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Joseph Stiglitz, Aaron Edlin, and J. Bradford DeLong

Print publication date: 2011

Print ISBN-13: 9780231143653

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231143653.001.0001

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PRINTED FROM COLUMBIA SCHOLARSHIP ONLINE (www.columbia.universitypressscholarship.com). (c) Copyright University of Minnesota Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CUPSO for personal use.date: 24 September 2021

The Virtues of Personal Accounts for Social Security

The Virtues of Personal Accounts for Social Security

(p.127) Chapter 15 The Virtues of Personal Accounts for Social Security
The Economists' Voice

Edward P. Lazear

Columbia University Press

This chapter argues that much of the debate on the establishment of private accounts for retirement benefits has missed the main issues. Some proponents argue that recipients will earn higher returns from private accounts. Opponents counter that the higher returns come at the cost of greater risk. Further, opponents argue that the current system is not too much worse than the market alternative and that transaction costs will eat up much of the additions. Many of these arguments miss the mark. The Social Security system is not a mere intermediary as is a stock broker. The current system has goals and functions that go beyond those of a fund manager. So to determine the desirability of private accounts, we must look at all of the fundamentals of the current system. The current system has some desirable features, but it also creates undesirable consequences. Private accounts accomplish the desired goals, but they eliminate most of the undesired consequences. Thus, private accounts are the right solution—but not necessarily because they offer account holders potentially greater returns.

Keywords:   Social Security system, public pension system, private accounts, retirement benefits

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