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SS 350: The Theory of Social Insurance

Born out of the Great Depression in an era of economic uncertainty and ill-preparedness, part of the vision which informed the construction of the Social Security system was a theory of social insurance. Life brings rewards such as a peaceful and happy existence in society, but no reward in life is certain. Everything entails risk. Hence, the theory behind social insurance is that some of the basic comforts that are enjoyed in life ought to be protected against future loss.

The problem with the current system is that it cannot achieve this vision because Social Security is a false promise. Consider another form of insurance: imagine that every month you pay a large percentage of your income for car insurance. Now imagine that you have been paying for your car insurance policy for fifty years, and one day when you turn 65 you are in an accident. If you phone up your insurance company for reimbursement and the agent tells you, “Sorry. We have run out of money and can’t pay you the insurance money you are entitled to,” would you consider that much of an insurance policy? That is exactly what will happen to our generation when it is time for us to collect our Social Security benefits—Social Security is really just a social insurance scandal.

Personal retirement accounts, on the other hand, can better secure and, thereby, insure your future. Since you would own your retirement account, there is no longer a risk that a politician will change your benefits structure or dip into the Social Security funds. Since you would choose how to invest your account, there is no longer a risk that your money will disappear. With a PRA you can be better assured that the comforts you have enjoyed your entire life will be sustainable when you are ready to retire.

    The Basics
SS 101: An Issue for Young Americans
SS 102: The Financial Crisis
SS 103: The Solution through Personal Retirement Accounts
Core Classes
SS 200: SS and Young People
SS 210: SS and Minorities
SS 220: SS and Women
SS 230: SS and Low-Income Earners
SS 240: Personal Accounts and Disability Insurance
Junior Electives
SS 300: The Theory of Ownership
SS 310: The Theory of Choice
SS 350: The Theory of Social Insurance
Do the Math
The PRA Calculator
Resources and Footnotes
Frequently Asked Questions
Suggested Reading
Recommended Links


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