I think these evolved emotional reactions are still applicable to modern life. And that is the only real difference I have with this paper.

In a hunter-gather society it is not possible to provide defined benefit welfare. This should be obvious since the group is small and the loss of even one productive individual results in a huge loss of production. Additionally there is a large daily variation in productivity. This means that a defined benefit system will run into supply problems and 'bankrupt' very quickly. Instead there is a defined contribution system. Losing productive people results in an instantaneous loss in benefits. This then encourages beneficiaries to produce (even marginally) to regain their lost 'income'. Additionally benefits cannot be so great as to starve out the productive members.

It is only with large modern agrarian societies that defined benefit welfare became possible. There is a great demand for this type of welfare. The predictability of a fixed income is highly desirable no matter how small or large that income is. But due to the economically mono-stable nature of such systems I oppose them. In my opinion they provide poor signalling to recipients. Additionally they encourage bureaucratic growth and arbitrary rules. The two forces of 'affordability to society' and 'departmental expansion' result in rules intended to keep people on the system while denying benefits to those without a history in the system.

As an example lets look at unemployment benefits (since it recently came up).

Our current system is a defined benefit model. There are no significant savings in the system. Current benefits are paid out from current taxes. As people move in and out of the system the cost of the program goes up and down while at the same time the revenues move in an inverse direction. Most of the time the variation in costs and revenues are small and easily handled. But at times of great financial distress costs spike and revenues plummet, i.e. during a recession.

There are a couple of ways to cover this cash flow issue. Debt is typically used, but this must be paid back in either higher future taxes or reduced future benefits. Anticipation of higher taxes reduces investment incentives, further slowing economic activity. Reducing benefits is politically difficult.

Poorly communicated rules are are another option. For UE the most common are work search/assignment rules and paperwork issues. These systems give bureaucrats discretion. By assigning people to undesirable jobs they can force them out of the system. Using confusing paperwork and choosing to help/not help applicants fill the forms out they can effectively choose who to give benefits to and who to deny. This obviously leads to corruption. Also, people who are familiar with the system are able to anticipate and avoid these traps. That leads to a bimodal beneficiary population of transient users and habitual users. Which in turn leads to accusations of unfairness and cheating.

Need is a third common criteria typically used in the form of maximum wealth or income rules. This form of rule creates perverse incentives. Those who anticipate future need of benefits are encourage to fully consume their current resources. Those currently receiving benefits cannot develop wealth for fear of losing those benefits.

I am sure there are more wrinkles to defined benefit programs that I cannot think of right now.

A defined contribution model avoids all of these problems. Costs and revenues are always equal and move in tandem. In good times both go up and in bad times both go down. It is not possible to have a cash flow issue causing program bankruptcy. With modern computers overhead costs can be minimal and fixed while beneficiary populations vary. The major downside to this type of program is the income uncertainty imparted to the beneficiaries.

A big part of the problem is the tendency to see the economy as a fixed-size pie: if someone is getting wealthier, then by definition someone else is getting poorer. I'm not sure if this is an innate human belief, or if it has become widespread because it has been so strongly reinforced in our public schools and popular culture for the past half century. But according to this belief, wealth cannot be either created or destroyed. That's easily disprovable with a little thought exercise. Consider: when you build a house, the completed house is worth more than the materials that went into it. You can live in a house; you can't live in a pile of lumber. People who do work to build the house expect to be paid for their labor, and that pay constitutes part of the increase of value. The other part is the profit that the seller makes. The act of building the house has created wealth. The other side of the coin is, if a tornado or earthquake hits the house and knocks it down, wealth has been destroyed. Even though you may be able to recover most of the materials, the remains are worth a lot less than the completed house was worth. Wealth has been destroyed. The pie isn't fixed. It's very dynamic.

I came to realize during the Reagan years that what actually determines the success or failure of an economy is productivity. During the '80s, there was a huge improvement in peoples' lifestyles, and this was because productivity went up. It made it possible to sell better products without raising prices; indeed, in some areas like personal computers, products improved and profits increased for producers even as prices went down. There were several factors involved in this improvement in productivity. Part of it was the tax cuts and regulatory improvements championed by Reagan. Part of it was due to research investments made by both the private and public sectors, in some cases decades prior. Part of it was due to the revolution in quality and manufacturing processes led by Deming. And part of it, IMO, is because the '80s were just a really fun decade to live in. When people feel good about their nation and their living conditoins, they are inspired to accomplish things, and they will search for ways to do their jobs better.

Among the enemies of productivity are government and government-sanctioned actions: taxes, regulations, and torts. Although all of these things are (probably) necessary to some extent, they all trade off productivity for a common good that is often nebulous and sometimes nonexistent. Because the benefits are so hard to define, and the direct impacts are often limited to relatively small groups, it adds to the tendency to view the economy as a fixed-size pie: Advocates of authoritarian govenrment can sell these things to an economically ignorant population as "getting your fair share", with almost no one noticing that what is really happening is that they are shrinking the pie.

And this is how we arrive at stuff like farm subsidies, Obamacare, and a government-regulated Internet. Productivity declines, which means that goods and services become of lower quality even as prices go up. But people will support it because it's "fair".