The “I’ve paid in all my life” fallacy

SOCIAL security is often described as the “third rail” of American politics—touch it and you die. Britain’s prime minister has just tied herself into a tangle over the way to fund long-term care for the elderly.

The problem is made more difficult because of the way that such benefit schemes were established and marketed to the public—as insurance schemes in which what you receive in benefits relates to what you put in. When pension schemes were set up by Franklin Roosevelt (pictured left) in the 1930s or in Britain, by David Lloyd George (pictured, right) in the Edwardian era, the insurance notion was something people could easily grasp (private schemes already existed) and could be seen as fair. 

This was fine in the early years of such schemes when the number of people contributing was far greater than the number of people taking benefits. But as our societies age, the costs rise and the inadequacy of...Continue reading