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Exam Questions M.I.T. Social Insurance Suggested Reading Syllabus

M.I.T. Reading List and Final Examination for Social Insurance. Diamond and Summers, 1981

The following reading list and final exam were found in the Peter Diamond papers at Duke University’s Economists’ Papers Archive. No instructor is named on either the reading list or the exam. While transcribing for this post, I thought I had better base the small detail of the course instructor on some evidence. Checking the published course catalogue for the 1980-81 academic year at M.I.T., I was able to confirm my suspicion that Peter Diamond was indeed a course instructor. Not surprising in hindsight was that the course was co-taught with Lawrence H. Summers (a.k.a. “Larry” Summers) of most recent infamy.

On Summers’ Jeffrey Epstein connection: see the series of articles in the Harvard Crimson by Dhruv T. Patel and Cam N. Srivastava, Exhibit #1, Exhibit #2, Exhibit #3 (with Elise A. Spenner).

Once I go to the trouble of preparing an artifact for posting, I cannot resist the compulsion to share it. I ask my visitors to accept this post as a tribute to Peter Diamond’s contribution to graduate economics education à la M.I.T. rather than a rehabilitative look at the young Larry Summers in the Rear-view Mirror.

The evil that men do lives after them; The good is oft interred with the archival records. 

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14.476 Social Insurance

Prereq.: 14.121, 14.122
Year: G (2)

Theory of social insurance and examination of some of existing and proposed US programs including some subset of Social Security, Unemployment Compensation, Worker’s Compensation, National Health Insurance.

P. A. Diamond, L. H. Summers

Source: Massachusetts Institute of Technology. Bulletin 1980-81. Courses and Degree Programs Issue 1980-81, p. 513.

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14.476 Social Insurance
Spring 1981

(x) – optional

  1. Introduction
    1. (x) H. Kunreuther et al, Disaster Insurance Protection, Chapters 1, 10.
    2. (x) P. Diamond, “A Framework for Social Security Analysis,” Journal of Public Economics, 1977, 275-98.
    3. (x) Debreu, G., Theory of Value, Chapter 7. Also in P. Diamond and M. Rothschild, Uncertainty in Economics.
    4. (x) Feldstein, M., “The Theory of Social Insurance,” Public Policy, 1977.
    5. (x) FTC Staff Report, “Life Insurance Cost Disclosure.”
  2. Moral Hazard
    1. (x) M. Pauly, “Overinsurance and Public Provision of Insurance,” Quarterly Journal of Economics, 1974, 44-54. Also in Diamond and Rothschild.
    2. Shavell, “On Moral Hazard and Insurance,” Quarterly Journal of Economics, November 1979.
  3. Adverse Selection
    1. Diamond and Rothschild, Uncertainty in Economics, Chapters 14, 16.
    2. Akerlof, “The Market for Lemons,” Quarterly Journal of Economics, 1970, 488-500. Also in Diamond and Rothschild.
    3. Rothschild and J. Stiglitz, “Equilibrium in Competitive Insurance Markets,” Quarterly Journal of Economics, 1976, 269-650. Also in Diamond and Rothschild.
  4. Property Insurance
    1. Joskow, “Cartels, Competition and Regulation in the Property-Liability Insurance Industry,” Bell Journal, 1973, 375-427.
    2. (x) Stone, J., “Opinion, Findings and Decision on 1978 Automobile Insurance Rates, Part II.” Also in Division of Insurance, Commonwealth of Massachusetts, Automobile Insurance Risk Classification: Equity and Accuracy.
    3. Smallwood, D., “Competition, Regulation, and Product Quality in the Automobile Insurance Industry,” in A. Phillips, ed., Promoting Competition in Regulated Markets.
    4. Shavell, “On Moral Hazard and Insurance,” mimeo version, Section 6, Experience Rating.
    5. State Farm Insurance Company, Research Department, “The Effect of a Suburban Driving Population on Urban Auto Insurance Premiums.”
    6. DuMouchel, “Computing Territorial Relativities which Include the Effects of Travel Between Territories on Claims Costs.”
  5. Pension and Social Security
    1. (x) Munnell, A., The Future of Social Security, Brookings.
    2. (x) Boskin, M., ed., The Crisis in Social Security, 1977.
    3. (x) Myers, R.J., Social Insurance.
    4. Pellechio, A., “Social Security Financing and Retirement Behavior,” AER, May 1979.
    5. Boskin, M., “Social Security and Retirement Decision,” Economic Inquiry, 1977.
    6. Quinn, J., “The Early Retirement Decision,” Journal of Human Resources, Summer 1977.
    7. Bulow, J., “Analysis of Pension Findings under ERISA,” mimeo, 1979, National Bureau of Economic Research working paper.
    8. Hagens, J., “Social Security as Retirement Insurance,” mimeo.
    9. Crawford and Lilien, “Social Security and the Retirement Decision,” mimeo.
    10. Mirrlees, J., “Intended Labour Supply.”
    11. Mirrlees J. and Diamond, P., “A Model of Social Insurance with Variable Retirement,” Journal of Public Economics, 1979, 295-336.
    12. __________ and __________, “Payroll Tax Financed Social Insurance with Variable Retirement.”
    13. __________ and __________, “Social Insurance where the Value of Retirement Varies.”
    14. __________ and __________, “Social Insurance with Variable Retirement and Private Savings.”
    15. HEW Task Force on the Treatment of Women Under Social Security, Report.
    16. HEW, “Social Security and Changing Roles of Men and Women.
    17. (x) 1979 Advisory Council on Social Security, Report.
    18. (x) National Commission on Social Security, Report.
    19. (x) President’s Commission Pension Policy, Interim Report.
  6. Unemployment
    1. (x) Unemployment Compensation: A Background Report, Background Paper 15, Congressional Budget Office, 1976.
    2. (x) “The Economics of Unemployment Insurance: A Symposium,” Industrial & Labor Relations Review, 30:4, July 1977.
    3. (x) Baily, M.N., “Unemployment Insurance as Insurance for Workers,” in J. Hight, ed., Symposium on the Economics of Unemployment Insurance.
    4. (x) Shavell, S., and L. Weiss, “The Optimal Payment of Unemployment Insurance Benefits over Time,” Journal of Political Economy, December 1979.
    5. (x) Hall, R., and D. Lilien, “Efficient Wage Bargains under Uncertain Supply and Demand,” AER, December 1979.
    6. Feldstein, M., “Private and Social Costs of Unemployment,” American Economic Review, May 1978, 155-8.
    7. Feldstein, M., “The Impact of Unemployment Insurance on Temporary Layoff Unemployment,” AER, March 1979.
    8. Clark, K., and L. Summers, “Labor Market Dynamics and Unemployment: A Reconsideration,” BPEA, 1979:1.
    9. Clark, K., and L. Summers, “Unemployment Insurance and Labor Market Transitions,” mimeo.
    10. (x) Baily, M., “On the Theory of Layoffs and Unemployment,” Econometrica, 1977, 1043-64.
    11. (x) Flemming, S., “Aspects of Optimal Unemployment Insurance, Journal of Public Economics, 1978, 403-425.
    12. (x) Jovanovic, B., “Job Matching and the Theory of Turnover,” Journal of Political Economy, 1979, 972-990.
    13. (x) “Firm-Specific Capital and Turnover,” Journal of Political Economy, 1979, 1246-1260.
    14. (x) Burdett, K. and Mortensen, D., “Search, Layoffs, and Labor Market Equilibrium.”
    15. (x) Holmstrom, B., “Equilibrium Long-Term Labor Contracts.”
    16. (x) Akerlof, G. and Main, B., “Pitfalls in Markov Modeling of Labor Market Stocks and Flows.”
    17. (x) __________, “Unemployment Spells and Job Tenures.”
    18. (x) National Commission on Unemployment Compensation, Report.
    19. Gustman, National Bureau of Economic Research working paper.
    20. Nickell, S., “The Effect of Unemployment and Related Benefits on the Duration of Unemployment,” Economic Journal, 89, 1979.
    21. Atkinson, A., “Unemployment Benefits and Incentives,” unpublished.

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14.476
Spring 1981
Final Exam

Answer four questions. They all count equally.

  1. “Unlike the case of adverse selection, with moral hazard but no adverse selection, competitive equilibrium is efficient.” Comment.
  2. Using a two period model of labor supply with uncertain incidence of (unobserved) disability, explain the effect of private savings opportunities on the ability of the government to provide disability insurance.
  3. Discuss the cases for and against cross-subsidization of different risk classes for automobile insurance (assuming that auto insurance as a whole breaks even).
  4. Discuss the advantages and disadvantages of annual sharing of husband’s and wife’s earnings for Social Security purposes.
  5. Discuss the determinants of the optimal waiting period for unemployment benefits. Be clear about the criteria you are using and the separate moral hazard problems affected by the waiting period.

Source: Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Peter Diamond papers, Box 4. Folder “Teaching Material”.

Image Sources: Portrait of Peter Diamond (2003) by Donna Coveny/MIT in “An Interview with Peter Diamond”, Macroeconomic Dynamics, 11, 2007, 543-565. Portrait of Lawrence H. Summers (1982) from MIT Museum.