Word: feldstein
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Lesnoy and Leimer also argue that the data from before World War II are of questionable relevance to Feldstein's model to begin with. The first social security taxes were not collected until 1937, and the first benefits were not paid out until...
They note that most saving during the decade before the war was not done with the expectation of receiving benefits upon retirement. These expectations of retirement benefits are a fundamental assumption of Feldstein's "life cycle" model. Moreover, they say, the Great Depression and the war represent abnormal periods for private saving in this country...
Lesnoy and Leimer also argue that minor revisions in Feldstein's equations--made to take account of differences in the way individuals plan their retirement savings--lead to radically different conclusions about the effect of social security on private saving. These modified assumptions lead to contradictory conclusions, they...
...Feldstein, however, stands by his original conclusion that social security decreases private saving and insists that his original statistical estimates of a 50 percent decrease in savings are on target...
Regarding Lesnoy and Leimer's assertion that his data sample is inadequate to make strong statistical inferences, Feldstein says, "All data sets have problems," adding, "Leaving out the early years and the pre-social security world you throw away sample points and throw away variability and just make the standard error larger...