Edited by John B. Davis and Wilfred Dolfsma
Chapter 25: Saving, Stock Market Investments and Pension Systems
Martha A. Starr Saving, stock market investments and pensions are avenues by which households build up claims to future income and consumption. Such claims are important in a number of respects: they broaden people’s options, reduce their insecurities about material living standards, and enhance their ability to live with dignity in old age. As such, understanding the multiplicity of factors that shape how people save, invest and acquire pension rights is important for understanding their access to well-being and the ways in which social arrangements improve or undercut that access. Saving In the traditional life-cycle view of saving, households maximize utility over the life cycle, resulting in a proﬁle whereby they borrow when young, save in mid-life, and spend down their assets when older; then total household saving is aggregated up from the behavior of independent households. Social economists share the criticisms of this perspective found in other ﬁelds, including feminist economics, behavioral economics, post-Keynesian economics, and economic methodology, which include: (1) the representation of households as monolithic, ignoring issues of gender and power within the household (Ferber and Nelson, 1993; Floro and Seguino, 2003); (2) conceptualizing cognition as general-purpose and powerful, rather than an assembly of special-purpose processes subject to limitations (Simon, 1955; Thaler, 1994; Dietz and Stern, 1995); (3) ignoring possibilities that diﬀerential saving across the income distribution may push aggregate supply out of balance with aggregate demand (Hobson, 1910; Ryan, 1935; Yunker, 1997; Froud et al., 2001), and (4) more generally, the problem of refuting...
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