The Political Economy of Population Ageing.

• Author: Pestieau, Pierre
• Position: Review

By William A. Jackson.

Cheltenham, UK: Edward Elgar Publishing, 1998. Pp. vii, 248. $80.00.

Population aging joined with the pay-as-you-go way of financing retirement income has for a long time been considered the main cause of the so-called old-age crisis. Yet it is obvious that the current statutory retirement age, together with reduced fertility and increasing longevity, imply a deteriorating dependency ratio over the next decades and in turn the unavoidability of decreasing benefits, or increasing contributions. This phenomenon is even more striking when dealing with the effective instead of the statutory retirement age.

We are also told that aging means not just longer life, but also longer life in good health. Thus, why not simply increase retirement age and adjust it to maintain financial balance in social security accounts? Instead, we find that most of the scientific research and advice by international bodies has focused on the development of alternative fully funded schemes.

In many countries, entrenched interests make it impossible to seriously postpone retirement age, and more generally reform the system. The indication is that the main factor of the old-age crisis is not so much aging and pay-as-you-go financing but rather the resistance of a number of interest groups to needed reforms. These groups are all too often successful in stalling the system, even though (or because) it involves increasing the burden for future generations.

When I decided to review the book "The Political Economy of Population Ageing," I expected that it would deal with the politics of social security reform, the reasons for the resistance to change, and the preconditions for reform. In fact, Jackson's book deals with the political economy of social security with a focus on the interaction between market and political equilibria. However, in the main, the author understands political economy as economics. In my view, his book should have been entitled "The Economics of Population Ageing."

This semantic and minor point aside, it is a very good book on the economic implications of population aging, covering a wide range of recent works written on the subject. Jackson adopts the interesting point of view, often argued outside of economics, that although population aging is a complex issue, it is less threatening than often suggested. One of the salient ideas he presents is that alarmism about population aging and the financial future of social security...