What is it about?
Western societies face an important decision which how much to tax the working-age population in order to provide for medical care for the older population. In essence this is a trade off between low-taxes/shorter lives and high taxes/longer lives. We derive a condition for the optimal level of such life-extending health care. Moreover, we show that it is increasing in the level of productivity and population growth. Finally, we show that a market equilibrium where each individual cares for himself my result in excessive health care expenditures.
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Why is it important?
With the ageing of the population of most Western countries the governments and their voters face the pressing decision on the level of resources allocated to caring for the old. These expenditures may extend the life of the old. Hence the paper addresses a relevant public choice problem.
Perspectives
The choice between having a good but short life versus having a longer life with lower consumption per year is made by individuals in their daily lives, such as when they eat healthy food and exercise, and by governments when allocating resources to health care. The paper derives how much we should lower consumption when working in order to extend our lifespan.
Gylfi Zoega
Haskoli Islands
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This page is a summary of: THE GOLDEN RULE OF LONGEVITY, Macroeconomic Dynamics, January 2018, Cambridge University Press,
DOI: 10.1017/s1365100516001371.
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