Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 10, 2023 erstellt
Description:
When Adam Smith – author of Wealth of Nations (1776) and Theory of Moral Sentiments (1759) – was elected Professor of Logic at Glasgow in 1751, he joined a benefit “scheme” that was unique for its time, although quite common in the 21st century. The scheme offered participants a choice of levels at which to contribute savings to a fund, ranging from 2% to 10% of wages, with benefits granted in the form of a reversionary annuity to a spouse and/or lump sum to children. This article (i.) describes the scheme in financial and actuarial terms, (ii.) values Smith’s annuity and (iii.) examines the choices made by participants, in a scheme which was prudently managed by Presbyterian ministers in the Church of Scotland. The research contribution of this paper is to leverage archival data from the National Records of Scotland to measure the extent of insurance anti-selection and to show that debates around choice architecture, default options and auto enrollment which infuse the literature in the 21st century, were prevalent in the mid 18th. For the record, Adam Smith actively contributed at the highest allowed rate, but it wasn’t a “good” investment for him ex ante or ex post. As for why, one must read the paper