Madoff, Ponzi Schemes and Social Security

And to fill out the Triple Header, Don Boudreaux on Madoff, Ponzi Schemes and Social Security:

Editor, The New York Times
229 West 43rd St.
New York, NY
10036

To the Editor:

Like many people, Ben Stein was assured that Bernard Madoff "never lost money" ("They Told Me That Madoff Never Lost Money," Dec. 28). Unlike many people, Ben Stein wisely understood this assurance to be nonsense.

Americans should apply Mr. Stein's wisdom to the greatest Ponzi scheme going: Social Security. Many pols and pundits assure us that this program is a great financial deal for ordinary Americans. But in principle Social Security is identical to Mr. Madoff's fraudulent scheme: rather than generate wealth through productive investments, both schemes transfer wealth from newer 'investors' to older 'investors.' As long as a sufficient number of newer 'investors' keep coming aboard – either by being duped a la Mr. Madoff or by being coerced a la Social Security – such schemes appear brilliant. This appearance, however, is a dangerous apparition.

Sincerely,
Donald J. Boudreaux