Harvard University is, by some measures, one of the most left-wing institutions on the face of the earth. So you may be surprised to hear that it has endorsed George W. Bush’s proposal for Social Security reform. Literally, of course, that is not true. But the retirement plan Harvard has set up for faculty members like me bears a striking resemblance to what the Social Security system would become under the president’s proposed changes.
This has the tone of liberals do not trust markets. This piece has been hammered by Brad DeLong, Joshua Marshall, and Matthew Yglesias. Yet, my favorite critique comes from Ezra Klein who raises the issue of risk in a witty way… Perhaps, David Brooks does not understand enough about markets to know that the reason that stocks pay a higher expected return than bonds, but Greg Mankiw does. I’m sure Mankiw is aware of the no free lunch positions put forth by Robert Barro and Gary Becker. And even if he shares the DeLong-Smetters view that there is risk arbitrage benefit, he is aware of Clinton’s proposals of add-on accounts and investing SSTF assets in stocks.
Yes, we liberals trust markets and we understand how they work. Greg Mankiw does too. So could David Brooks release Dr. Mankiw from this Vulcan Mind Meld?