This article by Norma Cohen, which Paul Krugman and others think is very important, strikes me as proving too much. Cohen writes,

Britain’s experiment with substituting private savings accounts for a portion of state benefits has been a failure. A shorthand explanation for what has gone wrong is that the costs and risks of running private investment accounts outweigh the value of the returns they are likely to earn.

If that’s true, then all private investment vehicles, from personal savings accounts to 401(K) plans to mutual funds to TIAA-CREF, ought to be shut down immediately and replaced by government commissars.

Social Security is a set of promises backed by the government’s ability to collect taxes. You can earn a decent return on your Social Security contributions, as long as the government continually has the ability to extract ever-larger tax revenues from subsequent generations. That strikes me as a system that’s bound to prove risky sooner or later.

Meanwhile, if Krugman would like to trade me his current TIAA-CREF balance for what his original investment would have earned if invested in Treasuries, I’ll be glad to make the deal.

For Discussion. What lessons are there to be learned from the British experience?