How long do you want to live?

[wiggin]

I don't disagree that DB systems are a disaster from a fiscal perspective that gets exacerbated by aging populations, but in general a poor dependency ratio is a disaster irrespective of the type of funding. Hence Japan, SK and much of Europe vs. the US; all have DB systems of some sort (supplemented by private savings) but demographics are the big driver of economic problems, not a pay-as-you-go DB pension system. One is a symptom, not the problem.

This is also why much of the hype about the Chinese economy is overblown. Just by sheer population they have an important economy that is going to continue to grow in importance for a number of years to come - but they're already starting to see their working age population shrink, and it's going to sharply fall off in the coming decades. This is likely to be a massive drag on the economy and a significant barrier to growth.

[RandBlade]

I don't disagree that DB systems are a disaster from a fiscal perspective that gets exacerbated by aging populations, but in general a poor dependency ratio is a disaster irrespective of the type of funding. Hence Japan, SK and much of Europe vs. the US; all have DB systems of some sort (supplemented by private savings) but demographics are the big driver of economic problems, not a pay-as-you-go DB pension system. One is a symptom, not the problem.

If you have one leg in a cast shooting yourself in the other foot is not going to help you walk. Yes a poor dependency ratio is a problem, a major problem not disputing it, but that is not the only problem by any means. We don't live in a black and white world where it is all one or all the other, we have gradients and how you cope is exacerbated or eleviated by what else you do. If we look across Europe which almost universally has had poor birth rates for a long time now but has quite a variety of economic systems in place we see some countries struggling much more than others. There is much, much more at play than just demographics alone. Those problems aren't going away and the demographics is only going to get worse to so if not addressed then the problems of recent years will look like a walk in the park.

Our demographics are a problem if not addressed but at the least in the US, UK and many other countries if we plan accordingly and adapt we can easily cope with the ageing demographics. If we don't, then the problems can become a ticking timebomb. Doesn't mean the bomb will inevitably go off, it can be defused.

This is also why much of the hype about the Chinese economy is overblown. Just by sheer population they have an important economy that is going to continue to grow in importance for a number of years to come - but they're already starting to see their working age population shrink, and it's going to sharply fall off in the coming decades. This is likely to be a massive drag on the economy and a significant barrier to growth.

Agreed. I'm surprised they've still not gotten rid of the one child policy.

[wiggin]

If you have one leg in a cast shooting yourself in the other foot is not going to help you walk. Yes a poor dependency ratio is a problem, a major problem not disputing it, but that is not the only problem by any means. We don't live in a black and white world where it is all one or all the other, we have gradients and how you cope is exacerbated or eleviated by what else you do. If we look across Europe which almost universally has had poor birth rates for a long time now but has quite a variety of economic systems in place we see some countries struggling much more than others. There is much, much more at play than just demographics alone. Those problems aren't going away and the demographics is only going to get worse to so if not addressed then the problems of recent years will look like a walk in the park.

Our demographics are a problem if not addressed but at the least in the US, UK and many other countries if we plan accordingly and adapt we can easily cope with the ageing demographics. If we don't, then the problems can become a ticking timebomb. Doesn't mean the bomb will inevitably go off, it can be defused.

I honestly think we more or less agree on this point. I just think that people often view the aging issue through a lens that is too focused on government finances and individual savings rather than broader macroeconomic trends that are much harder to change with smart policy. Yes, we absolutely can mitigate some of the worst problems relatively quickly through reforms to pensions, healthcare, changing incentives for saving, yadda yadda yadda. But the overall secular change in dependency ratios is going to screw even the best run economy if they don't have enough workers in their population. When you have a limited supply of workers but more and more capital to invest (the ideal outcome in a well-run but aging society) your only recipe for growth is to increase productivity. That's easy to do in a place like India but extremely hard to do in a place like the US, and returns on capital are thus quite low as a result.

There are obviously ways to increase your workforce, but they either take a lot of time (e.g. cash incentives for having kids) or are zero sum in the global totality (increasing immigration). As our world in general is staring a a leveling of population sometime in the next century followed by rapid aging, we have to think about this strategically. Yes, places like the US or UK will continue to act as a magnet for immigrants and talent, which will help domestic considerations... but if global production is being squeezed by secular pressures, there's going to be a big problem no matter what.

On a very broad macroeconomic scale, there's really nothing you can do to address the fact that within a few centuries we're going to be stuck at extremely anemic trend growth driven almost entirely by expensive improvements in productivity.

Agreed. I'm surprised they've still not gotten rid of the one child policy.

I question whether getting rid of the one child policy would really change that much any more. For one, it was always a pretty patchwork policy, but China's birthrate has still plummeted. For another, the cultural changes wrought by the policy are unlikely to bring Chinese fertility anywhere close to replacement level even if it was entirely scrapped. There are plenty of other Asian cultures without the same restrictive fertility rules which are in more or less the same mess - notably South Korea and Japan.