W climbs trees every day to fetch coconuts and then swims them across the channel to a neighboring island where she barters them away for drinking water and then swims back with jugs full of water.
P used to help W with the tree climbing, but is now too old to do the work. However, he long ago made a deal with W, and she's a man of her word, so she keeps him supplied with enough fresh water to get by every day. Still, when the yield of coconuts becomes bad, or when there's a glut of coconuts on the neighboring island, she is liable to feel that there is an excess of pensioners on the island.
U is in desperate need of water and would do almost anything, but he doesn't know how to swim or climb trees.
Now, tell me: How does the existence of U help get the fresh water that P needs? How does the existence of P help U find a way to earn his water?
I think there's another factor to consider. W doesn't give water directly to P, there's G who takes a little bit of water from everyone. G has enough water for themselves, and instead of drinking just the water they need, or helping U to make their island economy better, they decide to bathe in the water. Then when P wants some water like G has promised and there's none left, they blame U. Which makes W and P angry at U.
The situation is more like G is taking a little bit of water from everyone, and there's yet another person on the island E. E is in charge of delegating coconut fetching tasks to W and up until recently P. G decided E should also be in charge of distributing water that comes from G to W and P.
E realizes that once P leaves, there will only be one coconut fetcher. So, worried that they won't be getting enough water to give to G, E gives less water to W instead of hiring and training U to help this coconut fetching business. This isn't good because eventually W will become a P, and E will have no one, and G will not be getting water from E. Everyone becomes a U because G decided to give water to E to delegate instead of directly to W, P, and U.
Why do you want to add so many additional people to my already overcrowded island?!
They are primates descending from groups inhabiting the savannah.
As all the groups of this kind, they take care of the group whenever there are enough resources. If they are not forced by harsh circumstances, they don't leave to die of hungry the old. In the improbable case that one member of the group doesn't know how to do almost anything, somebody (maybe the older and experimented P predicting that he will be too old for working someday), will teach him how to do it so the economic welfare of the group improve.
In the other hand, imagine now that the group is made of Homo Economicus. Wait, why are we imagining this? Such creature doesn't exist.
Their point only shows that it is possible to have unemployment and an excess of pensioners.
It would have been easier to point out that an excess of pensioners != not enough workers. They're clearly different statements. But the illustration also served the purpose.
It did not, as far as I can tell, in any way suggest W should let U and P die, only demonstrated their simultaneous lack of utility for the workforce.
So, as I understand it, the argument is that unemployed people is unemployed not because the economy is so productive (we have coconuts and water for everybody with very little job) but because they are not enough qualified.
In other words, there are not enough qualified workers as demanded, and that is the reason we see real wages going up and up all the time.
Either private or government investment could, in principle, lead to economic growth that could expand the physical size of the economy. If people saved more money, I see the price of stocks going up, but I don't know how that translates to real growth in the economy, more jobs, better jobs, etc. Look at how Apple and so many other companies pile up cash, how telecoms refuse to invest in better broadband, the EU can't put together a realistic plan for Greece, and how economic investment is channeled through a series of "bubbles"; just yesterday I heard an acquaintance just bought a GM Suburban, than I heard on the radio that Banco Santander was not happy with their subprime auto loan portfolio in U.S. and then that GM is closing a factory.
Yes, American consumers didn't wait one minute after the price of gas dropped to get big, expensive vehicles because they assume the low prices are permanent. Ray Diallo had a bad year because he assumed high oil prices are permanent. It is completely predictable that oil prices are volatile on a five-year horizon because producers and consumers will change their behavior a LOT on account of a 5x change the price of crude, but people get blindsided every time.
The lesson of history us that people don't learn from history. Add up another 30 years of economic mismanagement in large and small ways and 2050 is not looking so bright.
"Meanwhile, the government is funneling an ever-greater percentage of revenue from productive pursuits to pensions."
My understanding was that pensioners would spend the money in the economy, so they are not funneling away from nothing.
That is too simplistic for me. Income for one also is income for somebody else down the line.
All those "economic" considerations I read about - not just on this topic - remind me of my extremely lousy chess play: Never think more than a single step ahead.
But the economy is a circle. All those views are form the PoV of an individual entity - income and expenses, and where it comes from and where it goes "does not matter".
But to look at the economy is completely different! Here you have to look at the entire circle, not at just a single piece of the chain.
For example, giving old people money, directly or indirectly, leads to an increased flow of money through systems of the economy that are utilized by old people. That would be the health sector most of all, not a lot of change in housing or food (they already had a roof to live under before they retired and they won't eat more food than before). Maybe tourism benefits too.
What happens if they get less money? What sector(s) benefit(s), who loses?
The purely financial considerations don't make sense to me on the greater economic level. Is the economy suddenly unable to maintain the housing and produce sufficient food because some numbers in some balance sheets are off? That happened a lot in history. My own grand parents lived with at least five different currencies within their lifetime without moving (Germany). We found that "finance" can easily be reset provided people are willing to do so (that's the important part) - what matters is factories, knowledge, culture, trade, etc.
There certainly are a lot of problems of high pensions (compared to non-pensioners), for example if the old people end up with a larger share of the available housing, which includes not just housing they themselves use but also housing they control (investments) because that funnels even more of the money flow through the economy through the control of (some relatively few) old people. that may no lead to a housing shortage, after all who owns housing does not seem so important as long as there is enough, but a consequence is that young(er) people feel insecure in their outlook and are more reluctant to have a family. Also, the kinds of housing being built is probably different when done purely as an investment.
As for the health sector, I'm not sure how bad it is to have it deal (even more) with old people's problems. After all, aging is everybody's problem at some point and if that leads to progress, be it symptom control or some day even more direct control of aging I don't see why getting more of the economy's money flow to go through that sector would be bad. After all if "cost control" was the overwhelming argument then collective suicide would be the best solution. Since we are alive and like it that way we may as well "waste" our resources on just that.
We have that wonderful tool "money" and "finance", but I think too many people have forgotten that it is a tool and treat it like a natural law and the be-all and end-all. We actually have much greater control - and much more arbitrary control than a lot of people think - over how we use the tool. Unfortunately only severe crisis opens the minds of people enough to wield the power we actually have over our own creation.
A very intelligent and agreeable but severely depressed man came out to my farm and I tried to get him to move rocks from one pile to another. He could do it as long as I supervised him, but could not sustain the effort when I was away.
Any employee takes a certain amount of time to manage, and that sets it's own floor on the "minimum cost" of hiring an employee.
The opiate epidemic is related to a syndrome of chronic pain which is very much a mind-body phenomenon from the viewpoint of biological psychiatry. People get back pain, neck pain, headaches, etc. and there is really no safe and effective treatment -- contacts with the medical system usually make it worse, but often the problem clears up when the patient gets a new job.
Modern economies run into issues with lots of investment in bubbles that don't increase productivity. Housing booms that rapidly increase the cost of housing don't increase productivity. Investing in ever riskier twisted financial exploitations does not increase productivity. Having huge amounts of taxable income filtered out of the country robs a country from future infrastructure investment, which does not increase productivity.
I get how not enough real resources (not enough food, not enough housing, not enough infrastructure, not enough knowledge) is a problem but 'not enough work' doesn't sound like a hard problem.
When labor becomes disconnected from gaining capital things become problematic in countries that do not believe in wealth redistribution. If you don't have a job "It's your fault for not working hard enough", if you are getting money from the government "you're a welfare queen". You can run into a system that deadlocks. There is plenty of production. There is lots of need. But there is no means of wealth transfer between those two groups and you can run into a state of consumption collapse.
- Inadequate savings for the median retiree
- High levels of wealth inequality
- High levels of foreign debt
In that case the wealth transfer mechanism is broken. Those that are old are reducing consumption while those that are young can't generate income to replace it while those holding all the wealth (savings) scramble to avoid defaults (and risk) in a rapidly slowing economy.
Do you mean from the young to the old?
How "inadequate savings for the median retiree" create unemployment?
I can't think of the mechanism. Do you mean a deficit of investment in the economy from the savings?
I'm thinking of wealth as the claim on productive assets such as stocks, bonds and property. Pensions are a structured transfer of wealth from the old to the young and of labor from the young to the old.
"I can't think of the mechanism..."
Inadequate savings can create structural problems that result in temporary mismatches between the desire to work and the desire to consume.
For example if retirees are worried that savings or pensions are inadequate they may delay consumption which can create temporary high unemployment.
The point is, it's logically and economically possible. You seemed to be under the impression that this situation is inherently contradictory, when it is not.
excess of pensioners => not enough workers
unemployed people => excess of workers
You could have no jobs and lots of pensioners. Then everyone wants to work but can't and those who once were working have retired.
So, the economy is producing the same with less jobs.
So, where is the problem for covering the needs of the pensioners?
I get how an excess of unemployed people (people without a job) can be a problem.
What I don't get is how both can be a problem at the same time.