Generational justice is extremely tricky

A short time ago, I wrote a couple of pieces (I, II) critical of an Evan Soltas’ article about the projected deficits in Social Security and Medicare. In those two pieces, I focused primarily on what I thought was a confused policy position of Soltas. But I also want to address the philosophical ideas surrounding generational justice that Soltas brought up.

Soltas basic moral argument is that deficits in old-age entitlement programs create generational injustice because they lead to a transfer from the young to the rich. He writes:

Every generation inherits institutions, knowledge, technology and private wealth, and with that, you could argue, some obligation to its forebears. Still, young people shouldn’t also inherit fiscal obligations so huge as to absorb much of their own effort. Using public borrowing to underwrite a huge transfer of wealth from the young and unborn to the old breaches that basic notion of fairness.

This quote is not terribly specific, but Soltas’ follow-up piece about squirrels reveals a desert notion of generational equity. That is, the contributions from every generation and the payouts they receive should basically equal out. That way no generation is receiving more in payouts than they contributed in, something that would be tantamount to theft from some other generation.

As I mentioned in a prior post, the first confusion in this is that it is trivially easy to have every generation get more in payouts than they contribute in. So long as the economy is growing, there should never be a problem with this. In that sense, everyone could be a net moocher. The only possible loser in this scenario is the last generation that ever lives. They would would foot the bill for the surplus of the generation before them and have no one available to foot the bill for them. Of course if you are the last generation ever, you probably have much bigger problems to contend with.

Beyond that, desert-based approaches to generational justice run into very tricky problems around technology and capital. The capital problem is the less tricky of the two. The issue is that the older generation has built out a considerable amount of capital (both public and private), and that capital will be passed over to the younger generation eventually. On a pure desert-based approach to generational justice, the full value of that capital will need to be given back to the older generation. Some of that value might be captured by selling the capital to the younger generation, but not all of it will.

Public capital especially — think about public infrastructure for instance — will never be sold to the younger generation. So to really balance accounts between young and old, you would need to calculate the value of the marginal capital built out by the older generation that will flow to the younger generation without compensation. Then that value would need to be paid out to the older generation from the younger generation somehow, e.g. through transfer taxes like those that already fund Medicare and Social Security.

The real trouble comes when you start thinking about compensating for technology. Soltas is in an especially relevant position to understand how significant technology transfers are. His generation did not invent the computer, the integrated circuit, the internet, or any of the other technology underlying his blogging. These technologies were integral to him being able to become a contributor at Bloomberg and Wonkblog, positions he will doubtlessly be able to leverage for more lucrative spots in the future. Does he owe some sort of monetary tribute to the generation that preceded him for that? It would seem that he does. Somehow we would need to figure out how much value that technology added to Soltas’ life (which seems at this point to be quite a bit), extract it from him, and dump it off to the older generation.

It gets even trickier than that. In addition to benefiting from the recent technological contributions of the older generation, the younger generation hugely benefits from inherited technology that is much older. Consider a world without algebra, electricity, or the internal combustion engine. On a view of generational justice that only entitles generations to their specific contributions, this presents very serious problems. The vast majority of any given generation’s economic product is attributable to technological gifts inherited from past generations. If each generation is not entitled to that which they did not contribute, each generation should be destroying — perhaps in ritual sacrifice to their ancestors — the majority of what they produce, lest they be moochers.