Hans Rosling argues below that it was the humble washing machine. But Stephen Bainbridge makes a compelling argument in favor of an even more underappreciated invention.
The concept of retirement is undergoing fundamental change. Does anyone really believe anymore that it’s possible for most folks to live comfortably over the final third of their lives while essentially generating no income?
That changing dynamic is behind such ventures as the Great Retirement Swap:
The way that we think about retirement in America is fundamentally flawed. The current retirement system assumes that people must diligently invest in the stock market over an extended period of 30 years or more in order to buy things in the future – like food, shelter, and clothing.
But what if people are free to share, barter and swap for these goods? To travel to wherever they want, provided someone has a spare room for them to use? To have access to any item they need, as long as they have an item of similar value to swap? [. . .]
Well, what if we fundamentally change the way we think about retirement to take into account the new trend toward collaborative consumption? Call it The Great Retirement Swap. At a macro-level, Americans would be swapping a bleak version of retirement for a positive, hopeful one.
At a more tactical level, older Americans would be swapping for goods and services, rather than owning them. Wealth in retirement would become a relative issue – are you wealthier if you own a second home in Florida, or if you have unfettered access to apartments across Europe, at any time of the year? [. . .]
While all this sounds a bit "un-capitalistic," it’s actually the free market at work, on a grand scale. When you barter for goods, there is a market price established for those goods. And best of all, it doesn’t require 7% annual compounded returns in the stock market to succeed.
With millions of Baby Boomers set to start retiring within the next few years, retirement nest eggs shattered by the financial crisis, and even eternal optimists convinced that Social Security is no longer sustainable in the long-run, it’s time to start thinking of a ground-breaking, innovative – dare I say it – radical solution for helping Americans attain the type of retirement they always dreamed of in their golden years.
Regardless of the feasibility of the Great Retirement Swap, what are the chances that government will do a better job than markets in providing choices for retirees?
The demise of primary care as a profitable area of specialization under our third-party payor-dominated health care finance system is a frequent topic on this blog. Dr. Robert Center picks up on that them in this recent KevinMD.com post in which he passes along what he sees happening in the marketplace for primary care services:
I believe primary care docs are rebelling against the system. The system has made primary care physicians suffer emotionally and financially. The system has taken the greatest form of medical care – that consisting of continuity, comprehensiveness, complexity and completeness – and denigrated it.
Now I talk about “the system” in an anthropomorphic sense, but “the system” is virtual. “The system” has no conscious, it is not deliberate, rather it represents the constellation of ignorance that the insurance companies, CMS and policy works have wrought. [. . .]
So what do primary care physicians do? They do what any sensible economic citizen would do, they alter the rules to their benefit. [. . .]
So decreasing numbers of primary care physicians are taking Medicare or Medicaid. So primary care physicians are leaving their jobs to do hospital medicine. So many primary care physicians are leaving the CMS/insurance company grid and retreating to retainer practices or cash only practices.
The rebellion is a quiet one. No one has declared this rebellion. This rebellion has no Glenn Beck or Sarah Palin; no Abbie Hoffman or Che Guevera. This rebellion occurs one physician at a time, as that physician finds continuing their practice undesirable. [. . .]
I believe the rebellion will continue. Every anecdotal sign that I see tells me that the rebellion is gaining speed and power. . . .
One day the wonks on Capitol Hill will realize the problem. AAFP and ACP (amongst others) have tried explaining the problem to the politicians. Until they understand that their constituents are angry because they cannot find a physician, they will not focus on the problem. . . .
As doctors flee from primary care (see earlier posts here, here and here), the vacuum will be filled by nurse practitioners and medical assistants, who are far less trained than primary care docs in key diagnostic procedures.
Make sure those payments on the concierge practice account are current!
Richard Epstein is typically lucid in taking on the increasingly foreboding regulatory culture that creates barriers for entrepreneurial creation of jobs and wealth:
What is to be done about the compliance culture–a culture born in response to excessive regulation–that now threatens to compromise the technological advances that have long spurred innovation in the United States?
This sad chronicle of relative decline takes place in three separate stages.
The first involves the new mindset that too often finds harmful externalities and bargaining breakdowns in virtually all human endeavors.
The second involves the bulky remedial structures that government puts in place to respond to these newly identified perils.
The third stage involves the subtle alterations in the selection of the compliance culture: the rise government officials and key private officers and executives whose skills matter ever more in these more severe regulatory environments.
This three-fold progression is not specific to this or that industry, but applies across the board. . . . [. . .]
No one should be so reckless as to claim that these forces operate in all cases in all ways. We still have our wonderful success stories. Yet by the same token, no one should be so naïve as to think that these forces have no role to play in the loss of innovation and competitiveness in this country, a loss felt in both absolute and comparative senses. This loss has become an ever-larger feature of the modern United States.
Stated another way, it’s not that rules are unnecessary for markets to perform efficiently. But what type of rules are better?
Rules that politicians enact and governmental officials enforce generally are far less efficient than rules that emerge as a result of the voluntary interactions of millions of individuals and companies. The successes and mistakes of those individuals and companies pursuing their own interests create rules that are the product of competition and personal responsibility. When those rules become sufficiently important in the fabric of a market economy, they become formalized as common law and precedent by courts.
The distinction between inefficient government-imposed rules and the decentralized rules that facilitate productive market economies is an important one to understand as we wade through the carnage of this current era of increasing governmental regulation.
Henry Blodget passes along this revealing Mary Meeker graph on how bloated entitlement programs now comprise a staggering 58% of federal government expenditures and a corresponding portion of the $1.3 trillion federal deficit.
In his wonderfully lucid style, the Wall Street Journal’s Holman Jenkins follows up with this column in which he explains how this system is intrinsically unsustainable, but also fixable:
Nobody should be surprised that public-sector workers in Wisconsin and elsewhere are fighting to preserve every penny of their promised benefits.[ . . .]
. . . this fight was penciled in long ago, when politicians and union leaders made the strategic decision to negotiate benefits without negotiating for the funding to make good on them. The mock shock and horror is all the more laughable given that events in Wisconsin are a perfect microcosm of the battle that every sentient American knows, and has known for a generation, awaits Medicare and Social Security.
Medicare is the real killer. According to Eugene Steuerle of the Urban Institute, an average couple retiring last year can look forward to consuming Medicare benefits with a present value of $343,000, having paid Medicare taxes with a present value of $109,000. [. . .]
The flip side of this depressing consideration, though, is a happier one. Moving toward a system of real savings, in which payroll taxes would flow into some version of personal accounts controlled by the worker, would bring a big improvement to incentives. We could expect a sizeable growth dividend to help finance the transition.
By "finance the transition," of course, we mean today’s workers having to reach into their own pockets twice, paying for their own retirement while also making up for the saving their parents and grandparents didn’t do. When people talk about generational injustice, this is what they mean. But the pain can be lightened and spread more evenly with borrowing. Here’s where we should not be afraid of debt. The bond market can be trusted to distinguish between good debt and bad debt–between borrowing to fix the system and borrowing to prop it up.
The global bond market demonstrably still has confidence in America even today, in the absence of a clear path of reform. How much more willing would investors be to advance us money if it were being used to put the entitlement state on a sound, pro-growth footing? By the same token, if we don’t at some point justify the market’s current confidence in our future, our comeuppance will be swift and overwhelming.
This is the entire political challenge today, and you cannot shower enough contempt on those politicians who try to stonewall reform by exciting fears in the elderly that they will be left out in the cold. . . .
Recent past generations of Americans survived the challenges of the Great Depression and World War II to help provide a prosperous economy and great wealth for citizens.
Will the current generations of Americans accept the responsibility to take on the challenge of sustaining that prosperity?
Don’t miss this KevinMD.com/David Gratzer, M.D. post on how – despite the miracles of modern medicine — the poor incentives of the fractured U.S. health care finance system encourage people not to change unhealthy habits:
But if medicine has never been so advanced, the actual health of Americans is far less robust. The Era of Modern Medicine has given way to the Age of Preventable Illness. Americans have embraced a culture of extremes: too much alcohol, tobacco, drugs, and food, and not enough exercise and restraint. American leads the way in medical innovation, winning more Nobel Prizes in Medicine than all other countries combined. We also lead the world in obesity, and have the poor life expectancy statistics to show for it. [ . . .]
ObamaCare seeks to divorce people from the financial consequences of their health decisions — regulating insurance to treat people equally regardless of age or illness (community rating), offering many no-deductible services, mandating the coverage of other services, and sweetening the deal with heavy subsidies.
Let’s be clear: a patient with Schizophrenia shouldn’t be punished because his father and grandfather had the disease. But many illnesses are preventable. Rather than encourage health, ObamaCare seeks to socialize the costs of bad health.
As noted earlier here, perhaps the wisest investment in health care finance that we could make at this stage is simply better education?
The turmoil in the municipal bond markets over the past week got me thinking.
Bill King has done a great job (and see generally here) of explaining how Houston’s unfunded public pension obligation represents an untenable burden on the city government’s financial condition. The problem is not just Houston’s, either.
So, it was refreshing to come across this Maria D. Fitzpatrick/Stanford Institute of Economic Policy Research paper (H/T Craig Newmark) that indicates that now may be the best time for Houston and other over-stretched local governments to attempt to do something about this mess:
ÔªøÔªøÔªøÔªøThe results show that the majority of Illinois public school teachers are willing to pay just 17 cents for a dollar increase in the present value of expected retirement benefits. The findings therefore suggest substantial inefficiency in compensation as the public cost of deferred compensation exceeds its value to employees. . . . [. . .]
In this context, the main finding of this paper, that the majority of IPS employees value their pension benefits at about 17 cents on the dollar, has two important implications. First, it suggests a possible Pareto-improving and politically feasible solution to the current inability of states to pay their promised pension benefits to public employees. Governments could offer to buy back pension benefits from teachers and other public sector employees. If the results here generalize, governments may be able to buy back promised employee pension benefits, or at least some of these promised benefits, for as little as twenty cents on the dollar. Doing so would draw down the pension obligations of governments both significantly and immediately, rather than waiting for a reduction in benefits to take effect years in the future.
Meanwhile, in this WSJ op-ed, Roger W. Ferguson, Jr. passes along an innovative approach that Orange County, California – the site of one of the largest municipal bankruptcies in U.S. history back in the mid-1990’s – is taking to deal with its unfunded pension obligations:
The plan is a hybrid model: It combines contributions by the county and its employees with both a traditional defined-benefit pension and individual accounts, which the worker can take with him from job to job.
Here’s how it works: New hires can choose either the old defined-benefit plan or the new hybrid plan when they sign up for benefits. The plan maintains a strong traditional pension, but it reduces the requisite contribution for both the county and its employees. It also redirects a portion of that money into the defined-contribution part of the plan where the money can grow over time.
Unlike a typical 401(k), the defined contribution part of the hybrid plan emphasizes retirement income as the primary goal. It incorporates affordable deferred annuity options during employees’ working years that can deliver income in retirement that compares favorably with what workers can expect from the traditional pension plan alone. The hybrid plan also increases workers’ take-home pay because workers’ contributions are lower than they are in the old defined-benefit plan.
This new program helps workers to think about how much monthly income they will need in retirement–as opposed to how big a nest egg they’re building. [. . .]
Sometimes real change begins with compromise. A new approach on pensions won’t close the gap between current pension promises and the public’s ability to afford them. But it points the way forward and acknowledges the reality that we have to start somewhere to address our nation’s public pension woes.
Are you listening, Mayor Parker?