Terry McDonough wrote: > If you regard workers and retirees as separate groups at some point in the > future it is undeniably true that increasing consumption (of a given existing > output) by retirees must lower the consumption of workers. This is true > whether the workers spend the proceeds of 401(k)s or Social Security checks.<
That's right: the goods and services paid for any income distributed to anyone right now has to be produced by labor being done right now using currently-existing inanimate resources. This is also true in the future: the goods and services paid for any income paid to anyone in the year 2020 has to be produced by labor being done at the time using currently-existing resources. Thus, if a fund accumulates money and promises to pay dividends in the future, it can only live up to that promise if its operators can grab a piece of the surplus being produced in the future (i.e., the surplus of production beyond what workers are paid at the time). Merely accumulating funds won't do it. [Doug has a good Keynes quote on this.] If the accumulation of funds corresponds to real fixed investment (factories, machines, infrastructure, productive education, etc.) that can allow a greater production of surplus in the future (by raising labor productivity relative to wages, etc. in the future). This means that the promise can be met. >The defense of the 401(k)s is that past savings have allowed investment in >capital which has increased output (or the productivity of labor).< Saving in 401(k) plans does not automatically cause real fixed investment because almost all of the stocks and bonds purchased are "used" paper that were used to finance fixed investment in the past. Rising saving can also hurt demand if there is not an equal increase in fixed investment (as is happening right now). Since the latter is not automatically produced by the former, just putting money into 401(k) plans doesn't help raise future labor productivity. These days, more and more of US fixed investment has been financed by funds from outside the US. That suggests that people outside the US will be grabbing more and more of the US surplus. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
