Yet a small detour via the effectiveness is helpful

If there is not consensus on the reform of pensions, we know at least that it should be "fair, equitable and sustainable" for Martine Aubry, "just, fair and balanced" for the Government. Admirable convergence, reflecting no doubt that the lack of imagination of their communicating. Economists who study public policies were more accustomed to the equity-efficiency Diptych, which has two critical drawbacks for political discourse: it insists on the necessary trade-offs, and the word "efficiency" has disagreeable connotations.

Yet, a small detour via the effectiveness is helpful. It allows, for example, to identify the fundamental objectives of public intervention in the financing of pensions. The question is not idle; After all, retirement contributions represent today one third of compulsory, and it is regrettable that reforms take place without the substantive debate agrees on the use of these sums.

A detour by a country that has different choices of ours can be useful. More than half of Americans complete their retirement by pulling on the savings they have accumulated during their active life: what is in our retirement by capitalization, the State supported by fiscal incentives. Massive use of capitalization has a disadvantage that it exaggerates, and two are more serious.

Let's start with the first: only well-off households could save, we were told. But nothing prevents to set up a system by capitalization, where, as in the distribution system, each employee should be involved, whether he likes it or not.

On the other hand, be it by short-sightedness, by ignorance, carelessness, or greed, many individuals are not enough saving despite tax incentives, or if they do, they are not wisely. Moreover, those that apply to follow the basic tenets of the small investor can be hit head-on by the medium-term financial market developments. In both cases, many retirees may find themselves disadvantaged. The regulation of pension funds strives to alleviate these difficulties.

Detour by the capitalization shows well the two main roles of the State in the functioning of the pensions: to ensure that each individual savings a minimum and that the instruments chosen were "safe."

These considerations also shape the contours of the intervention of the State in a system of retirement: it must collect a compulsory savings (retirement contributions) and guarantee a return consistent with economic and demographic developments - it is on this second point that the French system has sinned.

Since 15 years, an innovative solution has been a growing success, at the initiative of the Sweden: the individual accounts of contributions. The contributions paid by each employee are accumulated on a personal account and receive a rate of interest equal to the rate of wage growth over a long period. When the contributor decided to retire, the State pays him a life annuity which distributes the amount accumulated on the account on the life expectancy for his generation and age of retirement.

By construction, this system is financially balanced in the long term; It is simple to understand, well meet the two objectives discussed above, and is compatible with careers in various trades. Its application would also simplify the debate on "the age of retirement": with individual accounts, an employee knows that a year of work under reduced his annuity. Employees, often small, familiar with long careers would also directly benefit because their accounts would be fed much longer.

Unfortunately, the French debate on pensions is organised for decades on the same parameters. Emergency measures are probably needed. But we will have to return to the overall architecture of the system earlier rather than more later.