The annual congress of IIPF typically attracts a crowd of theorist interested in public economics and finance, in other words: our crowd of people :). We presented our work on error-proneness and social security. We provide a new rationalization of why social security may improve welfare. We consider a setting where the introduction of funded social security cannot improve welfare for a fully rational agent. We introduce error-prone individuals who make stochastic savings decisions according to the consistent-mistakes model. The expected utility of error-prone agents is lower than rational decision-makers even if, on average, they save the same. Furthermore, error-prone individuals save less for retirement in a multi-period setting than their rational counterparts. Social security limits the scope of mistakes agents make in their savings decisions and may generate substantial welfare gains.

Our paper was in a session jointly with work by Antoine Ferey, who -- like us -- works on optimal redistribution in social security. Our paper (here) shares many commonalities with Antoine's work. The comments of all the participants were very useful, especially Marek Kapicka and Xufeng Zhao.