Home > Economics, Idle Speculation, Things that keep me awake at night > The world as a whole cannot save for retirement

The world as a whole cannot save for retirement

People sometimes seem to talk about ‘saving’ or ‘indebtedness’ as if somehow people from the past or future could make a claim on things produced in the present. The world as a whole (a ‘closed economy’ in econ-speak) cannot be ‘lent’ money from future generations to create more goods and services, because goods and services are made in the present, with materials available in the present, manipulated by people actually working in the present. Debt (for example) redistributes claims to real resources amongst presently existing people, not between presently existing people and future people.

This has important implications, as the flipside of debt ‘taking’ from future generations is that by saving, future generations could ‘take’ from the present. Thinking about economic problems in terms of money or other financial assets can often obscure our thinking about what’s going on with the actual production and distribution of, you know, actual stuff. Once we think about things being made and sold/provided, the problem of the world getting older becomes incredibly clear.

Simply put, if our ability to make stuff is a function of how many people are making stuff, then as the ratio of people making stuff to people wanting stuff declines, in order to maintain the same distribution of consumption between makers of stuff and wanters who aren’t makers, then a greater proportion of what the former make must be consumed by the latter.

This will be a problem.

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  1. November 2, 2011 at 10:22 pm
  2. April 12, 2012 at 10:35 am

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