On Myopia As Rationale for Social Security

Torben M. Anderson and Joydeep Bhattacharya

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: It has been argued that "paternalistically motivated forced savings constitutes an important, and to some the most important, rationale for social security retirement systems." This paper revisits the role played by myopia in generating a theoretical rationale for pay-as-you-go social security in dynamically efficient economies. If the competing asset is linear storage and myopic agents are allowed to borrow against future pension benefits, there is no welfare-rationale for pay-as-you-go pensions. In that case, sufficently-strong myopia may justify such pensions only if agents cannot borrow against their future pension, and are at a zero-saving corner. With enough myopia, co-existence of positive optimal pensions and positive private saving is possible if the return to saving declines with saving, as in a model with a neoclassical technology.

Keywords: myopia; pensions; social security; dynamic efficiency (search for similar items in EconPapers)
JEL-codes: E60 H55 (search for similar items in EconPapers)
Date: 2008-09-01
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Economic Theory 2011, vol. 47 no. 1, pp. 135-158

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http://www2.econ.iastate.edu/papers/p1762-2008-08-29.pdf (application/pdf)

Related works:
Journal Article: On myopia as rationale for social security (2011)
Working Paper: On Myopia as Rationale for Social Security (2011)
Working Paper: On Myopia as Rationale for Social Security (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:12985

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