Report Rebuffs Arguments for Privatizing Social Security

Source: Rebecca Moore,, May 9, 2011

A recent working paper published by the National Bureau of Economic Research critically analyzes previous attempts to explain conversions of government pension provision systems, or social security systems, to personal accounts.

Common rationales include: higher returns; improvements in domestic financial institutional development; improving labor supply and retirement incentives; and hedging demographic changes. In each case, the report authors contend, a politically-stable and transparent government could have achieved similar results within the traditional system.

In A Matter of Trust: Understanding Worldwide Public Pension Conversions, (subscription required) Kent Smetters and Walter E. Theseira point out that the traditional system also tends to have lower transaction costs, less adverse selection, and other costs.

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