The Moral Case for a Market-Based
The economic effects of changing Social Security to a marketbased system are the subject of intense debate among public policy analysts. Will private investment boost national savings? Will it increase the rate of economic growth? What are the transition costs? These are all important questions. However, the primary concerns about changing Social Security to a system based on choice are moral, not economic. Social Security was accepted by most Americans on moral grounds. Ultimately, individual accounts will not be politically viable unless they are defensible on moral grounds. The morality of individual accounts is not, however, simply a strategic matter. Reform would not be justifiable if it were economically beneficial but morally suspect.
One might expect that a moral argument for a market-based retirement system choice would be framed in terms of classical liberal values, such as respect for individual rights and the liberty to manage one's own affairs. Indeed, such values are an important reason to give individuals the freedom to choose how to invest their pension contributions—but they are not the only reasons or the only values that direct us to a new retirement system based on individually owned, privately invested retirement accounts.
We live in a society that celebrates moral pluralism, where different values compete for the most politically significant award. While most Americans believe that individual rights and liberty are important, values such as fairness, community, and security are also considered important. When those values appear to be at odds, some people think liberty must be traded off for the other values. Thus, they do not consider arguments framed solely in terms of individual
Originally published as Cato Institute Social Security Paper no. 14, October 29, 1998, and updated to reflect current information.