Discussion

Abstract

It is a pleasure to comment on the Auerbach and Kotlikoff (AK) paper. I have found it fascinating, full of surprises and rich in paradoxes, though, admittedly, my enthusiasm may not be wholly unbiased. It turns out that their most unexpected and paradoxical results rely heavily on an unadulterated life cycle model, a model to which I am, understandably, attached and partial. In fact, their use of this model is even more extreme than some of my own applications in that they have “posited zero intergenerational altruism,” or, in other words, they totally disregard the possibility and implications of an estate motive. I will come back to this issue. I am sure that the reader will hardly ever find a dull moment in their paper, although the presentation is frequently difficult and a bit too compact. I suspect that they have lived and become accustomed to those unusual results and paradoxes and thus overestimate the ability of the average reader to catch on.