Pensions policy and the recession
1. Retirement provision requires a balance between pensions financed by individual saving and pensions paid by the state from taxes and insurance contributions collected from people of working age. The balance to be struck has to reflect the extent to which it is fair to expect future generations to support the current population in old age as against the fact that people of modest means are likely to find saving for retirement very difficult. 2. The Government's policy approach has been based on the view that, for behavioural reasons, individual retirement saving is best facilitated through automatic enrolment into incentivised pension schemes which prevent people having access to their retirement saving until they reach retirement. The Government takes the view that, in order to maintain a fair balance, pension saving should be encouraged and enabled 3. Policy-makers are probably more concerned than households about the burden that some mechanisms for financing retirement impose on future generations. Indeed some households may not fully recognise the implications for their successors of some forms of finance. 4. This means that an overall assessment of whether the nation is saving enough for its changing population structure may give an answer different to that obtained from the question whether and how far existing households have resources adequate to finance their own old age. 5. Capital gains on housing amount to a transfer of resources to existing home-owners from future generations which do not yet own homes and some of the econometric evidence on household behaviour suggests that these gains do affect consumption; they would not do so if households wanted to take full account of the impact of them on their descendents. 6. Savings rates including capital gains have been very high recently. On the other hand savings rates excluding capital gains but taking account of saving by businesses and by the government (both of which contribute to the resources available to address an ageing population) have been low in the last twenty years, both by comparison with earlier periods and relative to other advanced countries. 7. This suggests that policies to raise savings rates are very timely. 8. However, an argument is frequently put forward that, during a recession, the economy can be supported by promoting consumption rather than saving. This raises the question whether the Government's policies of facilitating retirement saving are misplaced. 9. This study concludes that the country's long-term history of …
Saving and the National Economy
Economics focuses on choices that people make and the factors that influence them. Most of these choices are micro-economic in character- decisions to purchase one good rather than another good. But there are two choices which have clear and direct implications for the whole economy. The first is the choice between work and leisure and the second is the choice between consumption and saving. The choice between work and leisure is a proximate determinant of the level of economic activity. In a small open economy, such as the UK, the amount of capital employed per worker is determined internationally by rates of return in capital markets; thus, for any given level of overall productivity it is fair to say that the work/leisure choices normally determines output. By contrast the consumption/saving choice has little influence on output in the short term, if the economy is not suffering from recessionary unemployment. But in the longer term it determines how much of the domestic capital stock is owned by domestic residents rather than by foreigners. If the capital stock is owned by foreigners property income has to be paid to them out of domestic output, so that national income is lower than domestic output. Conversely if domestic saving runs ahead of the need to finance the domestic capital stock the country will be a net recipient of income from abroad and income will exceed output. In either case it is fair to say that, while saving has no impact on output it does determine future national income and thus consumption opportunities.the last twenty-five years policy-makers' attention has been focused on policies designed to alter the balance between work and leisure; indeed the government has an explicit aim of delivering high labour force participation from people of working age. By contrast it has no explicit policy with reference to overall saving in the economy although policy has referred to some specific forms of saving by households (such as pension saving) and the government's macro-economic framework established clear target rules for government saving, i.e. the surplus or deficit on the government's current account. For the government to adopt overall saving as a formal policy goal would mean that it would have to settle on an appropriate definition of saving. As this paper shows, there are several possible definitions of saving. However, for a government taking a long-term view of the nation's affairs, this report argues that of some of the possible definitions are unsuitable, facilitating the choices which might be made for a policy goal. This report begins by discussing different measures of saving and, in particular the way in which they treat capital gains. The UK's saving record is then put in an international context and more detailed sectoral and historical data are discussed. The concept of savings adequacy is then explored. Finally conclusions are drawn.
Epistemic instrumentalism and the reason to believe in accord with the evidence
Epistemic instrumentalists face a puzzle. In brief, the puzzle is that if the reason there is to believe in accord with the evidence depends, as the instrumentalist says it does, on agents’ idiosyncratic interests, then there is no reason to expect that this reason is universal. Here, I identify and explain two strategies instrumentalists have used to try and solve this puzzle. I then argue that we should find these strategies wanting. Faced with the failure of these strategies, I articulate a heretofore neglected solution on behalf of instrumentalism.