The notes give 5 reasons to fund social security systems but I don't really understand how the first 3 are distinct points. 1. It increases the level of savings 2. It develops capital markets 3. It creates extra investment which stimulates growth Also, the Acted notes talk about money being used to create roads for the third point, I'm not sure how this represents a financial benefit or how a return would be achieved. Can anyone help with this? Thanks
I agree that these points are related. "Increasing the level of savings" is referring simply to the fact that a funded approach will lead to assets being built up, which may have a positive macroeconomic effect. "Developing capital markets": if money is being saved to pay for future retirement benefits, it needs to be invested somewhere. The markets will develop to deal with this. Having well-developed capital markets be advantageous. For example, arguably the UK profits from London being a global financial centre (jobs created, tax revenues etc) "Extra investment which stimulates growth": the Government may well invest the money in the social security fund in capital projects. For example, it may build a toll bridge. The users of the bridge will pay tolls, which provide a return for the fund. In addition, the presence of a bridge may reduce transport costs in that area, making it an attractive location for firms, which may establish bases there. In turn this creates economic growth for that area through jobs etc. A similar rationale can be applied to roads. Hope this helps
