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On Myopia as Rationale for Social Security

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  • Andersen, Torben M.
  • Bhattacharya, Joydeep

Abstract

This paper revisits the role played by myopia in generating a theoretical rationale for pay-as-you-go social security in dynamically efficient economies. Contrary to received wisdom, if the real interest rate is exogenously fixed, enough myopia may justify public pensions but never alongside positive private savings. With sufficient myopia, co-existence of positive optimal pensions and positive private saving is possible if the real interest rate on saving evolves endogenously, as in a model with a neoclassical technology.

Suggested Citation

  • Andersen, Torben M. & Bhattacharya, Joydeep, 2011. "On Myopia as Rationale for Social Security," ISU General Staff Papers 201105010700001264, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201105010700001264
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    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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