Pension Reform and Economic Theory

Pension Reform and Economic Theory

A Non-Orthodox Analysis

Sergio Cesaratto

The book is the first of its kind to attempt to deal with the economics of pensions and ageing on the basis of a rigorous theoretical framework alternative to neoclassical economics. Sergio Cesaratto breaks the dominant conformism in the current pension debate and explains that the strength of the various reforms proposed depends on the validity of the economic theories on which they are respectively based. He also illustrates the relevance of the Sraffian criticism to undermine the theoretical core of the mainstream proposals.

Chapter 9: Summary of the Main Arguments

Sergio Cesaratto

Subjects: economics and finance, public sector economics


… the basic mistake [of the former pension system] lay in the collectivistic concept of man and society which inspired the old system. That inspiration arises from a false ideological notion of the nature and conduct of the human being, and has predominated and influenced many public decisions adopted in Chile in the last few decades. (José Pinera, Minister of Labour and Social Security of Chile in 1981, quoted by Acuna and Iglesias, 2001, p. 23). 9.1 INTRODUCTION In most countries, including the US, PAYG is the dominant pension scheme. The prevailing opinion is that impending demographic shocks – lower fertility rates and increasing longevity – threaten PAYG. According to the conventional view, an increasing number of long-surviving elderly persons will weigh upon a falling number of young workers. The partial or complete substitution of public pension schemes is seen as a solution to this dismal perspective. Conversely, in this book we have argued that pension reforms do not solve the problems surrounding PAYG, but may actually aggravate them, and that PAYG’s troubles are not just demographic, but are bound up with economic policy and income distribution. This study also confirms the relevance of the classical approach, and of the Sraffian interpretation of the Keynesian theory, to economic and social policy issues. The conclusions draw together the threads of the main themes and results of the book. Section 9.2 will sum up the debate on the concepts of welfare state, retirement and pensions, respectively, in the neoclassical-Samuelsonian approach and in the classical-Keynesian perspective...

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