PITFALLS IN THE ECONOMIC-ANALYSIS OF AGING

In this paper we examine a number of pitfalls that one encounters in t he economic calculus of the consequences of aging populations. The mai n pitfalls of viewing the demographic future lie in assumptions concer ning (1) the (ultimate) stationarity of population growth and the assu mptions underlying those of the ''theory'' of demographic transition, (2) the exogeneity of factor prices and the state of technology, (3) t he neglect of implicit delayed-payment contracts within firms in which younger workers implicitly pay for the wages of older workers, and (4 ) the time inconsistency of intergenerational transfer schemes in gene ral.