When I saw the link here to Mish’s article on pension problems, I perked right up. That pensions would be in serious trouble was obvious to me, and at last, a review article by a top econoblogger? What could be better? Then I read it… And re-read it. Ouch.

I’m sure Mish is a fine economist, but he doesn’t know squat about the pension business. In his very first paragraph alone, he makes three serious mistakes, and things don’t get any better as he goes along. I would probably run out of comment room if I tried to address them all, so let me just address the one I found particularly offensive.

Mish seems to have some sort of philosophical hatred of defined benefit pensions. Throw the risk on the old people, I guess. Our math just can’t handle it! Sorry, Mish, YOUR math can’t handle it. Our math can do so just fine. It’s been doing so for 150 years.

You see, defined benefit pensions are nothing more than annuities with a payment schedule, and the payment schedule is nothing more than a simple regression. This has been done in the annuity/pension business and money has been made at it almost forever because it’s not that hard (well, for an actuary) and because contractual obligations have been met well enough to not have too many folks get mad.

But suddenly it can’t be done? After 150 years, everything is wrong? And this is a pension failure? Throw everything out that has worked for so long? This is a new world?

The only thing new about this world is that we’ve just had a black swan event, and that sort of thing messes everything up. But pensions did not cause that black swan event, and screwing with them will not prevent future black swan events.

I would suggest to Mish then that he spend his time trying to solve the whys of black swan events, something that economists are supposed to try to do, and leave the pension stuff to those who better know the business. It’s not time yet, as he seems to think, to start building the Soylent Green factories.

Dean Baker should retire. He is misguided in his beliefs. I’d say ideas, but he appears to have none of his own.

Don’t everybody rush to flog themselves just yet. The guy that did the study didn’t even cite google. In fact, his stats overstated Google’s actual effect by several orders of magnitude.

Google Adresses it here.

The harvard phys. guy restates what he meant to say here.

(aside…its amazing, a not surprising what media companies will do to get a headline!…thank heavens for NC and many other blogs)

(long goog…argggh)

Link

..[snip]…

Paris Hilton: “Billions and billions served.” (McDonald’s)

Scarlett Johansson: “The best a man can get.” (Gillette)

Heather Mills: “One leg at a time.” (Dockers)

..[snip]..

http://systemicallyimportant.blogspot.com/2009/01/company-mottos.html

I have never understood why it is ok for a CEO to negotiate for a higher pay package but if you got 2 or more non-CEOs doing the same thing at the same time, then it is the WORST THING IN THE WORLD. I’d agree that the unions probably had a bit too much power in the 40’s and 50’s, but that era is long since past.

The Soviet Union did essentially what he is proposing, with full state control of research and development (and the arts), and it was an abysmal failure as they fell far behind the U.S., ending up stealing most of their technology. And ending up with a load of lousy artwork, rivaling even the junk subsidized by the National Endowment for the Arts, and that’s saying something.

The other problem being, of course, that the intellectual property sytem is protected under the Constitution, but that never seemed to slow down a thinktank employee with a “good” idea.

The baby aardvark is adorable.