Our Ridiculous Approach to Retirement (US Stupidity)

[Junghalli]

Because individual psychology demotivates further production after the government starts taking more than around 50% of your earnings, no matter the amount you are earning. So without major alterations to human psychology, the concentration of capital caused by increasing productivity with a reducing number of workers will yield a reduction in economic output because the individual tax burden will rise above the point where individual humans reduce their output.

If the "problem" is that it's easy to create a large surplus with little effort is that really necessarily a problem?

[The Duchess of Zeon]

Because individual psychology demotivates further production after the government starts taking more than around 50% of your earnings, no matter the amount you are earning. So without major alterations to human psychology, the concentration of capital caused by increasing productivity with a reducing number of workers will yield a reduction in economic output because the individual tax burden will rise above the point where individual humans reduce their output.

If the "problem" is that it's easy to create a large surplus with little effort is that really necessarily a problem?

Yes, because the psychology of the mega-rich means they will reduce that surplus if more than 50% of it is confiscated via taxation.

[Broomstick]

At least if we tax at Duchess's 45-60% the situation will significantly improve. I'll take improvement over the status quo. I'll take better over waiting endlessly for perfection.

[Junghalli]

Yes, because the psychology of the mega-rich means they will reduce that surplus if more than 50% of it is confiscated via taxation.

Assuming this becomes a problem ... it seems to me there's going to be a curve here. On the one hand you want to maximize liesure, on the other hand you also want to have enough material productivity that a decent standard of living remains feasible. There's going to be an optimum and it's probably not going to be at either at end of that scale; there will be a balancing act.

What makes you sure that long retirements are undesireably on the liesure maximization side of the optimum?

[The Duchess of Zeon]

At least if we tax at Duchess's 45-60% the situation will significantly improve. I'll take improvement over the status quo. I'll take better over waiting endlessly for perfection.

Yes, the tax structure should be crafted so that all earnings more than per capita GDP should be taxed at a rate such that each person paying taxes pays a level slightly above 48% of income, sufficient to balance the reductions in productivity above 48% of income taxation (this is total taxation from all sources) versus increased revenue. This point will probably fall around 55% of total income, but that's just a WAG.

[The Duchess of Zeon]

Assuming this becomes a problem ... it seems to me there's going to be a curve here. On the one hand you want to maximize liesure, on the other hand you also want to have enough material productivity that a decent standard of living remains feasible. There's going to be an optimum and it's probably not going to be at either at end of that scale; there will be a balancing act.

Yes, that's what I'm saying, that all of these things can be optimized ultimately.

What makes you sure that long retirements are desireably on the liesure maximization side of the optimum?

Existing projections of increases of wealth in western societies. You seem to be far more optimistic about those in the future.

I guess the fundamental point that I'm trying to warn people about is that, the human brain evolved to make humans successful in situations of extreme scarcity. That evolution results in extremely perverse outcomes in a society trending toward post-scarcity.

[Junghalli]

Existing projections of increases of wealth in western societies. You seem to be far more optimistic about those in the future.

Could you elaborate on this please?

[The Duchess of Zeon]

Existing projections of increases of wealth in western societies. You seem to be far more optimistic about those in the future.

Could you elaborate on this please?

I mean that total social wealth being higher makes it cheaper as a proportion of that wealth to provide "minimum acceptable" benefits. If social wealth stops increasing due to resource constraints of any kind, then we will be left near current income levels, which aren't enough to sustain minimum acceptable benefits without widespread employment.

If resources allow for continued expansion of total social wealth, this will not be an issue.

Since we both know the planet is finite, though, the question is if any kind expansion can possibly be achieved from only Earth resources to a sufficient level to make increased leisure lifestyles actually possible. I think not.

[The Duchess of Zeon]

Basically, resource scarcity coupled with productivity nonscarcity may be a permanent trap of a single-planet species.

[The Duchess of Zeon]

Also there's the possibility that "minimum acceptable" may increase over time, as it is a highly subjective definition. Look at recent attempts to define broadband internet access as a human right. Does this mean human rights were unobtainable in the 18th century, or was a grain dole and free housing good enough then? If the minimum acceptable provision to humans continues to increase, then increasing resource nonscarcity may not actually keep up with demand anyway. What I do know however is that with a reasonable level of employment you can maintain successful wealth redistribution within a fixed quantity resource base indefinitely.

[Junghalli]

I mean that total social wealth being higher makes it cheaper as a proportion of that wealth to provide "minimum acceptable" benefits. If social wealth stops increasing due to resource constraints of any kind, then we will be left near current income levels, which aren't enough to sustain minimum acceptable benefits without widespread employment.

If resources allow for continued expansion of total social wealth, this will not be an issue.

Since we both know the planet is finite, though, the question is if any kind expansion can possibly be achieved from only Earth resources to a sufficient level to make increased leisure lifestyles actually possible. I think not.

Basically, resource scarcity coupled with productivity nonscarcity may be a permanent trap of a single-planet species.

Well, I'm generally skeptical of this brand of Malthusianesque thinking, so yeah, I guess I am more optimistic than you. I can't offer a rigorous defense of anti-Malthusianism but I'll just observe:

1) What was the carrying capacity of the Earth with the technology of 1500? I bet a lot lower than now. Advancing technology has a way of allowing resources to be more effectively utilized to create high living standards.
2) Our society is wasteful and inequitable; I bet there's a lot of room for improvement there without even touching whizz-bang star trek wondertech.

More to the point, even taking this Malthusianesque perspective as a given it occurs to me that the optimum I talked about is probably different for different people. Me, for example, I always joke that I make a shitty capitalist because give me basic comfort and I'm happy and I can't see the appeal of busting my back to afford a huge house and a nice car when I never really get to enjoy it cause I work 70 hours a week; I'd rather have liesure than luxury. Some people seem the opposite though. So really, you want the system to have flexibility.

I do like the idea of having different retirement ages from say 60 to 75 with different levels of benefits it entitles you to. Your choice whether you want to prioritize liesure or luxury. I guess I'm not really disagreeing with you here, except you seem to think it will work out so the optimum for most people will be to retire at 70, and I suspect we could do better than that.

Edit: as far as anti-Malthusianism goes, I'll also point out that just because the Earth has 7 billion people now doesn't mean it has to have 7 billion people forever; even if you assume a hard Malthusian cap, long-term you can let each person have a much bigger slice of the limited pie just by having less people claiming a piece, and arranging for that to happen just requires reducing the birth rate below replacement level (assuming nobody invents an immortality treatment afterward).

[The Duchess of Zeon]

My contreargument is that the wastefulness and inequitableness is built into the human psyche through evolution;

In particular such that in a social capitalist society where there is total nonscarcity of productivity, wealth concentration will approach unity; but psychologically we cannot obtain more than ~48% of that wealth to redistribute to the other 99.9% + part of the population not involved in production, due to human psychology being based in biological terms around an environment of scarcity. This means that unless ~48% of the overall GDP being distributed to 99.9% + of the population is sufficient to meet all of their perceived needs, the society will fail.

To wit: Unless artificial inefficiency is imposed, society will collapse unless the average living standard provided by 50% of per capita GDP is sufficient to meet social demands for living standards. If it is not sufficient, then artificial inefficiency must be imposed and the best way to do this is to spread out control of production capital, probably via syndicalism.

[Junghalli]

There's a lot I'd take issue with in your analysis, but I can't conclude your central idea (that mandating inefficiency may be a good idea) to be necessarily without merit.

Though I'm kind of curious whether you hold the view that the general wastefulness and inequitability of present society is an inevitable result of human nature (rather than just the more specific "we can't redistribute more than 48% of people's wealth without negative consequences"), as the way you emphasize that first sentence seems to imply to me. In which case let's just say this another area where you're more pessimistic than I am.

[Simon_Jester]

Worst case, either the "accepted" standard of living declines until it can be achieved on half of per capita GDP, or (more likely IMO), something like half or so of the population remains adequately employed, in which case we only need to provide "acceptable" living for the remainder... which means we only need to be able to support half the population on half of GDP, which really ought to be possible.

This only stops being true if we automate the system so far that skilled human labor becomes irrelevant, in which case we might as well declare the Singularity and call it a day, see below.

The reason we can't just keep increasing taxes is that the Laffer curve actually applies above 48% of total income being taxed (there was a Stanford study), so we'll depress economic productivity once we exceed that cutoff by high enough that the depression in desire to work equals out to the increased revenue, we will receive no further revenue increases from further taxation. So somewhere between 48 - 60% of individual income is the maximum government tax take, from which we have to supply retirees and unemployed youth. Once the combined requirements of retirees and unemployed youth as well as healthcare and all other government functions exceed about 50% of GDP, the system breaks down.

I would be very much surprised to see it get that bad. Life expectancy for retirees is still only 15-20 years (assuming they retire at 65), and Social Security pensions are much smaller than normal income.

The only ways we get the outcome you describe are if health care costs increase totally unabated for a few more decades, or if we hit Greco-Spanish levels of youth unemployment permanently. In the first case, political pressure will force changes in Medicare long before it forces the government to tax at 50% of GDP. In the second case, it makes so much more sense to FIRST put all those unemployed youth back to work, and only THEN worry about whether or not we need to put septuagenarians back to work.

I can imagine a society where your projection comes true and it is necessary for all able-bodied 70-year-olds to remain in the workforce. But we'd have to exhaust so many other options first that predicting it now seems... overspecific. Sort of like predicting a USA run by an overtly communist dictatorship; it could happen but probably only after at least three other iterations of the US government had risen and fallen first, making it spectacularly unlikely in our lifetime.

Mind you, I'm not convinced we're getting to the "endless high employment because of technology" point yet, IIRC people have been predicting that for a long time and it hasn't been happening for a long time. But I'm just going with it as an assumption here, as this strikes me as a discussion worth having.

Well, automation has already squeezed almost all the human labor out of agriculture and manufacturing in the US. And it's beginning to overtake service white collar jobs, as is outsourcing. Unemployed factory workers were able to find jobs in service and clerical work and so on, but where will the unemployed service sector people work?

Unless we invent whole new sectors of the economy and find a reason to pay them, we get high unemployment out of that. I don't know what we'd do. In a command economy it would be easy but it would be essentially state-mandated makework. Under capitalism...? [shrugs]

In short, benefits demand increases and efficiency gains collectively lead to capitalism becoming unviable beyond a certain point, so you have to eliminate capitalism entirely and replace it with something else, or you have to redistribute capital and thus the tax base across a broader spectrum of society. Forced inefficiency is a way to do this.

I still think it very likely that the superrich will need enough skilled people to maintain the automated factories that they have to pay them enough to keep the system running. That doesn't stop being a factor until we figure out how to automate engineering and IT work. At which point we might as well just declare the Singularity and call it a day, as I said above.

Because when the automatic economy can design, build, and maintain itself without human input, it doesn't need its own owners to run any more than it needs engineers or assembly line workers; you could just walk in and appropriate the whole thing and it would still work.

This would make redistribution of wealth easier to achieve, not harder, because the means of production are now self-organizing and you remove the problem that killed 20th century communism. If the factories are smart enough to feed and maintain themselves, you have no further need of the sentient owner-class to run them for you, so you don't need to design a bureaucracy to replace that owner-class.

Stas Bush could probably talk your ear off about this.

I'd much rather have 65-year-olds unemployed and 25-year-olds working, than have it the other way around.

The problem is that the way the system is currently structured, or likely to be structured, that leaves 65 year olds in grinding poverty in all too many cases.

I agree; that's half my point. The way the system is structured is perverse; it forces retirees to keep working, displacing the labor of the most vigorous part of the population, delaying their entry into the workforce, making it difficult for them to start families and raise the next generation.

Or to clarify what I was talking about, it makes more sense to have grandparents not working and newlyweds working, than to do it the other way around. The longer we keep the system running the other way round, the worse the long term consequences will become.

[Starglider]

The US structural employment rate is frankly still small beans and can be eliminated (in principle, not with real-world politics) by;
1) Reducing the trade deficit to zero (by stepping up import duties to arbitrarily high values).
2) Redirecting as much money as possible (given individual skills and ability) from unemployment benefits to paying people to build & maintain national infrastructure.

(1) will result in a significant drop in standard of living due to price rises, but developed world standards of living are largely floating on developing world labor anyway, a rather dubious moral proposition. Note that the US has a diversified enough economy and enough exports, capital fluidity and remaining industry to survive the resulting trade shock with only moderate deprivation - many smaller countries do not.

The notion that people don't want more or better quality things or services is trivially disproved by the fact that most lottery winners greatly increase their spending, rather than saying '$50k is enough for anyone, all the rest can go to charity'. As for resources, at sensible population levels the only one critical one is energy - everything else except possibly helium can be recycled given enough energy. As such we are not going to face an absolute shortage of jobs until (a) we run out of non-renewable energy sources without successfully transitioning to renewable ones or (b) we develop robotics and AI to the point that human labor is not cost effective, even when offshored to the cheapest possible location. In both cases frankly we will have much bigger problems than income inequality.

[Junghalli]

Worst case, either the "accepted" standard of living declines until it can be achieved on half of per capita GDP, or (more likely IMO), something like half or so of the population remains adequately employed, in which case we only need to provide "acceptable" living for the remainder... which means we only need to be able to support half the population on half of GDP, which really ought to be possible.

The CIA World Factbook tells me the USA has a per capita GDP of $48,100. So a naive calculation is that would make around $23K available for welfare, minus what you need for other government functions, in the worst case scenario.

Alternately, if we're in wild hypothetical scenario territory I find it quite possible to imagine that wealth redistribution sufficient to depress productivity might still be worth it; lower productivity doesn't necessarily hurt the standard of living if the benefits of high productivity are all being funneled to a minority. So 48% is one plausible optimum but not the only one (unless someone has an argument for why lowered productivity must be to a degree that cancels out any gains from wealth redistribution).

I can imagine a society where your projection comes true and it is necessary for all able-bodied 70-year-olds to remain in the workforce. But we'd have to exhaust so many other options first that predicting it now seems... overspecific.

Yeah, I second this.

The notion that people don't want more or better quality things or services is trivially disproved by the fact that most lottery winners greatly increase their spending, rather than saying '$50k is enough for anyone, all the rest can go to charity'.

Has anyone advanced such a notion?

The nearest I can recall is me saying the optimum is probably somewhere between maximum productivity and maximum liesure, which does not imply that people don't want more or better things, simply that they also want liesure and don't always prioritize the first over the second.

Edit: ah, if I read you right you are using that as evidence that there will not be an unemployment problem, not responding to anybody - didn't realize that at first.

[Simon_Jester]

The CIA World Factbook tells me the USA has a per capita GDP of $48,100. So a naive calculation is that would make around $23K available for welfare, minus what you need for other government functions, in the worst case scenario.

We are also nowhere near the point where automation becomes so efficient that only a small fraction of the population is actually doing anything to keep the machine running. As long as that doesn't happen, Duchess's predictions aren't going to come true.

At the moment, the system would probably work even if another large block of workers or two were laid off... but a huge number of people are employed in jobs that are either indirectly necessary*, or in high demand by people whose jobs are directly necessary**. To get to where Duchess is talking about you'd have to automate a lot of those jobs, too.

But as long as something like half the population is seriously involved in working and producing GDP, we won't hit the Laffer curve limit in terms of our ability to support the other half at our per capita GDP. Being able to support people on less than per capita GDP is just icing on the cake.

*Think elementary school teachers; the economy would function without them for 10-15 years, but then things would start to come apart.
**Computer programmers and engineers need plumbers, electricians, waiters, policemen, and so on. Get rid of them and the elite technocrats' life becomes intolerable.

Alternately, if we're in wild hypothetical scenario territory I find it quite possible to imagine that wealth redistribution sufficient to depress productivity might still be worth it; lower productivity doesn't necessarily hurt the standard of living if the benefits of high productivity are all being funneled to a minority. So 48% is one plausible optimum but not the only one (unless someone has an argument for why lowered productivity must be to a degree that cancels out any gains from wealth redistribution).

Marina actually tried to adjust for this- she pushed the percentage to where she figured further decrease in total GDP from a tax hike would reduce the tax base enough to cancel out the increased rate.

That only got up to 55%. Tax more than that and you have less to spare, unless you reinvest those taxes in putting people to work so that the future tax base can expand and leave you with fewer people on the dole.

The notion that people don't want more or better quality things or services is trivially disproved by the fact that most lottery winners greatly increase their spending, rather than saying '$50k is enough for anyone, all the rest can go to charity'.

Has anyone advanced such a notion?

The nearest I can recall is me saying the optimum is probably somewhere between maximum productivity and maximum liesure, which does not imply that people don't want more or better things, simply that they also want liesure and don't always prioritize the first over the second.

Edit: ah, if I read you right you are using that as evidence that there will not be an unemployment problem, not responding to anybody - didn't realize that at first.

I think someone here said this recently, hell it might have been Starglider... or not. Either way:

One of the first things people do when they get a good solid income is buy back their time. They hire babysitters so they have free hours to go out and do fun things. They eat out more often and save time preparing food and cleaning dishes. They buy new things instead of taking time to repair them. They pay to get their lawn mowed or their car washed instead of doing it themselves. They (often) go on vacations, even if it makes their career prospects a bit less stellar, because they want a break from day-in day-out grind.

So yes, everyone wants leisure, and the more economic freedom you give someone the more leisure they seek out, up to a certain limit where you're actually happy with the amount of work you do.

Most people would probably be optimally happy if they were working close to their own version of that limit.

[Junghalli]

Semi-random thing that occurred to me:

I wonder if that 48% maximum applies to support for family as well as taxes? I doubt it. Anecdotally, I surrender more than 48% of my work income to my family's control (granted this isn't exactly the same thing as giving it to other people ... I benefit from it too). Anyone with more than one dependent who doesn't live better than they do must be spending more than 48% on them (including "communal" expenses like rent).

It just occurs to me that government welfare isn't necessarily the only mechanism to redistribute wealth from workers to non-workers. Granted, our society isn't big on extended family networks and obligations to family members that aren't spouses or underage children, and I can see potential issues with such a set-up that relies on that ... but it might be something to consider, as long as we're wildly speculating. It might be too much to ask for somebody to give 80% of their wealth to strangers ... but for people in their monkeysphere, I suspect that might change. My impression is most anti-tax types don't so much want to keep the money for themselves as to keep it for themselves and their own immediate personal circle.

[Simon_Jester]

No, I don't think it does. Humans don't think of money spent on our own children the way we think of money spent on someone else's children.

The real problem with rebuilding extended family, Junghalli, is that you'd have to reorganize modern labor relations. For decades, the job market has assumed that people are free to commute and free to move. The Internet just reinforces the trend. It makes it easy for unemployed people to saturate the HR department of everyone with a vaguely applicable offering.

If you can't move across town (or across state, or across country) to find a new job, you're a lot less employable in most of the skilled technical fields likely to survive the rise of automation. Which means keeping an extended family together for any length of time gets harder.

Plus, if wealth gets really concentrated, and unemployment gets really high, extended families become actively counterproductive. A handful of billionaires can afford to support a clanlike extended family in style (see Saudi oil billionaires), but anyone else who is 'only' moderately successful (upper middle class) will find themselves dragged back to the poverty line by clamoring relatives.

[Junghalli]

^ True.

Can't really think of any other content to put in this post.

[D.Turtle]

Slight problem with The Duchess of Zeon's ideas: The point of maximum revenue of tax rates is estimated to be somewhere around 70%.

[Straha]

Because individual psychology demotivates further production after the government starts taking more than around 50% of your earnings, no matter the amount you are earning. So without major alterations to human psychology, the concentration of capital caused by increasing productivity with a reducing number of workers will yield a reduction in economic output because the individual tax burden will rise above the point where individual humans reduce their output.

If the "problem" is that it's easy to create a large surplus with little effort is that really necessarily a problem?

Yes, because the psychology of the mega-rich means they will reduce that surplus if more than 50% of it is confiscated via taxation.

I don't think that's true. During the 50s, 60s, and early 70s the upper tax rate in the United Stats was immensely high, and yet there was massive growth and personal investment even from the mega-rich. People will always try to earn more, even if it's only a little more, and historically this is empirically proven time and again. Even now your claim would mean that there would be no "mega-rich" individuals in France, where the personal income tax can be as high as 70% and there's an accompanying wealth tax (before sales tax), or Italy where personal income tax combined with national retirement and pension schemes and provincial taxes can easily take over 50% of income (again, before some rather harsh sales taxes), or Belgium where anyone who earns over $40k pays a 50% federal income tax, and municipal income taxes run around 10%. (Sweden also applies, but I can't remember the full figures off the top of my head. IIRC The income tax is 55%, and then there's an additional payroll tax of 5%, and then more on top of that.)

[The Duchess of Zeon]

Slight problem with The Duchess of Zeon's ideas: The point of maximum revenue of tax rates is estimated to be somewhere around 70%.

I'd need to reference the original Stanford study to come back to the rate of decline after 48%. I'll get back to you on that.

[Surlethe]

I don't think that's true. During the 50s, 60s, and early 70s the upper tax rate in the United Stats was immensely high, and yet there was massive growth and personal investment even from the mega-rich.

You can't compare a world where there are strict controls on capital movements to the modern economy.

People will always try to earn more, even if it's only a little more, and historically this is empirically proven time and again. Even now your claim would mean that there would be no "mega-rich" individuals in France, where the personal income tax can be as high as 70% and there's an accompanying wealth tax (before sales tax), or Italy where personal income tax combined with national retirement and pension schemes and provincial taxes can easily take over 50% of income (again, before some rather harsh sales taxes), or Belgium where anyone who earns over $40k pays a 50% federal income tax, and municipal income taxes run around 10%. (Sweden also applies, but I can't remember the full figures off the top of my head. IIRC The income tax is 55%, and then there's an additional payroll tax of 5%, and then more on top of that.)

Strawman: The claim is that the income available for taxation, hence tax revenues, would rise as a very high tax rate fell, not that there would be no wealth left.

[The Duchess of Zeon]

I don't think that's true. During the 50s, 60s, and early 70s the upper tax rate in the United Stats was immensely high, and yet there was massive growth and personal investment even from the mega-rich.

Growth would have been higher still without that tax rate, as was proved when JFK easily restarted the economy with elimination of the 90% top marginal rate.