America's Social Security, for example, is largely pay-as-you-go.
For this reason, its critics often compare it to a Ponzi scheme in order to discredit it.
But the comparison can also work the other way.
If Social Security—a venerable entitlement that has spared millions from penury—bears some resemblance to a Ponzi scheme, then perhaps Ponzi principles are not always as diabolical as the name suggests.
In some cases, those principles might indeed redound to everyone's benefit.
One such scenario was sketched by Paul Samuelson of the Massachusetts Institute of Technology in 1958.
His thought experiment is easiest to understand when recast as an island parable (along lines suggested by Laurence Kotlikoff of Boston University) .
The island in this parable is home to unusually tall cacao trees, hungry people, and little else.
Only the young can climb the trees and pick the fruit, which must be eaten quickly before it spoils in the hot sun.
And only two generations (young and old) are alive at the same time.
On such an island, the elderly have no way to provide for themselves.
They are physically incapable of picking fruit.
They cannot buy fruit from the young, because they have nothing to offer in exchange.
Nor can they live off any cacao pods saved from their youth, because their stockpile will have rotted by the time they are old.
There are no durable, imperishable assets that might serve as a vehicle for their thrift.
The solution, of course, is an intergenerational Ponzi scheme.
The young give fruit to the old on the understanding that the next generation will do the same for them when they grow frail.
In effect, the young lend to their parents and collect repayment from their children.
In so doing, they serve as a link between two generations that never otherwise coexist.
The scheme works, Samuelson pointed out, only because “new generations are always coming along”.
If reproduction were ever to cease, the last generation would get nothing out of the scheme.
Knowing this, they would not put anything in.
But their failure to contribute would also deprive the penultimate generation of a payout, leaving them no reason to take part either.
Any anticipated future break in the chain causes the whole thing to uncouple.
If the scheme must ever end, it cannot even start.