Mackenroth thesis

The statement formulated by Gerhard Mackenroth in 1952 is called the Mackenroth thesis or Mackenroth theorem that the social expenditures of an economy must always be provided from the current national income:

“Now the simple and clear sentence applies that all social expenditure must always be covered by the national income of the current period. There is no other source and there has never been another source from which social expenditure could flow, there is no accumulation from period to period, no 'saving' in the private sector, there is simply nothing other than current national income as a source for the social expenditure ... The capital accumulation method and the pay-as-you-go method are not essentially different. Economically there is always only one pay-as-you-go system. "

- Gerhard Mackenroth: The reform of social policy through a German social plan. in: Writings of the Verein für Socialpolitik NF, Volume 4, Berlin 1952

Meaning of the Mackenroth thesis

It follows from the Mackenroth thesis that the pension system does not necessarily have to be based on the funded system, but can also be organized using the pay-as-you-go system . Accordingly, the funded system is de facto just one variant of a pay-as-you-go system that is always in place. The reason for this is that the services and goods that retirees need can only be provided in the present by workers. If the number of workers and thus the number of goods and services on offer decreases, then no saved capital is of any use, because then a high supply of money is offset by a low supply of goods. This leads to rising prices and rising wages, in which, however, the non-working pensioners do not participate in a system that is only funded. The value of the saved pension is melting away.

Proponents of the pay-as-you-go system usually prefer the form of a state-run pension insurance scheme, as the administrative costs are lower than with privately organized life insurance schemes. The administrative costs of the statutory pension insurance institutions in Germany are, for example, 2 to 3% of the contribution payments and thus considerably lower than for private pension insurance (e.g. in Chile, where the administrative costs are 20% of the contribution payments).

This approach played an important role in the discussion about a major social reform in the Federal Republic of Germany in the 1950s . The funded pension insurance reserves that existed at the time had largely been destroyed by war , inflation and currency reform . In addition, up to now one had never been able to accumulate sufficient reserves. The old-age pensions were in fact financed by current income and state subsidies. Against this background, a scientific discussion gradually got underway as to whether funding was even possible and necessary. The question was answered in the negative at the time. Accordingly, Wilfrid Schreiber , the “father of dynamic pensions” , spoke of the “mistaken obsession with having to build up reserves”. The Mackenroth thesis thus became the basic maxim for the great pension reform of 1957 . The funded “savings pension” was converted to the “dynamic pay-as-you-go system”.

The Mackenroth theorem regained greater importance in the context of the debates over pension reforms since the 1990s.

criticism

The thesis that the social expenditures of an economy (in the economic sense as consumption) always have to be generated from the current national income is undisputed and results from the technique of the national economic accounting ( usage accounting ), according to which the following applies:

${\displaystyle Y\!\,=C+S}$

with national income , consumption and economic savings . ${\displaystyle Y}$ ${\displaystyle C}$ ${\displaystyle S}$

In the opinion of critics, however, it does not follow from this that funded old-age provision would be pointless. You can supplement the pay-as-you-go system because it results in a higher savings rate . On the one hand, saved capital can be profitably invested in one's own economy, so that future national income will rise. On the other hand, the capital can be invested internationally, so that retirement provision is not only dependent on one's own economy. Many pension schemes therefore use both the pay-as-you-go system and funded coverage.

However, empirical studies have shown that the savings rate in countries with a funded pension system is no higher than in countries with a pay-as-you-go pension system . A connection between the way the pension system is organized and the level of the savings rate could therefore not be established. It was therefore not possible to prove that a funded old-age provision leads to higher growth rates. This is also proven by the model calculations by Paul A. Samuelson .

designation

Winfried Schmähl has pointed out that the thesis was put forward as early as 1939/1940 by Theodor Bühler , who was then employed in the ergonomics institute of the DAF . Mackenroth, however, helped the thesis to become better known, which is why it was called "Mackenroth thesis" or Mackenroth theorem early on.

literature

• Axel Börsch-Supan : Social Policy. In Handbuch der Volkswirtschaftslehre Volume 2 ISBN 3540612629
• Friedrich Breyer : Economic theory of old age insurance , Verlag Franz Vahlen Munich 1990
• Hans Günter Hockerts : Social-political reform efforts in the early Federal Republic. On the social reform discussion and pension legislation 1953-1957 . in: Vierteljahrshefte für Zeitgeschichte , Volume 25 (1977), pp. 341–372 ( PDF )
• Stefan Homburg : Theory of old-age security. ISBN 3540188355
• Bernhard Külp : Different financing systems of the statutory pension insurance and their influence on the distribution between the generations . in: Hamburg Yearbook for Economic and Social Policy, 36th year (1991), pp. 35–54
• Gerhard Mackenroth : The reform of social policy through a German social plan . in: Writings of the Verein für Socialpolitik NF, Volume 4, Berlin 1952
• Bert Rürup , "Mackenroth's Theorem": A zombie of pension policy. Handelsblatt Research Institute, August 5, 2016
• Wilfrid Schreiber : Security of existence in industrial society , Cologne 1955

Web links

• Clemens Fuest: Are our social security systems intergenerational? in Freiburg discussion papers on regulatory economics
• Kai Ruhsert: The Mackenroth Theorem (PDF file; 86 kB) Slide presentation on the reflection pages
• Association of the German Insurance Industry: Retirement Provision and Demographic Change - No Advantage for the Funding Procedure?
• SWR Teleakademie (Video): The instrumentalized fear of the future: Statutory or private pension insurance, who has the benefit?
• Friedrich-Ebert-Stiftung: Funding in times of crisis - The risks of private pension and long-term care insurance (PDF file; 426 kB)

supporting documents

1. ↑ Ursula Engelen-Kefer, Funding of capital in the health and old age insurance system in: Herbert Riesche, Winfried Schmähl, Health and old age insurance - same challenges, same solutions? , Lit-Verlag, 1st edition, 2004, ISBN 978-3825871369 , page 110
2. ↑ Börsch-Supan p. 203
3. ↑ Fuest p. 3
4. ↑ Bert Rürup: "Mackenroth's Theorem": A zombie of pension policy. Handelsblatt Research Institute, August 5, 2016, accessed January 10, 2017 . 
5. ↑ Ebert Foundation: Old-age security policy: broader compulsory insurance, withdrawals of benefits, supplementary private provision, guaranteed minimum income
6. ↑ Winfried Schmähl: About the sentence: "All social expenditure must always be covered from the national income of the current period" . in: Hamburg Yearbook for Economic and Social Policy, Volume 26 (1981), pp. 147–171