by Romina Boccia and Ivane Nachkebia, Cato at FreedomSeptember 5, 2024.
Extract:
The article ignores the total replacement rate of the US pension system, which includes both Social Security and voluntary pensions. When viewed from this broader perspective, the U.S. approach replaces more than 73 percent of average workers’ early retirement earnings, significantly higher than the OECD average of 55.3 percent. This puts the United States ahead of many countries, including some with more robust government-run systems.
For example, the article shows that French state pensions replace 57.6 percent of an average worker’s early retirement earnings, compared to social security’s 39.1 percent replacement rate. (As mentioned, when voluntary pensions are included, the total replacement rate for the U.S. pension system is more than 73 percent.) On the other hand, the French system remains at 57.6 percent due to limited coverage of voluntary pensions, so low that the OECD does not take it into account in its calculations of the total replacement rate. OECD data also shows that American seniors are much less dependent on the government for their retirement income than their French counterparts. Public benefits make up 39.3 percent of the total income of American seniors, while in France they account for 78.1 percent.
DRH comment: This article is also interesting in another way. It shows a significant degree of understanding among Americans that they cannot rely on Social Security for a large percentage of their retirement income.
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As Thomas Hazlett wrote in a 1983 article for the Wall Street Journal, WH Hutt “is perhaps the most important economist of this century.” Hutt’s colleague Samuel Bostaph of the University of Dallas predicted that Hutt could be one of the most important economists of the twenty-first century. Economists who know WH Hutt probably only know him because he popularized the term “consumer sovereignty.” This is unfortunate because he made many more substantial contributions that deserve to be revisited in the 21st century. They still have much to teach us about how free societies function and flourish.
Personal note: I attended 3 different week-long seminars with Hutt. The first was the First Austrian Economics Conference in South Royalton, Vermont in June 1974. The second was a Liberty Fund seminar (and the first I ever attended) at Ohio University in Athens, Ohio in June 1975. The third was immediate afterwards and in fact, he, his lovely wife, and I marched through an airport together to catch a flight to attend it. It was the second Austrian Economics Conference, held at Hartford College in Hartford, Connecticut. Although I was very impressed with him, I had only a vague idea of his importance at the time.
The second of these new theories—and the latest entry in the battle for the hearts and minds of political candidates—is a set of economic ideas and policy recommendations called “industrial policy.” It has been the subject of a growing stream of books and articles; it has been endorsed as a concept by the AFL-CIO; its regulations are included in a number of bills now before Congress; and it receives a sympathetic response from many of the candidates for the 1984 Democratic presidential nomination.
The phrase ‘industrial policy’ means slightly different things to different people; it refers less to a single theory than to a loose collection of similar diagnoses and proposals. The diagnoses generally cluster around two basic statements:
DRH comment: This is an oldie but goodie. I reread it while writing my last Substack post: “Brad Delong’s unsatisfactory case for an industrial policy,” I blog to differSeptember 8, 2024. It’s full of good content. I read it while researching industrial policy when I was a senior economist on President Reagan’s Council of Economic Advisers. It affected my work in two ways. Firstly, I took advantage of it when writing my first article for Fortune“The Myth of MITI,” August 8, 1983. I quote from that piece here. Secondly, I was one of the people at the CEA who pushed hard for an industrial policy chapter. My side won and we wrote it. I wrote the first draft and it was thrown in the trash because it was too basic. (I ultimately agreed.) But I had a lot of input on the version that ultimately appeared. Indeed, I turned it into a lecture I gave to students at the Naval Postgraduate School in February 1984, a lecture that led to my receiving an offer to join the faculty.