Noam Scheiber's &c.
via The New Republic Online: "
Matt [Yglesias is] obviously right. (It's not a particularly controversial statement.**) In fact, I think you can go further. The first point to make is, given that the risk-adjusted returns on stock are the same as the risk-adjusted returns on bonds, you don't need a privatization scheme to accomplish what we'll end up accomplishing with private accounts. That is, under privatization, some people will earn more than the 3 percent return they'll have to pay back, other people will earn less than the three percent return they'll have to pay back. On average, there will be no net benefit (i.e., no new wealth created; it's just getting redistributed). But, of course, the government could do that on its own, without privatization. It would just have to pick a certain group of people who would do better than they would under the current system, and a certain group of people who would do worse, taking care to make sure that the numbers exactly offset. The only difference between this government-run system and the privatized system is who gets to pick the winners and losers (i.e., the market versus the government); there would still be the same number of winners and losers, and the size of their gains and losses would be the same. (Assuming that's what the government set out to do.)
But we can go even further than that. Under privatization, it's a safe bet that the winners would mostly be affluent people and the losers would mostly be poor people. Why? Because affluent people typically have more experience and knowledge about investing, and access to superior investing advice, and they're more likely to exploit this experience/knowledge/advice to make above-average returns. By contrast, poor people with little experience/knowledge/advice would be the ones most likely to get burned. So, in effect, privatization is a scheme in which we don't create any new wealth, we just take from less affluent people and give to more affluent people. (Again, this is in the aggregate--there will obviously be individual exceptions).
But, of course, this is pretty morally-arbitrary. As long as you're not creating new wealth, why not a system which takes from the more affluent and gives to the less affluent (which, as we've established, we could pull off just as easily)? The answer, obviously, is that, unlike the poor, rich people know when they're getting screwed, and they'd never let it happen. So the final question is, if a system in which group A gets screwed by group B could never fly because group B would point out its fundamental unfairness, why should we impose the exact same arrangement on group A, simply because group A can't defend itself? If you can't answer that question in good conscience--and I don't think you can--I'm not sure how you defend privatization.
