Related papers: Resolving Aaron's Social Insurance Paradox
We argue that the recent growth in income inequality is driven by disparate growth in investment income rather than by disparate growth in wages. Specifically, we present evidence that real wages are flat across a range of professions,…
Dynamic, risk-based pricing can systematically exclude vulnerable consumer groups from essential resources such as health insurance and consumer credit. We show that a regulator can realign private incentives with social objectives through…
We consider social welfare functions when the preferences of individual agents and society maximize subjective expected utility in the tradition of Savage. A system of axioms is introduced whose unique solution is the social welfare…
With the growing attention and investment in recent AI approaches such as large language models, the narrative that the larger the AI system the more valuable, powerful and interesting it is is increasingly seen as common sense. But what is…
The population and capital dynamics of three stylized investment systems are mathematically described using discrete-time difference equations with closed-form solutions. The models share a common capital budget equation but differ in their…
We study the performance of general dynamic matching models. This model is defined by a connected graph, where nodes represent the class of items and the edges the compatibilities between items. Items of different classes arrive one by one…
We study a budget-aggregation setting in which a number of voters report their ideal distribution of a budget over a set of alternatives, and a mechanism aggregates these reports into an allocation. Ideally, such mechanisms are truthful,…
We study how nonlinear, state-dependent health dynamics shape economic behavior, inequality, and the evaluation of disability insurance at older ages. Using English panel data, we construct a continuous health index and estimate its…
Artificial currencies have grown in popularity in many real-world resource allocation settings, gaining traction in government benefits programs like food assistance and transit benefits programs. However, such programs are susceptible to…
We note a simple mechanism that may at least partially resolve several outstanding economic puzzles, including why the cyclically adjusted price to earnings ratio of the S&P 500 index has been oddly high for the past two decades, why gains…
The rise of artificial intelligence (A.I.) based systems is already offering substantial benefits to the society as a whole. However, these systems may also enclose potential conflicts and unintended consequences. Notably, people will tend…
We consider social welfare functions that satisfy Arrow's classic axioms of independence of irrelevant alternatives and Pareto optimality when the outcome space is the convex hull of some finite set of alternatives. Individual and…
A four-pronged approach to dealing with Social Science Phenomenon is outlined. This methodology is applied to Financial Services, Economic Growth and Well-Being. The four prongs are like the four directions for an army general looking for…
Arrow's Theorem concerns a fundamental problem in social choice theory: given the individual preferences of members of a group, how can they be aggregated to form rational group preferences? Arrow showed that in an election between three or…
This paper provides a general framework to explore the possibility of agenda manipulation-proof and proper consensus-based preference aggregation rules, so powerfully called in doubt by a disputable if widely shared understanding of Arrow's…
We analyze the household savings problem in a general setting where returns on assets, non-financial income and impatience are all state dependent and fluctuate over time. All three processes can be serially correlated and mutually…
We mathematically demonstrate how and what it means for two collective pension funds to mutually insure one another against systematic longevity risk. The key equation that facilitates the exchange of insurance is a market clearing…
This paper resolves the empirical puzzle in the public-private wage literature: why studies using similar data reach contradictory conclusions about wage premiums and penalties. Utilizing rich French administrative panel data (2012-2019),…
The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…
This research presents an analysis of the demographic risk related to future membership patterns in pension funds with restricted entrance, financed under a pay-as-you-go scheme. The paper, therefore, proposes a stochastic model for…