Public Policy Evaluation, Social Risk and Pension Capital

Mordecai Kurz

Rivista Internazionale di Scienze Sociali, 2006, vol. 114, issue 3, 389-416

Abstract: Today’s demand for social insurance is supported by economic reasoning showing that private insurance markets do not provide efficient coverage for medical insurance, for inter-generational risk sharing and for income instability. It is unfashionable to say but government intervention in these areas is the solution and Conservative economic ideology is the problem. Hence, policy in the 21th century will focus on publically managed social insurance. In studying the problem of Social Security, I show it arises from changing demography which generated a deficit. Study of proposed solutions lead me to four conclusiones: (i) Privatization of Social Security is infeasible since system has a «Legacy Debt» of $11.6 trillion. (ii) Proposals to privatize Social Security are ideologically motivated and offer no real solution. (iii) Privatization is undesirable since it is not optimal to rely entirely on the markets to determine retirees’ incomes. Volatility of financial markets will result in unacceptable inter-generational income inequality.

Keywords: Welfare state; Social Security; public policy; social insurance; insurance markets; risk sharing; Legacy Debt; privatization; private retirement accounts; conservative economics; market volatily (search for similar items in EconPapers)
JEL-codes: D52 D6 E12 E6 G2 H55 (search for similar items in EconPapers)
Date: 2006
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