This lecture continues the analysis of Social Security started at the end of the last class. We describe the creation of the system in 1938 by Franklin Roosevelt and Frances Perkins and its current financial troubles. For many Democrats, Social Security is the most successful government program ever devised and for many Republicans Social Security is a bankrupt program that needs to be privatized. Is there any way to reconcile the views of Democrats and Republicans? How did the system get into so much financial trouble? We will see that the mess becomes quite clear when examined with the proper present value approach. Present value analysis reveals the flaws in the three most popular analyses of Social Security, that the financial breakdown is the fault of the baby boomers, that privatization would bring young investors a better return than they anticipate getting from their social security contributions, and that privatization is impossible without compromising today's retired workers.
This course attempts to explain the role and the importance of the financial system in the global economy. Rather than separating off the financial world from the rest of the economy, financial equilibrium is studied as an extension of economic equilibrium. The course also gives a picture of the kind of thinking and analysis done by hedge funds.
As one of the world's great universities, Yale traces its roots back to the early 1640s when colonial clergyman sought to establish a school in order to continue the tradition of European education within the Americas. Yale has now grown to educate over 11,000 students from over 100 countries on a 310-acre campus in New Haven, Connecticut. Within the school's 260 buildings are over 2,000 undergraduate programs in 65 departments taught by a distinguished faculty. As Academic Earth's first partner school, Yale has been a leader within the space of OpenCourseWare by consistently delivering on its esteemed mission to expand access to educational materials for all who wish to learn.