by Romina Boccia and Ivane Nachkebia, Cato at LibertySeptember 5, 2024.
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The article fails to appreciate the full cost of the changes to the US retirement system, which includes both Social Security and voluntary pensions. Considering this broader perspective, the US approach replaces more than 73 percent of pre-retirement earnings for the average worker, much higher than the OECD average of 55.3 percent. This puts the United States ahead of many countries, including some with strong government-run systems.
For example, the article shows that French public pensions replace 57.6 percent of the average worker’s pre-retirement income, compared to a Social Security replacement rate of 39.1 percent. (As mentioned, when voluntary pensions are included, the total replacement rate of the US retirement system exceeds 73 percent.) On the other hand, the French system remains at 57.6 percent due to the limited coverage of voluntary pensions, which are so low that the OECD does not include them in the calculation of the total replacement rate. . The OECD data also highlights that older Americans are less dependent on the government for their retirement income compared to their French counterparts. Social benefits make up 39.3 percent of the total income of American seniors, while in France, they make up 78.1 percent.
DRH Comment: This article is interesting in another way as well. It shows a greater level of understanding among Americans that they cannot depend on Social Security for a large percentage of their retirement income.
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As Thomas Hazlett wrote in a 1983 Wall Street Journal article, WH Hutt “may be the most important economist of this century.” Hutt’s colleague at the University of Dallas Samuel Bostaph prophesied that Hutt might become one of the most important economists of the twenty-first century. Economists who know WH Hutt probably only know him because he popularized the phrase “consumer sovereignty.” This is unfortunate because he made many great contributions that deserve to be revisited in the 21st century. They still have much to teach us about how free societies function and thrive.
A personal note: I was in 3 separate weeklong conferences 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. , indeed, he, his lovely wife, and I crossed the border we are flying together to catch a flight to go there. It was the second Austrian Economics conference, held at Hartford College in Hartford, Connecticut. Although I was very impressed with him, I only had an idea at the time of his importance.
The second of these new ideas—and the latest entry into the competition for the hearts and minds of political candidates—is a collection of economic ideas and policy recommendations that go by the name “industrial policy.” It has been the subject of a growing number of books and articles; endorsed as a concept by the AFL-CIO; its instructions are embodied in many laws now before Congress; and it received a sympathetic hearing from many of the candidates for the 1984 Democratic presidential nomination.
The phrase “industrial policy” means different things to different people; it refers not so much to a single theory as to a loose collection of similar diagnoses and propositions. The diagnosis usually includes two basic propositions:
DRH Comment: This is an oldie but a goodie. I read it again while writing my latest Substack post, “Brad Delong’s Unconvincing Case for Industrial Policy,” The Blog to DifferSeptember 8, 2024. Full of great content. I read it while researching industrial policy when I was chief economist with President Reagan’s Council of Economic Advisers. It affected my work in two ways. First, I drew on it by writing my first article Good luck“The Legend of MIT,” August 8, 1983. I’m quoting from that piece here. Second, I was one of the people at CEA who pushed hard for the industrial policy chapter. My side won and we wrote it. I wrote the first draft and it was thrown in the trash can as something too basic. (I finally agreed.) But I had a lot of input into the final version. Indeed, I gave a speech that I gave to students at the Naval Postgraduate School in February 1984, a speech that led to an offer to become a teacher.
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