Allocating pensions to younger people : towards a social insurance against a short life

This book takes as a starting point that welfare states in developed societies do not provide systems of social insurance against the risk of an early death. In contrast to the way in which economically developed countries provide ways of insuring citizens against other possibilities, such as unemployment and disease, no such social insurance mechanism exists for early death. It aims to demonstrate that, despite the impossibility to compensate the victims of a short life once they are identified, and despite the impossibility to identify the persons who will be short-lived (when they are still alive), it is nonetheless possible to construct a social insurance against the risk of a short life by means of age-based statistical discrimination favouring all young persons. Combining philosophical literature with economic analysis, the book re-examines the ethical foundations of social insurance, and proposes a major reform of the welfare state: the construction of a social insurance against a short life. It shows how such an insurance system could be constructed by partially reversing existing pension systems, by offering a period of retirement to all young adults before they start their career. Such a reversed pension system would allocate more free time and opportunities to younger members of society before they enter the labour market, and, hence, this system would also improve the lives of the unidentified young persons who will turn out to die prematurely. The book discusses the social desirability of this new system, as well as its financial feasibility and societal consequences, examining how pension allowances paid to young adults may be financed by the work of senior workers. As such, this book demonstrates how the universal uncertainty about the duration of life can be reconciled with the idea of social justice. With an accessible and interdisciplinary approach, this book will be of interest to academics working in a range of fields, including economics, public finance, social insurance, the economics of ageing and the welfare state, economic ethics and political philosophy. Gregory Ponthiere is a Professor of Economics and Philosophy at the Universit catholique de Louvain, Hoover Chair in Economic and Social Ethics. Preface 6 Contents 9 List of Tables 11 1 Introduction: homo economicus, homo moriturus 12 References 19 2 The Evil of a Premature Death 20 2.1 Epicurus: Death Does Not Matter for Us 23 2.2 Lucretius: Symmetry, Satiation and Usufruct 26 2.3 Seneca and the Wasted Lifetime 29 2.4 Wittgenstein and the Intemporal Life 31 2.5 Bachelard and the Fabric of Duration 32 2.6 Nagel and the Deprivation Account 36 2.7 Parfit’s Patient 40 2.8 Broome and the Intuition of Neutrality 42 2.9 Death Matters for Us 46 References 48 3 An Insurance Against a Short Life 50 3.1 Utilitarianism and Premature Deaths 53 3.2 The Limits of Utilitarianism 56 3.3 Rawls and Lifetime Inequalities 57 3.4 Responsibility and Compensation 61 3.5 Is an Insurance Against a Short Life Possible? 65 3.6 Herod’s Strategy 67 3.7 A Maxim for the Allocation of Resources 71 3.8 The Denial of Death 75 3.9 The Bias Towards the Future 79 3.10 Towards a New Pillar for the Welfare State 80 References 81 4 Reversing Retirement Systems 84 4.1 A Unique Opportunity in History 87 4.2 Live, Live, Live 91 4.3 On Financial Sustainability 93 4.4 Some Thought Experiments 94 4.5 A Basic Pension or More? 98 4.6 Demographic and Technological Evolutions 100 4.7 Reward and Free Lunch 104 4.8 Careers and Incentives 106 4.9 An Effective Insurance Against a Short Life? 109 4.10 Organizing the Transition 111 4.11 An Alternative to Other Reforms? 113 References 117 5 Conclusion: The Welfare State at a Crossroad 119 Reference 121 Appendix 122 On Alternative Insurance Devices Against a Short Life 122 On Junior Work Ban 125 References 128 Bibliography 129 Index 134