The problem with Ponzi schemes is that the number of people you can turn to for funds to pay off the current participants quickly goes to zero, leaving someone holding claims that cannot be paid.
But what if you could grow the base of potential participants fast enough? Well, then the scheme can run forever as long as the base grows fast enough relative to the promised payoffs.
Social insurance programs with pay-as-you-go funding, like Social Security, are very similar to Ponzi schemes with a growing base. However, things can go wrong if the system relys on a growing base that doesn't grow.
In Japan the base is not growing and the Japanese government is concerned. One way to help kick up the birth rate might be to reduce the number of hours spent at work. As this article from CNN shows, this is actually a policy the government is promoting.
So far the US government is not pursuing a similar policy, but that may be because the US can rely to some extent on immigration to swell the base. In Japan, immigration is much more heavily restricted. This means the Japanese have to produce their own domestic Ponzi participants rather than import them.
But what if you could grow the base of potential participants fast enough? Well, then the scheme can run forever as long as the base grows fast enough relative to the promised payoffs.
Social insurance programs with pay-as-you-go funding, like Social Security, are very similar to Ponzi schemes with a growing base. However, things can go wrong if the system relys on a growing base that doesn't grow.
In Japan the base is not growing and the Japanese government is concerned. One way to help kick up the birth rate might be to reduce the number of hours spent at work. As this article from CNN shows, this is actually a policy the government is promoting.
So far the US government is not pursuing a similar policy, but that may be because the US can rely to some extent on immigration to swell the base. In Japan, immigration is much more heavily restricted. This means the Japanese have to produce their own domestic Ponzi participants rather than import them.
Update (1/28) - Here is Rick Evan's take on the same article.
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Interesting comparison, Kerk. I hadn't thought about it much, but Madoff and SS are quite similar. The sad part is that we participate in SS knowingly; at least Madoff's investors could claim to have been duped.
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