The Insecurity of Ponzi Schemes
29 December 2008
Editor, The New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Like many people, Ben Stein was assured that Bernard Madoff "never lost money" ("They Told Me That Madoff Never Lost Money," December 28). Unlike many people, Ben Stein wisely understood this assurance to be nonsense.
Americans should apply Mr. Stein's wisdom to the greatest Ponzi scheme going: Social Security. Many pols and pundits assure us that this program is a great financial deal for ordinary Americans. But in principle Social Security is identical to Mr. Madoff's fraudulent scheme: rather than generate wealth through productive investments, both schemes transfer wealth from newer 'investors' to older 'investors.' As long as a sufficient number of newer 'investors' keep coming aboard - either by being duped a la Mr. Madoff or by being coerced a la Social Security - such schemes appear brilliant. This appearance, however, is a dangerous apparition.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Like many people, Ben Stein was assured that Bernard Madoff "never lost money" ("They Told Me That Madoff Never Lost Money," December 28). Unlike many people, Ben Stein wisely understood this assurance to be nonsense.
Americans should apply Mr. Stein's wisdom to the greatest Ponzi scheme going: Social Security. Many pols and pundits assure us that this program is a great financial deal for ordinary Americans. But in principle Social Security is identical to Mr. Madoff's fraudulent scheme: rather than generate wealth through productive investments, both schemes transfer wealth from newer 'investors' to older 'investors.' As long as a sufficient number of newer 'investors' keep coming aboard - either by being duped a la Mr. Madoff or by being coerced a la Social Security - such schemes appear brilliant. This appearance, however, is a dangerous apparition.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Sunday May 24, 2009 at 12:17pm