Timothy Taylor Does Have a Blog

That second link is face-palm material. It suggests throughout that government pension funds set their discount rate based on their asset allocation. If that's how they did it, most would have a lower discount rate.

Politicians figured out years ago that upping the discount rate reduces their required contribution. Most of those discount rates are not set by the appropriate professionals - they are set in law. The actuaries are required by law to use them, so they do. It has nothing to do with the stock market.

It also irritates me that pensions and social security are discussed as if they are similar financial schemes. Pensions are, well, pensions, while social security is PAY GO. It is not a pension. It doesn't make any sense to compare financial obligations because they aren't calculated or discussed in similar terms.

Nobody who understood the issues facing those programs would make that post; it just doesn't make any sense.

If you want to give people a pension, why not buy them an annuity, or at least make it an option they can buy with their 401(k)?

Generally, pensions face the problems of conflicts of interest between receipients and overseers - overseers are incentivized to mislead employees as to the overall risk and promised benefits. Pensions provide insurance against adverse individual outcomes, but not against adverse employer outcomes.

401k's face the problem of individuals not having even basic financial education while the employer still controls the choices, or in the case of 403b's and 457's, the behavior of providers border on fraud.

Generally, I think the pensions are fine in theory, but should be managed and accounted for by independent third parties, and participants should receive shares and quarterly statements on the status of their share.

As one commenter stated, Social Security is not really a pension, though it is structured to look like one.

"Obviously, the post includes a graph. What strikes me, though, is that net lending by banks really plummets after the period of financial crisis. One could argue that there were two distinct phases. In the first phase, there was a lot of worry about bank solvency. In the second phase, bank lending fell. If the two phases had coincided, we could talk about this being a credit crunch. Instead, it looks like a financial panic, followed by a real downturn, which in turn reduced the demand for loans."

Yes, it didn't actually fall until the fed started paying interest on reserves.