Seminar Papers, Institute for International Economic Studies, Stockholm University
Five Fallacies in the Social Security Debate
Abstract: This paper discusses five examples of the conventional
wisdom that has often been expressed in the social security debate, even
among academic economists. These are: 1. The major problem in most social
security systems is that of demography: people simply live too long. 2.
Disregarding the issue of demography, a Pay-As-You-Go system is inferior to
a fully funded system since the former usually has a lower rate of return.
3. Disregarding the portfolio aspect (which might favor a PAYG system), a
funded system dominates a PAYG system in a world of certainty. 4. The
social security system is a suitable instrument for intergenerational risk
sharing. 5. The government is a safe and reliable provider of insurance.
Keywords: Social security; (follow links to similar papers)
JEL-Codes: H55; (follow links to similar papers)
24 pages, June 1, 2000
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