??? The computer is not inventory, is this a second thread of spot the non-sequitur?

Possibly you would be happier if I said, “Accounting never has solved the problem of asset valuation.”

So write a list of assets and what do you have? An inventory… bah!

The computer can be resold if necessary, probably not for a profit but you never know. I’m well aware that most accountants would suffer head explosion if you try to call the same object both running plant and inventory for resale, but I see that as a design limitation in accountant’s heads, not my problem.

I’m trying to point out that a lot of our dearly held beliefs about expenditure and value are largely arbitrary categories that suit some people some of the time. If you purchase any object for any reason, obviously its value to you must be higher than the listed price, so value is subjective, so the distinction between consumption, saving and investment is also highly subjective. We can get a better idea AFTER the fact, based on a full life-history of the item, but anyone can be smart in hindsight.

As for the other point: if the internet connection increases his kids’ future earning capacity, it’s investment; if it’s accompanied by an offsetting reduction in other consumption, it’s also saving; and if it’s fun then it’s simultaneously consumption and investment. The national accounts don’t permit anything to be both, but since the macroeconomic discourse is fixated on GDP, investment and growth, rather than on consumption, no one complains.

Also, even though I love rationality, and I resent the rigidity of our super at least a little bit, the assumption is not intuitively wrong. Is there any evidence of people behaving rationally to increase savings to match smaller super? Should we expect Italians and French to be increasing their savings as the probability that they wont get all the super they expect increases?

Suppose I take the money that would have gone to super and spend it on a new computer and faster Internet connection for my kids. Is that saving for the future, or consumption, or infrastructure spending?

Accounting never has solved the problem of inventory valuation.

Now people may indeed be myopic, but I want evidence of that. And that young people (quite rationally – consumption gives you more utility when young) have a high personal discount rate, or that old people ex post wish they’d saved more (they really wish they’d consumed as much and still saved – ie they’d had more income), is not evidence of myopia.

Voluntary retirement savings are notoriously low in Northern Europe, precisely because of their earnings-related pension schemes. A great deal of their saving appears to take place after retirement – which is the exact reverse of what compulsory super aims to achieve.

So yes, I reckon its an understatement.

Also, even though I love rationality, and I resent the rigidity of our super at least a little bit, the assumption is not intuitively wrong. Is there any evidence of people behaving rationally to increase savings to match smaller super? Should we expect Italians and French to be increasing their savings as the probability that they won’t get all the super they expect increases?

Are low-super countries high non-super savers? Or is it actually the inverse – high super countries actually those that are high savers anyway?

In fact the policy assumes irrationality twice over, doesn’t it? First that people are too myopic in deciding how much to save in the first place, and second that they’ll continue their voluntary savings. It’s a kind of second-best policy, countering one irrationality with another to produce a rational outcome.

Regarding the empirical evidence, are you inclined to completely dismiss Connolly and Kohler’s estimate of 38 percent as the ‘offset coefficient’?

Anyway, you just have to look at the empirics. Our household savings rate has fallen all through the period in which super has operated.