Compulsory Purchase of Annuities

One possible justification for such compulsion is strictly paternalistic. People could if they wished decide to

do individually what die law requires diem to do as a group. But they are separately short-sighted and

improvident. "We" know better than "they" that it is in their own good to provide for their old age to a greater

extent than they would voluntarily; we cannot persuade them individually; but we can persuade 51 per cent

or more to compel all to do what is in their own good. This paternalism is for responsible people, hence does

not even have the excuse of concern for children or madmen.

Those of us who believe in freedom must believe also in the freedom of individuals to make their own

mistakes. If a man knowingly prefers to live for today, to use his resources for current enjoyment, deliberately

choosing a penurious old age, by what right do we prevent him from doing so? We may argue with him, seek

to persuade him that he is wrong, but are we entitled to use coercion to prevent him from doing what he

chooses to do? Is there not always the possibility that he is right and that we are wrong?

A possible justification on liberal principles for compulsory purchase of annuities is that the improvident will

not suffer the consequence of their own action but will impose costs on others. We shall not, it is said, be

willing to see the indigent aged suffer in dire poverty. We shall assist them by private and public charity.

Hence the man who does not provide for his old age will become a public charge. Compelling him to buy an

annuity is justified not for his own good but for the good of the rest of us.

The weight of this argument clearly depends on fact. If 90 per cent of the population would become charges

on the public at age 65 in the absence of compulsory purchase of annuities, the argument would have great

weight. If only 1 per cent would, the argument has none. Why restrict the freedom of 99 per cent to avoid the

costs that the other 1 per cent would impose on the community?

The belief that a large fraction of the community would become public charges if not compelled to purchase

annuities owed its plausibility, at the time OASI was enacted, to the Great Depression. In every year from

1931 through 1940, more than one-seventh of the labor force was unemployed. And unemployment was

proportionately heavier among the older workers. This experience was unprecedented and has not been

repeated since. It did not arise because people were improvident and failed to provide for their old age. It

was a consequence, as we have seen, of government mismanagement. OASI is a cure, if cure it be at all, for

a very different malady and one of which we have had no experience.

The unemployed of the 1930's certainly created a serious problem of the relief of distress, of many people

becoming public charges. But old-age was by no means the most serious problem. Many people in

productive ages were on the relief or assistance rolls. And the steady spread of OASI, until today more than

sixteen million persons receive benefits, has not prevented a continued growth in the number receiving

public assistance.

Private arrangements for the care of the aged have altered greatly over time. Children were at one time the

major means whereby people provided for their own old age. As the community became more affluent, the

mores changed. The responsibilities imposed on children to care for their parents declined and more and

more people came to make provision for old age in die form of accumulating property or acquiring private

pension rights. More recently, the development of pension plans over and above OASI has accelerated.

Indeed, some students believe that a continuation of present trends points to a society in which a large

fraction of the public scrimps in their productive years to provide themselves with a higher standard of life in

old age than they ever enjoyed in the prime of life. Some of us may think such a trend perverse, but if it

reflects the tastes of the community, so be it.

Compulsory purchase of annuities has therefore imposed large costs for little gain. It has deprived all of us of

control over a sizable fraction of our income, requiring us to devote it to a particular purpose, purchase of a

retirement annuity, in a particular way, by buying it from a government concern. It has inhibited competitioriln

tnesaleof annuities and the development of retirement arrangements. It has given birth to a large

bureaucracy that shows tendencies of growing by what it feeds on, of extending its scope from one area of

our life to another. And all this, to avoid the danger that a few people might become charges on the public.