One of the justifications often advanced by liberals in defense of Social Security is that it “helps protect people from their own stupidity”. (I had a very intelligent and rather liberal co-worker make this claim to me just last week.) Todd Zywicki does a good job here analyzing some of the specifically economic reasons to be skeptical of the “stupidity insurance” justification — it both fails to explain some of the key features of Social Security and doesn’t explain why other varieties of economic stupidity should be left ‘uninsured’.

On the theory that it’s never too late to chime in with an opinion (“Haight Speech: Commenting On Yesterday’s News Whenever We Get Around To It”), I’ve got a slightly broader observation about the “stupidity protection” justification: applying it to non-economic stupidity seems to yield profoundly unliberal consequences.

My great-Uncle Ernie did something very stupid when he was a young man. He married someone who can be charitably described as the wrong woman. That decision had very negative consequences for the rest of his life — much worse ones than retirement malinvestment would have. Would the goal of protecting him from the consequences of his stupidity justify a government program to vet the suitability of people’s marriages?

One of Anne’s co-workers had a child with a man who, again putting the point charitably, turned out not to be the best husband and father material in the world. She is now a single mother with limited job skills struggling to raise a child. Would the goal of protecting her from her stupidity justify a government program to vet the suitability of people to have children?

If you are religious, you will no doubt have noticed a lot of secular people making what you judge to be stupid decisions about their spiritual lives. If you are secular, you will no doubt have noticed a lot of religious people making what you judge to be stupid decisions about their spiritual lives. Would the goal of protecting people from their own stupidity justify a government program to reward ‘goodthink’ and punish ‘badthink’?

Something like 62 million people voted for George W. Bush in the last election — provoking one major newspaper to publish a headline “How could people be so stupid?” Would the goal of protecting people from their own stupidity justify making it illegal to vote Republican? (Or Democrat, if you swing the other way?)

In general, if you accept the idea that protecting people from their own stupidity is in itself a justification for government action, you are implicitly advocating a totalitarian government. This is true because stupidity is a ubiquitous feature of human life. There is no sphere of action in which people cannot make stupid decisions, and if it is the job of government to prevent such decisions then government has a role to play in every part of human life. This doesn’t strike me as a viewpoint that liberals should be defending.

(It could be objected that Social Security isn’t about preventing people from making stupid investment decisions, it’s about protecting people from the consequences of stupid investment decisions. I don’t think this objection works, though. Social Security prevents me from deciding where to invest the payroll dollars that are taxed away from me. It works specifically by giving the government control over the investment of that money. If Social Security were only intended to protect me from the consequences of poor investment decisions then it would allow me to make the decisions and then provide means-tested benefits if my investments turned out badly.)

2 Responses to “Social Security and "Stupidity Protection"”
  1. David Foster says:

    An interesting and persuasive argument. But…is managing investments a fundamental human ability like choosing a mate, or is it something more esoteric like, say, circuit design?

    An awful lot of people, including some very smart ones, seem to have trouble with fundamental investing concepts like the relationship between interest rates and security prices, and the discounting of future cash flows to present value.

  2. Kyle Haight says:

    I’m not that sure that choosing a good mate is a fundamental human ability. Half of all marriages end in divorce. Saving for retirement, at a basic level, is pretty obvious. You have to work or you don’t eat, and there’s a period towards the end of life where you can’t work as hard but still need to eat. Hence the need to save.

    Now, there is a lot of basic financial acumen that many people don’t know because it was never taught to them. I suspect that letting people invest a slice of their own payroll taxes would create an incentive for them to learn, just as the spread of 401k plans did and does. (Personally I’ve never understood why concepts like cash flow, security pricing, compound interest, interest rates, etc. aren’t taught in high school along with sex ed and driver’s ed.)

    The more general point (which I think holds true of mating, saving and a lot of other things) is that many people don’t view long-term consequences as fully real. This leads them to make decisions that maximize short-term gain at the expense of long-term costs, such as spending money now on a fancy car at the cost of having to eat dog food in retirement; or marrying someone to sleep with them and then divorcing when the lust wears off.

    It’s possible that expecting people to plan for the long term is asking too much of them, but I doubt it. Certainly telling people not to worry about long-term consequences of short term actions because the government will take care of things doesn’t encourage long-term thinking.

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