The Inherent Faults of the State Pension System and the Main Direction of its Improvement

Banyár, József

doi:10.35551/pfq_2019_4_4

Cited by 1 publication

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References 16 publications

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“…As a result, the most important problem of the PAYG system, its dependence on demographics, is eliminated. I have demonstrated the errors of the PAYG system, and the principles according to which an HC system should be constructed, in several studies (Banyár 2016a(Banyár , 2017(Banyár , 2019a(Banyár , 2019b(Banyár , 2019c. However, the focus of these studies was always a description of the problems associated with PAYG, and I was only able to explain in a very limited manner how an HC system could actually be constructed.…”

Section: Introductionmentioning

confidence: 99%

The Outlines of a Possible Pension System Funded with Human Capital

Banyár

2021

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The broadly used pay-as-you-go (PAYG) pension system is intrinsically wrong. The essence of the problem is that the PAYG system distributes the yield of raising children, i.e., of human capital investment (which is essentially the pension contribution), in such a way that it disregards the extent to which individuals have contributed to this, and even whether it has occurred at all. This error can be corrected if we take the pension contribution to be the yield on an investment of human capital, and as such use this to pay back the costs and expenses of the raising of the contribution payer—overall to those who paid these costs and expenses at the time. Accordingly, the central question of my study is whether it is possible to construct a consistent pension system based on the above foundations, and how my ideas may be inserted into the Diamond–Samuelson model. The method of the study was logical analysis and the construction of a theoretical mathematical model. The results of the study show that it is possible to construct a public pension system that operates according to a different logic than today’s system, a system which is free from the effects of demographic fluctuations, which does not motivate the refusal to have children, and which will remain self-sufficient under all circumstances. The study achieves this by presenting a possible pension system of this kind in detail. Via the suitable modification of the Diamond–Samuelson model, I have succeeded in showing that the pension system I am proposing increases the willingness to have children up to the social optimum, in contrast to the fully (but traditionally) funded and PAYG systems. This system currently only exists in theory and may be regarded as a major theoretical innovation, which naturally has certain (although not particularly extensive) antecedents. Its introduction could enable the resolution of the contradictions of existing pension systems and could also provide a solution to the as yet unsolved problem of the increasingly expensive regeneration of human capital, and as such, its potential practical implications are immeasurable.

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Section: Introductionmentioning

confidence: 99%

The Outlines of a Possible Pension System Funded with Human Capital

Banyár

2021

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The Inherent Faults of the State Pension System and the Main Direction of its Improvement

Cited by 1 publication

References 16 publications

The Outlines of a Possible Pension System Funded with Human Capital

The Outlines of a Possible Pension System Funded with Human Capital

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