Krugman on Ponzi: I Was Being Cute
Many people have quoted an article Paul Krugman wrote 15 years ago in which he said that Social Security has a “Ponzi game aspect.” So how does Krugman respond? He now claims that he said it because Paul Samuelson had made the same point much earlier. True. In my book, The Joy of Freedom: An Economist’s Odyssey, here’s what I wrote about Samuelson’s famous claim:
MIT economist Paul Samuelson added some of the intellectual backing for these policies. “The beauty about social insurance is that it is actuarially [italics Samuelson’s] unsound.” Samuelson’s point was that if real incomes were growing quickly, each generation could get more out of Social Security than it paid in. While its critics attacked Social Security as a Ponzi scheme, Samuelson beat them to the punch in 1967 by blessing it as one. “A growing nation,” wrote Samuelson, “is the greatest Ponzi game ever contrived.”
But Krugman now says that Samuelson was being “cute” and Krugman “was just emulating him.” Really?