Social Security in Theory and Practice (I): Facts and Political Theories
Casey B. Mulligan
Social Security, retirement, gerontocracy, retirement incentives, political theories of Social Security
166 countries have some kind of public old age pension. What economic forces create and sustain old age Social Security as a public program? We document some of the internationally and historically common features of Social Security programs including explicit and implicit taxes on labor supply, pay-as-you-go features, intergenerational redistribution, benefits which are increasing functions of lifetime earnings and not means-tested. We partition theories of Social Security into three groups: political', efficiency' and narrative' theories. We explore three political theories in this paper: the majority rational voting model (with its two versions: the elderly as the leaders of a winning coalition with the poor' and the once and for all election' model), the time-intensive model of political competition' and the taxpayer protection model'. Each of the explanations is compared with the international and historical facts. A companion paper explores the efficiency' and narrative' theories and derives implications of all the theories for replacing the typical pay-as-you-go system with a forced savings plan.
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