Hardcover | $7.75 Short | £5.95 | ISBN: 9780262042130 | 216 pp. | 5.375 x 8 in | December 2002 Paperback |$4.75 Short | £3.99 | ISBN: 9780262541824 | 216 pp. | 5.375 x 8 in | January 2005

## Overview

In this book, Peter Diamond analyzes social security as a particular example of optimal taxation theory. Assuming a world of incomplete markets and asymmetric information, he uses a variety of simple models to illuminate the economic forces that bear on specific social security policy issues. The focus is on the degree of progressivity desirable in social security and the design of incentives to delay retirement beyond the earliest age of eligibility for benefits. Before analyzing these models, Diamond presents introductions to optimal income tax theory and the theory of incomplete markets. He incorporates recent theoretical developments such as time-inconsistent preferences into his analyses and shows that distorting taxes and a measure of progressivity in benefits are desirable. Diamond also discusses social security reform, with a focus on Germany.

## About the Author

Peter Diamond is John and Jennie S. McDonald Professor of Economics at MIT. He received the 2010 Nobel Prize in Economics.

## Endorsements

“"Peter Diamond is one of the world's premier economists. This path-breaking book extends the traditional theory of optimal taxation to multi-period models. But it also considers how optimal tax rules/formulas need to be modified if agents are myopic, borrowing constrained, or time inconsistent. Diamond's findings will change how we think about and design public policy toward retirement saving and life-cycle labor supply." Laurence J. Kotlikoff , Department of Economics, Boston University”
“Peter Diamond is one of the world's premier economists. This path-breaking book extends the traditional theory of optimal taxation to multi-period models. But it also considers how optimal tax rules/formulas need to be modified if agents are myopic, borrowing constratined, or time inconsistent. Diamond's findings will change how we think about design public policy loward retirement saving and life-cycle labor supply.”
Laurence J. Kotikoff, Department of Economics, Boston University
“"When the leading health economist speaks, it behooves others to listen. These lectures by Newhouse neatly and conclusively undermine the nostrums of both the right and the left. He shows why government regulation is cumbersome and inefficient and why knee-jerk appeals to markets ignore the myriad perils from asymmetric and incomplete information. Those who seek easy answers to hard problems will be disappointed. Those who demand a guide to clear thinking about matters of transcendent importance will be richly rewarded."--Henry J. Aaron, The Brookings InstitutionPlease note: Endorser gives permission to excerpt from quote.”
“"For a generation, Peter Diamond has thought more clearly and more deeply about the subject of social insurance than has any other economist. He has been a mentor to every serious scholar interested in the subject. This book confirms that he still is."--Henry J. Aaron, The Brookings Institution”
“"Slemrod and Bakija have made their splendid guide to the federal tax system as fresh and current as this morning's newspaper. Careful readers will be immunized against the easy sophistries that too often masquerade as tax policy debate. This third edition lays out sophisticated economic analysis in simple language that should make it an oft-consulted companion of students, journalists, lawyers, officials, and virtually anyone else who wants to make their way through the weird terrain of the U.S. tax system."--Henry J. Aaron, The Brookings Institution”