immense incentive to withstand and disseminate false information. Finally, there are other methods that could “break” KSM in the above scenario like the shock of capture and some thoughtful, sophisticated tricks that are certainly not torture and in the Army manual.
I’ve been saying this for years, but it’s worth repeating: moral behavior is practical behavior. The debate over torture isn’t just this idea about “liberty vs. safety”–it’s also centered on the idea that the practice of torture isn’t even practical. By and large, torture isn’t just barbarously immoral–it’s also a lousy intelligence gathering tool.
I was trying to come up with something appropriately snarky and disapproving about Barack Obama’s decision to have Rick Warren perform the invocation at the Inauguration, but Mark Kleiman beat me to it.
I finally got around to watching the Wolverine trailer last night. Take a gander for yourself.
I don’t know about you, but I think this looks terrible. Bombastic, pseudo-angsty, and over-the-top cheese in the manner of the wretched affair that was X-Men 3.
I’ll maybe catch this on DVD if anyone says it’s worthwhile.
Like Conor Friedersdorf, I also fail to see how allowing same-sex civil marriage would undermine religious liberty. “Marital status” is not a protected class as far as anti-discrimination law goes. Not only that, but the law already protects the religious liberty of churches to perform or not perform marriages as they will. Catholic churches, for example, don’t marry people who have been divorced, and there’s no legal problem with that.
And as one of Conor’s commenters wisely points out:
The easy way to determine this is to look at countries that already have gay marriage, and see whether it has caused any loss of religious liberty. If they could find examples where it has, opponents of gay marriage might have a point. I don’t think such examples really exist - Canada in particular has made it completely clear that religious institutions are not required to perform or endorse same-sex marriages - but who knows, I may have missed some.
