CaliforniaStateUniversity, Fullerton

Department of Economics, LH-702; Phone: 278-2228

Gerontology 506 Economics of Aging (3)Spring 2005

Eric J. Solberg, Ph.D., Emeritus Professor of Economics

Office Hours: M17:45-18:45 and by appointment

Office: LH-323HPhone: (714) 278-2237e-mail:

Prerequisites: Admission into the Gerontology M.S. program and GERO 501 or ECON 340 or the equivalent or consent of the instructor.

Description of the Course: Economic consequences of population aging and the economic status of the aged. Income adequacy in old age: dependency, work income, retirement income planning, social security income, employer-sponsored pensions, financing health care. Economic security today and tomorrow.

Course organization: After several weeks of seminars led by the instructor, there will be a mid-term examination on the foundations of the economics of aging. Students will then review published literature, conduct research, make presentations, and lead discussions on contemporary issues. Topics may include Social Security reform, generational equity, economic security of women, heath care problems, national health insurance, private pension regulation, private responsibility, and the future of social insurance programs. Each student will prepare a term paper based on their presentation and subsequent discussion.

Assessment: Students will be graded on their contributions to discussions (20%), a mid-term exam on foundations (30%), and a final evaluation based on their presentation of research and a term paper (25% on presentation and 25% on term paper). Grades will be determined by the instructor’s evaluation of student performances on these assignments. A “plus” or “minus” grade may be assigned. No extra credit assignments will be possible.

Make-up examinations will be given only in cases of certifiable illness or other extenuating circumstances such as death of a family member. The student must contact the instructor about taking a make-up examination as soon as possible and no later than the day of the regularly scheduled final examination.

While students are encouraged to form study groups and to work cooperatively in the completion of assigned tasks, all reports should reflect individual efforts. An “F” grade may be given for the course in cases of cheating or plagiarism.

Late work may be penalized by a reduction in grade.

Behavior: Behavior that persistently or disruptively inhibits other students’ ability to learn and the instructor’s ability to teach is considered disruptive and may be subject to disciplinary action. A student responsible for disruptive behavior may be required to leave class pending a resolution to the problem, and may be reported to the Dean of Students Office, Judicial Affairs for further action. Please treat your instructor and other students with respect. Rude and uncivil behavior can be disruptive. Late arrival to class can also be disruptive, particularly when instruction is affected.

Required reading:

  • Robert Clark, Richard Burkhauser, Marilyn Moon, Joseph Quinn and Timothy Smeeding, The Economics of an Aging Society, Blackwell, 2004
  • Peter Diamond and Peter Orszag, Saving Social Security: A Balanced Approach, Brookings Institution, 2004

Recommended reading:

  • Peter Diamond, “Social Security,” The American Economic Review 94 (1), March 2004: 1-24
  • Dean Baker and Mark Weisbrot, Social Security: The Phony Crisis, University of Chicago Press, 1999
  • George E. Rejda,Social Insurance and Economic Security (sixth edition), Prentice-Hall, 1999
  • David A. Wise, editor, Frontiers in the Economics of Aging,University of Chicago Press, 1998

Outline of Topics and Reading Assignments for Economics and Aging

Please read indicated chapters before each seminar. If you don’t, a seminar/discussion format will not work, and I will have to resort to boring lectures.

January 31 – The Graying of America; Economic Foundations [Clark et al., Chapters 1 & 2]

  • The basic economic problem – scarcity
  • Production possibilities and consumption possibilities
  • Forms of economic organization
  • The mixed economic system – the role of governments
  • The circular flow model of a market economy
  • Microeconomics and macroeconomics
  • Individual decision making – constrained optimization
  • Opportunity cost; marginal analysis
  • Price determination: demand and supply
  • Making investment decisions – present value
  • Benefit-cost analysis

February 7 –Economic Well-being of Older Americans [Clark et al., Chapter 3]

  • Measurement
  • Sources and shares of income
  • Income of the elderly
  • Poverty
  • Diversity
  • Alternative measurement assumptions
  • Wealth
  • A population at risk?

February 14 – Economics of Retirement Old Age[Clark et al., Chapters 4 & 5]

  • Stock and flows; Income and net worth
  • Future value; Present value
  • The law of demand; Income and substitution effects
  • The work-leisure trade-off – the budget constraint
  • Supply of labor time – substitution and income effects
  • The participation and retirement decisions
  • Saving and borrowing – intertemporal choice
  • Life cycle model
  • Role of the public sector
  • Limits of public & private responsibility

February21 – Campus Closed

February28 – Retirement Policies & Pension Plans [Clark et al., Chapter 6]

  • Why offer pension plans?
  • Types of pension plans
  • Portability
  • Recent trends
  • Government regulation
  • Retirement policies
  • The role of Social Security
  • What makes a “good” pension plan?
  • What mix of public and private plans?

March 7 – Social Security: Individual Perspectives [Clark et al., Chapter 7]

  • How OASDI works
  • Benefit computation
  • Policy objectives
  • Balancing insurance and redistributive goals
  • Who gets what from OASI
  • Money’s worth issues
  • Gender issues
  • Other equity issues

March 14 – Social Security Financing Reform [Clark et al., Chapter 8; Diamond & Orszag; handouts]

  • When will the funds run out?
  • Proposed solutions
  • Criteria for reform
  • Henning Bohn’s view
  • Robert Eisner’s view
  • Laurence Kotlikoff’s view
  • Peter Diamond’s view

March 21 – Disability Policy [Clark et al., Chapter 9]

  • How SSDI works
  • SSDI policy history
  • SSI policy history
  • Program participation and work incentives
  • Trends in employment and caseloads
  • Policy trade-offs

March 28 –April 3 – Spring Recess

April 4 – Health Care Issues [Clark et al., Chapters 10 & 11]

  • Health care and the elderly
  • Medicare
  • Supplemental coverage for acute care
  • Problems and strengths of Medicare
  • Reform options
  • Long-term care
  • Financing health care
  • Need for reform
  • Supplemental Security Income (SSI)
  • Health care in the U.S.
  • Attacking problems in heath care
  • Access to medical care

April 11 – Mid-term Evaluations

Presentations on Issues by Students

April 18 and 25; May 2, 9 and 16

Possible Topics

  • The divisive issue of generational equity
  • Dependency ratios
  • “Sandwiched” generations
  • Conversion of defined benefit plans to defined contribution plans
  • Will Social Security be there for me?
  • Rates of return and management costs of Social Security compared to private sector alternatives
  • Judging fairness by the legal treatment of and the outcomes for women in Social Security
  • Care-giving and benefit options
  • National health insurance
  • Heath care problems in the United States
  • The Canadian model; other international comparisons
  • The economic value of life
  • The meaning of poverty as it relates to the elderly
  • Public assistance programs: SSI; TANF, Medicaid, GA
  • Guaranteed annual income plans & the negative income tax
  • The new Medicare drug benefit
  • Does Social Security discourage work?
  • Does Social Security influence saving and investment?
  • Age discrimination and the labor force
  • Generational equity
  • Dependency ratios; the “sandwiched” generation
  • Who pays for long term care? Normative issues.
  • The high cost of dying
  • The economics of assisted dying
  • Retirement and health/wealth
  • The demand for home modifications
  • The economics of bequests

May 23 – Instructor Wrap-up & Final Evaluations; Term Paper Due

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