My goal was not to compare rich US counties with Singapore along every possible parameter. I only wanted to show the weakness of any argument that (1) conveniently refers to data X (% of millionaires) and (2) implies its causation through its correlation with data Y (mandatory savings).
To Wheylous: In the case of Singapore, “saving 30%” means 30% of your wages go into a government-controlled investment fund, and you can only withdraw this money - and any interest gained - upon retirement (although in Singapore’s system, a certain proportion is also set aside for healthcare, and another portion can be used for purchasing public housing - which is 85% of houses there). In a more general sense, “saving 30%” means 30% of your wages go into a fund that you can invest as you choose in the private market. This law is enforced in pretty much the same manner the minimum wage law is enforced. And you’re right; there’s no guarantee of getting 100% back, but this simply reflects the fact that there’s no such thing as a risk-free investment: you can’t generate growth if you don’t take any risk. I know many people here who’ve had to postpone their retirement for three to five years due to losses their superannuation funds suffered in the GFC, but they’re still better off than they would have been with no savings/investments at all.
To z1235: Ah, fair enough. I think it’s still possible to make the argument for correlation theoretically, however. For example, someone earning US$60k per annum, mandatory savings of 30% of that ($20k), investing at a conservative 3% return, would be a millionaire in 30 years. In comparison, someone saving at a rate closer to the US average, say 10% of total income, and earning the same amount ($60k), would have to work 61 years to become a millionaire, meaning that unless they wanted to work into their eighties they’d be unlikely to ever amass a million dollars. So due to the mandatory savings in Singapore, anyone earning more than a certain amount would eventually become a millionaire by default: they couldn’t stop it if they tried, short of quitting work or taking a lower-paying job. I suppose saying forced savings creates millionaires is really just a tautology, since even at 0% returns, in the case of 30% mandatory savings anyone who earned 3 million or more in their working life would be a millionaire upon retirement; as long as incomes were reasonably high, forced savings couldn’t not create millionaires.By that logic, with the median wage of around $60k here, if people work 45 years (age 22-67), they make $2.7 million, so if the government forced people to save 37% of their income, and wages remained steady, then eventually at least 50% of the population would be millionaires upon retirement! Not that I’m advocating this, of course, just providing a theoretical example of how forced savings can create prosperity (whilst ‘prosperity’ may be a rather arbitrary term, I think most people would consider a country where nearly 50% of its people became millionaires to be more ‘prosperous’ than one where only 1% did). Hence my amusement that statists never put forth such a policy, since I’d think they’d jump at the chance to say something like “Thanks to me, half my country’s people will become millionaires” 
Then which eskimo village from my previous example would you think is more “prosperous” after FOUR generations: Village A, where everyone, each by their own free choice, ate seven fish a week and saved one fish a week, or Village B, where the benevolent Wise Chief forced everyone to save FOUR fish a week, leaving them to barely survive on a diet of four fish a week? That is, to the extent that there still exists a Village B to make the comparison.
In other words, who is more “prosperous”: Person A who is alive, with a belly full, and $100 in his account, or Person B who is dead from starvation, with 3000oz of gold in his basement? I am using reductio ad absurdum to show the undeniable fallacy of your argument.
On what basis does the Wise Chief in Singapore decide that saving 30% of my income for my retirement is subjectively more valuable to me than sending my two kids to Harvard, or paying for my wife’s life-saving expensive surgery? How does he know what makes me more prosperous (i.e. what subjectively gives me more satisfaction over any time horizon)?
To Z1235: Firstly, in that eskimo village, the fish were only saved, they weren’t ‘invested’, in the sense that forgoing their consumption in the present didn’t allow the eskimos greater consumption in future. The eskimos didn’t use forgone consumption of the fish to create second and third order goods that could increase their future productivity at fish-obtaining. Savings and forgone consumption only contributes to prosperity when it is invested. Investment would be if the fishermen saved enough fish to last them a week, then decided to go a week without fishing, living on the fish they’d saved and using that time to build a giant net that would allow them to catch far more fish in future.
To z1235: Secondly, your reductio ad absurdum argument for why compulsary savings don’t increase overall prosperity could be just as easily used as an argument for why voluntary savings don’t increase overall prosperity, as Keynesians have shown. If the State was setting compulsory savings rates to maximise long-term prosperity, it’d have no more incentive to set the savings rate high enough that people starved than an individual concerned with long-term prosperity would have incentive to save so much that they starved.
To Z1235: Thirdly, the Wise Chief doesn’t know ‘what subjectively gives you more satisfaction over any time horizon’; I never suggested compulsory savings was valid from the viewpoint of maximising your individual satisfaction/utilility, only from the viewpoint of maximising the planner’s satisfaction, or of maximising overall economic growth over time.
30% of your wages go into a fund that you can invest as you choose in the private market
Again, buying cake is investment…
The problem is likely more difficult to answer than we think.
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This is similar to a capitalistic system where people invest out of their own volition. However, here everyone, even the poor, must invest. Thus, the condition of the poor is likely made worse.
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The investment of the well-off people could increase the standard of living for everyone.
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This might result in a market with rapid boom-bust cycles.
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This might shift consumption patterns. In this economy, many less immediately-consumable goods will likely be bought due to a lower amount of purchasing power. When people have large sums of money, they invest in larger holdings like houses or boats (correct me if I’m wrong).
And I’m forgetting some stuff I thought of under the shower
Forced saving (deflation) distorts the market no less than forced spending (inflation). Both alter the market interest rate and will cause economy-wide misallocation of resources. Of course, this is the weaker argument against forced saving. The strongest argument is that it’s simply wrong to force people to do things they don’t want to do unless you have a good justification for it (i.e. they committed a crime against you, etc.)
Clayton -
Of course, (the tough survivors in) Village B had tons of fish saved but the Wise Chief prevented such increased consumption by forcing them to save even more. It makes no difference whether they were “invested” or not. You are missing the point that, whether invested or not, the “optimal” amount of savings (postponed consumption for the sake of increased future consumption) can only be reached through voluntary exchange/action between free agents, and NOT through dictat from the Wise Chief, no matter how benevolent or wise he may be. Central planning doesn’t work. It creates more misery and less satisfaction for ALL over ANY time-frame compared to an uncoerced (voluntary, free) market.
You have missed the boat on subjectivity of values. Even if the State (the Wise Chief, or wise Keynes) had everyone’s best interests in mind, the outcome of their dictat would be inferior (if not disasterously so) to the outcome of an uncoerced (voluntary, free) market. Again, whether benevloent or not, central planning simply doesn’t work. Have you heard of the Economic Calculation Problem?
What other measure of satisfaction/utility/value exists apart from the individually subjective one? The whole point of this thread is that there is NONE.
If it works then why would it need to be forced?
Even a minarchist would have a problem with this.
Correct me if I’m wrong, but regulation not = central planning.
When we talk about central planning we talk about total central planning with all decisions being made by one entity. Statists have gotten smarter and realized that total central planning is not feasible, so just decided to regulate the market. This is not a centrally-planned economy (though you could argue that if non-action is also a form of planning, then it is all planned, but I don’t buy it in this case).
Also, Clayton, I agree with your “strongest” argument. I just didn’t think that this was the correct subforum for it. Also, it sadly is not an argument that appeals to the public much.
To Wheylous: I guess I should have specified that by ‘private market’ I meant ‘private investment market’, and anyone selling cake as an investment most likely wouldn’t last long (Unless the demand for cake was somehow inelastic, and there was a massive cake shortage coming up; banana prices quadrupled here recently due to cyclone/storm damage, and if demand for bananas had been inelastic then they’d have been quite a profitable investment.)
- I think the general consensus here would be that the condition of the poor would be made better by investing, not worse, if by ‘condition’ you mean lifetime income. But if by ‘condition’ you mean present consumption, then yes, they would indeed be made worse. Also, in the sense that the ‘bad’ condition of the poor is considered to be due to their high time-preference, forcing them to save would make that condition ‘better’.
- Yep, that’s would be the reasoning behind it, to increase the ‘standard of living’ for everyone (defined either as the planner’s subjective evaluation of what they consider best for society, or overall growth in GDP terms).
- Rapid boom-bust cycles are generally considered here to be due to inflationary action of the reserve bank; as far as I’m aware, there’s no reason why a society with high savings due to legislation would be significantly more prone to boom-bust than a society with high savings due to naturally low time preferences. Also, savings mitigate the effect of boom-busts: growth based on saving is more stable than growth based on debt.
- It would shift consumption patterns, and that would be the intention behind it. Shifting consumption from first order goods, to higher order goods that may be used to produce greater quantities of first order goods in future than would exist without those higher order goods.
To Clayton: Forced savings by deflation is not completely identical to forced savings by mandating people save a certain percentage of their wages. Deflation is a transfer of wealth from borrowers to savers, reducing incentive to borrow, whereas simply forcing people to save doesn’t involve that transfer of wealth, and so doesn’t induce this distortion. And you’re right, it’s wrong in the sense of forcing people to do things. But, as I said, since statists generally have no problem with such forceful intervention in other contexts, why aren’t there a group of statists out there pushing for mandatory savings, since if they believe that the state can produce superior growth/GDP outcomes to the market and should be used towards that end, then forced savings would be the best way to go about it.
To Z1235: I should have made it clearer then: I wasn’t discussing saving indefinitely without ever consuming, which is why I mentioned Singapore’s savings scheme, which is essentially a pension scheme, as people are allowed to consume their savings when they retire. As to what you say about the ‘optimal’ amount of savings, what you describe is the amount ‘optimal’ to maximising the utility of all living humans. However, the example I gave of a perspective from which compulsory savings could be argued for, wasn’t the perspective of maximising utility for all living humans, rather the perspective of maximising total utility: imagine utility can be measured in arbitrary units of utility, and the average human experiences X units of utility each year. The more humans existing at any one time, the greater the total value of utility (the sum of each human’s individual utility), so in a world of N people, total utility would be NX per year. If this population remained stable for 100 years, then suddenly became extinct, total utility over that time would be 100NX. If it instead lasted 10,000 years, however, then total human utility over that time would be 10,000NX. Say however that the savings necessary for people to develop the technology necessary to prevent their extinction in 100 years would reduce their yearly utility by half, meaning their yearly utility was only NX/2. The people therefore have two options: live without the saving, and become extinct in 100 years, or live only half as happily with saving, and live 10,000 years. The former would generate 100NX total human utility before the race was wiped out, and the latter would generate 5,000NX total human utility. Therefore, a planner concerned with maximising overall utility over an indefinite timespan, would choose the latter: sacrificing the utility/satisfaction of the people currently living, in favour of the utility of the people who would live in future.
To Z1235:I understand the economic calculation problem, but again that concerns maximising the utility of those currently living, and doesn’t account for those yet to be born. From the quantitative utilitarian perspective described above, planners could justify reducing the outcomes for those currently living in the name of better outcomes for those who’ll be living in future. Not that I’m arguing they should, as I’ve said earlier, just describing a perspective that could be used to justify such intervention.
To Z1235:You said “What other measure of satisfaction/utility/value exists apart from the individually subjective one?” Each person has different subjective values. If someone thinks that a mandatory savings scheme, and the consequent higher growth, would benefit them somehow, do you not deny that it would be rational for them to pursue the implementation of such a scheme? It mightn’t maximise your utility, but it would maximise theirs.
And to Jay: Why would it need to be forced if it works? It ‘works’ in the sense of increasing economic growth in GDP terms, but it doesn’t ‘work’ in the sense of maximising people’s subjective utility. If you told the population of say Greece: “alright, I want you all to save 30% of your income, as if you do our GDP will be 25% greater in forty years time than it would otherwise”, do you think they’d do it? No, because they value present consumption over arbitrary future growth.
Mandating/regulating X (rate of savings, interest rates, welfare/charity, etc.) is central planning of X, as opposed to voluntary (free) action determining the X which maximizes individual subjective utility/satisfaction. So yes, you are wrong. North Korea is not the only instance of central planning today. Far from it.
Yes, central planning of X, but when you omit said X from the discussion, you make it seem like you are talking about total central planning. And in your post you drew on the general knowledge of the members of this board of the arguments against total central planning, but was instead applying it to central planning of X, which results in an unfair acceptance of your argument.
It’s like saying “violating the NAP is unjustified” and having everyone cheer, while you were actually talking about violating NAP after proper judicial proceedings, which is acceptable.
What’s “total” central planning? Even North Koreans still get to sleep and pee whenever they want, I think.
I meant central planning of economic production and major transactions.
As in the communist Bulgaria once forgot to order factories to make toothbrushes and the poor nation had bad breath that year.
“total” central planning is not an absolute term (it is left to interpretation), but what I describe as “total” central planning is definitely more far-reaching than your central planning of X, which may just be central planning of the rock in front of 123 Main Street. The extent of the control makes the difference between mere regulation and full out central planning.
I think
Or do they … O.o
The fish oil intervention was your idea not mine, and we’re talking about your point of view, not mine. Only the individual himself can assess the value of any action proposed or performed. I would not consider making the individual to swallow fish oil or have force used against him worth the possible health benefits. That is not the issue, if you read my post then I put a lot of qualifications upon the actual benefits of the intervention but that’s not the issue anyway, the issue that I was dealing with was the actual implications of the intervention itself, this does not call for an attack based upon the fact of force involved.
We cannot measure utility, indeed the idea of more or less utility is nothing more than a theoretical concept therefore we cannot say if utility is lost or gained due to our actions.
As I wrote in a previous post in this thread:
The chances of anyone being that held back by a manditory saving policy is quite slim. The fact is that if perfectly imposed there will be increases in long term growth and a decrease in current consumption. Whether or not this is good depends upon the feelings and beliefs of the individual in question.
I know exactly what subjective values are thank you, and I apply the concept much more doggedly than many around here who take ethics seriously. And no, first of all I can value the actions of person B and what person B does, I might be more adept at predicting what will actually bring about the most utility to person B, on a national level I accept that this is so improbable that it isn’t worth speaking about because it works at a personal level, but also the individual can value the actions of others and generally estimate and consider his own utility. If the manditory savings practice is enacted then let us say that it will take two decades for the standard of living to overtake what it otherwise would (we have to look at not only what the standard of living originally was but also the growth that the economy would otherwise experience) then from that point on the vast majority will be better off than they would otherwise be, and after another decade or two practically everyone would be better off than they otherwise would have been. So if you value the increased utility and material progress of all following generations more than the forced short run suffering then all else equal you will have to support the manditory savings intervention.
Then I’m not sure what Mises you know. Possibly Mises the social theorist, not the economist?
“It is logically impossible to reconcile the point of view of the economist and that of the interventionist. If prices are uniquely determined by the market data, they cannot be freely manipulated by government compulsion. The government’s decree is just a new datum, and its effects are determined by the operation of the market. It need not necessarily produce those results which the government wants to realize in resorting to it. It may happen that the final outcome of the interference is, from the point of view of the government’s intention, even more undesirable than the previous state of affairs which the government wanted to alter.”
"The notion of right and wrong is a human device, a utilitarian precept designed to make social cooperation under the division of labor possible. All moral rules and human laws are means for the realization of definite ends. There is no method available for the appreciation of their goodness or badness other than to scrutinize their usefulness for the attainment of the ends chosen and aimed at."
“State and government are not ends, but means. Inflicting evil upon other people is a source of direct pleasure only to sadists. Established authorities resort to coercion and compulsion in order to safeguard the smooth operation of a definite system of social organization. The sphere in which coercion and compulsion is applied and the content of the laws which are to be enforced by the police apparatus are conditioned by the social order adopted. As state and government are designed to make this social system operate safely, the delimitation of governmental functions must be adjusted to its requirements. The only standard for the appreciation of the laws and the methods for their enforcement is whether or not they are efficient in safeguarding the social order which it is desired to preserve.”
"As is the case with every other variety of government interference with the price structure, the results obtained not only are contrary to the intentions of the government but produce a state of affairs which, in the opinion of the government, is more undesirable than conditions on the unhampered market."
"The problem of interventionism is not a problem of the correct delimitation of the “natural,” “just,” and “proper” tasks of state and government. The issue is:… Can it realize those ends which people, in resorting to it, want to attain?"
Human Action in the section “the government and the market”.
The basis for all praxeological critiques MUST by necessity be a critique of the means, not the ends, because value is indeed subjective. One end is no more or less rational than the other unless it is impossible to achieve it. Most people would be willing to live in a forceful society for a prosperous nation. Otherwise the libertarian ideal would be the easiest thing in the world to reach.
To z1235: Imagine there’s a sudden ice age, and the eskimos can no longer catch fish. The village with the "emaciated but “rich” lucky survivors" is the only one that survives, due to the large stockpile of fish that was built up, which they can live off until the ice thaws. They might have been cursing the wise chief through the teeth for half-starving them, but after the ice age they’d be grateful to him for forcing them to save, as if he hadn’t then none of them would have survived. Equally, their children and children’s children would also be grateful to the chief, as would the children’s children’s children, and children’s children’s children’s children (all of whom wouldn’t have been born if not for the forced savings). Hence, if someone believed the ‘utility’ of those future generations (who wouldn’t have been born without the savings) made up for the ‘disutility’ of the half-starved earlier generations being forced to save, then they could argue that the chief’s policy was justified.
Exactly what is the purpose of this analogy? What do you see its relation to reality? It has nothing to do with your original statement which revolved around increased investment causing economic growth and individual opportunity. The only purpose I can see is a potential justification for SOME cases of mandatory savings when the alternative is long term doom, which is also something that we could not have known ahead of time, or if it was then it’s almost certain people would save independently.
So is it just theoretical or is there some actual connection you’re trying to make?
To z1235: The purpose of that analogy was to demonstrate an ethical framework from which compulsory savings may be argued for. From the standard economic utilitarian perspective, even if compulsory savings does cause greater economic growth and individual opportunity in the long run, it’s not justified due to the disutility it causes people in the present by preventing them from spending their money as they choose. From the perspective of maximising utility over an extremely long timespan, however, the perspective of maximising the amount of time humanity exists, then this compulsory savings would be justified if it prevented humanity’s extinction. It does relate to the real world, because humanity faces a small chance of extinction, from things such as meteors, supervolcanos, nuclear war, the sun’s heat death, failure of their Earth’s magnetic field, etc. Every unit of technological growth, reduces very slightly the risk of such extinction, by increasing the chance we’ll have the ability to deal with it. For instance, if humanity reached the technological level to settle other solar systems, the risk of extinction would fall to practically zero, since it’d be extremely unlikely for an extinction level event occur simultaneously on every planet we occupied. Hence to someone operating from such a perspective, any decrease in present utility created by forcing people to save would be justified if the increased growth resulting from it decreased the possibility of future extinction (therefore increasing the probability of much higher future total utility) by a sufficient amount to offset the present disutility. To put it simply, arguing for compulsory savings in the name of greater future growth and prosperity is a weak argument, in the sense that people should be allowed to choose to consume more now in exchange for less future growth and prosperity in future. Arguing for compulsory savings in the name of decreasing the probability of the species’ extinction is a stronger argument, from a quantitative utilitarian perspective. Not that I’m advocating either of these arguments, mind you, just describing a particular utilitarian framework within which compulsory savings could be considered rationally desirable.
To z1235: You say if a long-term doom was known ahead of time “then it’s almost certain people would save independently”. What is your reasoning for this? Say for instance, it was known with 99.999% certainty that a gigantic meteor was to hit Earth in 2050, that the only way to deflect it was with a giant laser, and for people to save enough to create this laser they’d have to reduce their standards of living by half. Whether or not they did this would depend on their preferences: much as someone can rationally choose to smoke, deciding that the pleasure it gives them makes up for the reduction in their lifespan, people could rationally choose that they’d rather live a prosperous life and be killed by a meteor than live a poor life in exchange for surviving a few years longer. The only way to be certain people saved enough to build the laser, destroy the meter and prevent extinction, would be if savings rates were determined by someone for whom surviving the meteor was of greater importance than having a high standard of living from now to 2050.
Neodoxy, Madmiser – I find no profit in participating further in this thread. Also, please fix your recent posts to reflect who’s saying what and who’s replying to whom.
To z1235: Fixed; I put a bit at the beginning of each paragraph stating who it was to 
And, okay then, thanks for the discussion!