Retirement is seen almost as a right by most people in the West, especially America and Europe. Make it to your sixties and most people expect to retire from the daily grind of earning a living. Yet, especially in America, the average retirement nest egg is pathetically low at sixty-five thousand dollars. One in four Americans have no retirement savings. Forty percent of retirees rely solely on Social Security for retirement income. This is another example of how fiat money combined with welfare have blurred the reality of what is actually required that allows someone to retire from the work force.
The Robinson Crusoe Thought Experiment
Once again the Robinson Crusoe thought experiment will help us gain a clearer picture of reality, because it is based upon the Austrian concept of methodological individualism. In other words, we peel the scales of macroeconomics from our eyes in order to see the world clearly. Assume that Robinson Crusoe is stranded on an unpopulated but bountiful island. There are fish, fruits, and vegetables for relatively easy harvesting. Each day Crusoe spends several hours harvesting this bounty in order to sustain himself. Now, Crusoe is aware that, eventually, he will grow old and find it more and more difficult to harvest the island’s bounty. Yet, he wants to “retire” from his daily toil. What can he do?
Crusoe’s Two Options
He must do one or both of two things. He must spend part of his day, while he is still fit and healthy, either to build a subsistence fund to sustain him for his expected lifespan or he must build capital goods that make harvesting the island’s bounty much easier. Of course, he can do both. On the one hand, he can spend more time each day catching fish and drying them to last a long time. He can do the same with some fruits and vegetable via dehydration in the sun. These tasks may require him to spend longer days at work or he can put himself on a diet, similar to what we today would do by foregoing some desired extravagance. Or, on the other hand, he can spend more time each day building fish traps and ways to irrigate a garden for easier access to the island’s fruits and vegetables. All this takes time out of his day, too, which requires some sort of sacrifice to his leisure and consumption.
So, we see that there is no way for Crusoe simply to “retire” after reaching a certain age, unless he has saved to create a subsistence fund or invested in capital goods or both.
A Third Option for Crusoe–Coercion
There is one other alternative that may open for Crusoe. While exploring the island he comes upon Friday, who joins him for companionship. Now let us assume that Crusoe decides to retire and asks Friday to take care of him. Feed him, etc. in the way he used to do for himself. What would Friday do? If he agreed, he would have to work twice as long each day, for he has not only himself to feed he now has Crusoe to feed. This is not a good deal for Friday, so he rejects Crusoe’s request. This should settle the matter that Crusoe and Friday have to take care of themselves not only while they are fit and healthy but also by preparing for their respective retirement days. But Crusoe has something that will change Friday’s mind. Crusoe has a gun that he salvaged from his sinking ship. He threatens Friday with violence unless Friday does his bidding.
We now see that Crusoe has created government and has invested its powers in himself. Friday must pay his taxes, in the form or dried fish and vegetables, or else! Sound familiar? Friday must pay his taxes to the state of Crusoe. This might be the end of our thought experiment, but let’s take it one step further. Let’s assume that Friday discovers a young man or woman living on the island. Friday teaches the young person how to fish, harvest fruits and vegetables from the land, build fish traps and irrigated gardens. Now, when Crusoe dies, Friday takes the gun and becomes the new government of the island. This becomes a rudimentary Ponzi scheme. Each successive generation must labor to provide for the older generation in order to work themselves to the top of the pyramid. Of course, the Ponzi scheme will fail when no new generation appears.
In today’s America and other Western nations, the Ponzi schemes are failing. Each generation is supporting more Crusoe’s with fewer Friday’s. The subsistence fund is dwindling and the capital stock has depreciated to the point that it provides fewer and fewer fish, fruits, and vegetables. The real answer always was for each individual to work and save for his own retirement, building up his subsistence fund and capital stock as he saw fit, depending upon his foresight and work ethic.
Conclusion
Fiat money and state coercion have prevented us from seeing the threat to our well being that would be apparent with sound money and true liberty.
© Patrick Barron 2025 Website
