Political instability of pension systems, in particular, when people are not (fully) rational

Political instability of pension systems, in particular, when people are not (fully) rational

Oliwia Komada and Artur Rutkowski took part in a wonderful 17th International Conference on Pensions, Insurance and Savings in Paris! All sessions, panels and keynote addresses where of top quality. The highlight for us is:

David Blake: You watched Netflix for an hour? No worries! You only lost 45 minutes of your life on this! During the hour of relaxing on couch your life expectancy increased by 15 minutes! We live longer then we used too and we will live even longer? But how much longer? We cannot really tell. Will the life expectancy increase faster or will it start to slow down? We cannot really tell… This is a huge risk that insurance market cannot cover. But government can. And should. David Blake’s full text on this topic.

Oliwia Komada presented joint work with Joanna Tyrowicz and Krzysztof Makarski on political instability of social security that involves funding. Introduction of funded pillar to the pension system (e.g. introducing OFE in Poland), even though efficient and preferred by majority, turns out to be politically un stable. The pension assets will be captured and the funded part will be replaced with a pay-as-you-go scheme. Sounds familiar? :)

 

 

 

Artur Rutkowski presented his latest paper Evaluating an old-age voluntary saving scheme under incomplete rationality. The standard model assuming full rationality doesn't serve well when it comes to evaluation of old-age voluntary saving scheme. Therefore, a new type of model is required. We delivered :) First, a new OLG model with incomplete rationality is created. Second, certain policy is evaluated. This time the policy is Employee Capital Plans (or: Pracownicze Plany Kapitałowe). The overall evaluation is not favourable.