Simulating the Future of Social Security
Cato Podcast
Cato Institute
4.5 • 979 Ratings
🗓️ 21 June 2010
⏱️ 10 minutes
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| 0:00.0 | This is the Cato Daily Podcast for Monday, June 21st, 2010. I'm Caleb Brown. |
| 0:09.0 | When the Congressional Budget Office and the Social Security Administration run numbers on the fiscal health of Social |
| 0:14.8 | Security. Their independent estimates are remarkably similar. But if the agency's numbers |
| 0:20.5 | are similar because they are created with respect to each other, and those |
| 0:24.6 | estimates are not independent. |
| 0:26.8 | And for the trillions of dollars that flow through Social Security, the implications could |
| 0:31.6 | be huge. So says Jagad Goklay, senior fellow at the Cato Institute, |
| 0:36.0 | and author of the new book Social Security, |
| 0:38.0 | a fresh look at policy alternatives. |
| 0:41.0 | A micro- involves random numbers. So some people might say, well, stuff is driven |
| 0:52.3 | by random numbers in your calculations, how do you |
| 0:56.4 | make sure that your calculations are delivering reasonable results or the right results that can be trusted to evaluate a big and complicated program like Social Security. |
| 1:11.0 | So even though it's true that there are random numbers involved and that introduces some |
| 1:20.4 | variation in the results that's actually an advantage because essentially the processes, |
| 1:30.0 | the demographic and economic forces that are being characterized in the exercise, |
| 1:38.0 | which we call a micro simulation, is controlled by certain relationships that are estimated using |
| 1:46.7 | statistical techniques. So once we have these relationships estimated, we know the general trend or thrust of where those demographic |
| 1:59.3 | and economic forces are headed towards, but we don't we don't have full confidence to say it's |
| 2:06.8 | headed precisely in a particular direction which is why we build in a random element to it. But the random element is also |
| 2:18.2 | controlled in the sense that the variation around the trend can also be estimated using statistical techniques. |
| 2:28.0 | So building in a random element helps us not only characterize the direction in which the uncertainty associated around that direction. Now in my book I don't do |
| 2:46.0 | everything that is possible to do with micro simulations. I actually focus only on the trend and I don't very much characterize the |
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