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February 17, 2005
Robert Frank on economic self-interest
NYT: The Theory That Self-Interest Is the Sole Motivator Is Self-Fulfilling
But some economists go so far as to say that self-interest explains virtually all behavior. As Gordon Tullock of the University of Arizona has written, for example, "the average human being is about 95 percent selfish in the narrow sense of the term." Is he right? Or do we often heed social and cultural norms that urge us to set aside self-interest in the name of some greater good?
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France is, of course, not the only place in which the self-interest model's predictions fall short.
Most Americans, for example, leave tips even after dining in restaurants they will never visit again. We take the trouble to vote in presidential elections, even though no single individual's vote has ever changed the outcome in any state. We make anonymous donations to charity. From society's perspective, our willingness to forgo self-interest in such instances leads to better outcomes than when we all act in a purely selfish manner.
It's a new monthly column written by our very own Professor Robert Frank.
Posted by sam at 07:05 PM
A young person's take on privatization of social security
NYT: Greenspan Backs Idea of Accounts for Retirement.
The debate about privatization of Social Security (SS) to me comes down to whether SS is a tax or something else. As someone with absolutely no faith in ever receiving retirement from SS, it's a tax. If it's a tax fine, call it a tax and agree that the goal is to ensure a reasonable retirement for everybody - to maximize value to society. Take it out of my paycheck and let me try to forget about it.
The current system is a bit different. (Some of it) is my money, sure, but some beaurocrat will invest it in T-Bills and AAA bonds for 50 years and give me maybe 80% of what I put in. No thanks. Not to mention that our administration's poor fiscal policy gives me increasing unconfidence that the money will still be there when I retire.
Bush wants to privatize it, to turn it into something like an IRA or 401(k) and allow me to make my own investment decisions. That must mean that it's my money, right? If I'm an adult and can be trusted to make my own investment decisions, let me make all of my investment decisions - to maximize value to the individual.
And with my particular investment goals and risk profile, I might like to invest in assets likely not to be included in the options with a Fidelity Social Security Account™. In Brazil, Bulgaria, maybe Argentina. Maybe starting a business myself or investing in another small business. Will Fidelity give me those options? Probably not.
Given these four choices (taxation, state-run investment, privatization, nothing), I'll take the first or the last. The other two are strange in-between choices that minimize value to me (state-run investment) or to society (privatization).
Posted by sam at 03:14 PM