Social Security & The Free Rider Problem

There is a slowly unfolding global catastrophe being driven by two factors:

1. Public pensions
2. Birth control

The second provides unfettered access to one of our core pleasures without all the pesky little side effects (or at least the ones that crawl and ask for your car keys). The second ensures that other peoples' pesky little side effects — which are quite expensive and time-consuming, by the way — will pay for your old age.

The result?

A massive free rider problem — the largest in human history. Humanity is about to get a lot older, and as we've removed the need to rely on our own offspring, there suddenly aren't enough offspring. This has an impact not only on public pensions but on private savings as well. If there aren't enough producers, then you will see (and are seeing) long-term inflation as labor becomes more and more expensive and rare.

Is all hope lost? Maybe not. Taking the US as a particular case, imagine this mitigation:

• For those 35 and younger, they will receive their full social security when they retire so long as their own children (adopted or not, it is the cost and trouble of raising children that we're dealing with) are contributing more to the program than they (the old folks) consume.
• Any amount contributed by the children, beyond what their own old folks consume, would be distributed to others eligible for social security — up to 100% of their previously specified benefit.
• Any amount beyond that would be part of the social security surplus - as presently defined.

It is highly aggressive... then again, the US, EU, China and others are in serious trouble. If you're infertile or unmarried, well, you won't be spending all that money on kids, so you should save more for yourself. If your kid is a washout, that sucks. Maybe have a spare, and try and raise children capable of earning a living.

Could this approach mitigate the upcoming catastrophe by reintroducing the traditional economic relationship between the generations?

I am wearing my flame-proof suit and ready for your fireballs!

Full disclosure: I have six kids and I live in a country that is well above the replacement rate for children. Israel is the only OECD country not facing this free-rider problem... Thus, for me, this is more of a thought experiment than a personal challenge. In other words, I don't feel your pain.