The Social Safety Net for the Elderly

I've been following the discussions about social security and social insurance in the economics literature and in the blogosphere for quite some time. Tyler Cowen has recently written an excellent summary and analysis of the issues at The Marginal Revolution.

To summarize one of his important points:
Many of us think people ought to be free to allocate their wealth and spending as they choose, and many of us think people ought to assume, accept, and live with the responsibility and results of their own decisions.
Nevertheless, as a wealthy society in the 21st century, we will no longer force the elderly poor to starve or become dependent on their progeny or charitable organizations. And if that is the case, completely privatizing social security (or the CPP/OAS system in Canada) will not work -- most people will still want (and vote to have) a social safety net.

If this assessment of old-age insurance is correct, then there are some important questions to be asked:

1. How high do we want the social safety net to be?
2. How should we fund the annual expenditures for the social safety net?

And of course our answers to these questions will depend crucially on our guesses about how elastic we think people's responses will be to changes in taxes and benefits.

But the crucial part of his analysis that we must accept is that the important question is not whether to have gubmnt provision of old-age security; rather, it is how much to provide and how to provide it.