 So, shall we start just in one minute? We want to put the slides up now rather than waiting until later. I mean, it's just the title. You have it now. Normally essential bank. Yes. I've noticed with the slides that's why I thought maybe. Okay, okay. Yeah, good afternoon. So, Peter, it is a tremendous, tremendous pleasure to welcome you at the ECB, to the ECB. Peter, as you know, is known for laying the foundation of analyzing markets with search frictions, no surprise, for which he received the Nobel Prize in 2010. Peter is also known for his analysis of U.S. social security policy and has advised governments globally on pension reforms, which is the topic of the Jean Monnet lecture on good pension design. This is the topic that you will present now. Now, let me say something more personal about the introduction. I entered the ECB in June 2011, and coincidentally, that was a time where Peter got objections from the U.S. Senate, from one particular group of senators in the Senate. And that was three times, I think that was the third time. You wrote in June when I entered the bank here, in June when I entered the bank, this op-ed in the New York Times, which coincided at four days, the time when I joined the bank. And the title was very nice, because it was, when a Nobel Prize isn't enough to join our community of central banks, because a Nobel Prize is not enough. I never forgot that, Peter. This referred to, of course, the blocking, as I said, from your nomination at the Fed Board by Republican senators. The argument was, and I read it, the argument was too little experience in conducting monetary policy, because it had only done work on pensions and labor market theory, whether it was the argument. And I can assure Peter that we fully agree with the argument you developed on the critical importance for central banking in understanding the functioning of labor market for the conduct of monetary policy. I fully agreed. And in your Nobel acceptance speech, and it was in December 2010, after the Great Recession of 2009, you concluded that structural unemployment issues of mismatch were not important in the slow U.S. recovery and there's not a reason to stop an accommodative monetary policy. And yes, analysis of labor market is central to monetary policy. It's not the only thing, because there isn't the other part which will be the matter of the speech today, which has to do with financial markets and risk sharing, which is another point in which you insisted also, which was the good understanding of the properties of capital markets. How economic risks are and should be shared. This is also very relevant for designing policies to reduce risk to avoid future financial crisis. So that's the topic you entered today, which is the good design of pension. And I'm very pleased, again, to agree to hear. Yes, you will control. Just push on the right one. And if there are trouble, we'll be there. Thank you for reminding me of an interesting time in my past. I think it was in before. You would agree that I said it. I do have to admit that on the op-ed page of the Times, it's the headline writers who picked the headlines. And the authors have no say in that. When I thought about why someone who's basically a public finance economist was invited to talk to an academic conference of monetary and finance people, I thought I should start with some elements of how the basic mindset in public finance is different from the basic mindset in other places. And then sticking with my theme, I'll explain how the basic mindset in pension analysis is different from the basic mindset in public finance, or at least the optimal tax portion of it. And then I'll touch rather briefly on a couple of policy issues in the pension area with a focus on the issues that are most tightly connected to the capital market. So everybody here obviously knows the basic welfare theorem, and we've already in this conference had a number of references to Pagoo taxation. So is this the fundamental welfare theorem for public finance economists? No. This is the fundamental welfare theorem for public finance economists. It says if you don't have distorting taxes, you don't have an optima. And the reason here is you care about income distribution, you've got asymmetric information. There's no way you can address that without distorting taxes. Similarly, if you have asymmetric information around individual uncertainty and insurance, whether it's done by an insurance company or done by a government, you need what are implicit taxes. A further element that comes with this mindset is that it matters a great deal what is happening outside the area you're analyzing. So I will talk about pension systems and pension plans. It's a mistake to do a full-blown analysis of normative issues on a plan without the context of the rest of the system. So as an example of that, if the standard theory and you say, well, if the government's spending more, it's going to raise taxes to cover that, there are going to be more distortions, that's part of the cost of the spending. If, on the other hand, you're financing your government with an optimal income tax, you've done an optimal trade-off between distortions and social welfare, and indeed you normally would have some people having a zero marginal tax rate, so no distortion, but if you've optimized, that's the marginal value of revenue no matter what tax you're changing. Given both distributional concerns and efficiency concerns. So you start in a different place for things, and now let me move on. That's all I wanted to say, not getting into my other hobby horses about what's wrong with monetary theory and finance. That's some other time. So what's obvious, and I don't have to say it, is pensions are very important, and currently in many countries pension changes are very important, because even though aging has been predictable and largely accurately predicted by at least the U.S. Office of the Actuary of Social Security, systems have not been built to adapt to trends. Pension systems also have to adapt to shocks, and we've had some big shocks that have shaken up the whole mix between defined benefit and defined contribution. So pensions matter. Let me start with the basic. Doing pension analysis, the focus is on the people you're financing with it, and I'm not going to look at disability issues. So this is retirement, economic security, and old age. And it's normal to divide the concerns into three pieces. Consumption smoothing means taking consumption away from somebody in some way when they're young and giving it back when they're older, and making that work better. Secondly, an insurance mechanism, recognizing that are annual income tax, annual welfare models, don't deal with all of the insurance issues that you might, and a pension system has in it inherently arguments that are different from those in annual income taxes. Vickery did once argue for lifetime income taxation, but it's never happened anywhere. And poverty relief, there's a general sense that because you're not expecting much labor supply, what you can do in poverty for the elderly is greater than what you do elsewhere. But pension design, I can assure you, is difficult. First of all, it's politically very difficult, but even economic analysis is difficult because of the complexities you're dealing with, and the diversities in the population, and number one, ability to prepare for accumulating the rights that you will finance your retirement, and then the way you use those rights, huge differences in the population and their ability to do that, and therefore huge differences in how the government might address people, but keeping things not too complex means you're designing a system that will work better for some than for others. Family structures matter, that's a concern, and labor market experiences are diverse. I didn't put up explicitly the gender issue, but obviously it touches on each of these. The pension system has both economic and demographic risks, as does the rest of the economy. A lot of focus on the costs of administration of pension systems, in part as with discussions of mutual funds, it's the one thing we really know how to measure well, whereas all of the other items of are you doing a good job on the risk return frontier is inherently much more difficult, and the role of government is vital, and the quality of government is going to tell you what sorts of things are sensible and not sensible, and the political space for government is going to be involved. So now let me make the obvious point about pensions, and this is relative both to basic theory and to optimal tax theory. The central issue is, left to their own devices, a large fraction of the public in most countries would do inadequate savings for what would be sensible for consumption smoothing, sensible for economic security in old age, but that's not the only feature, if that were the only feature you could mandate saving and turn everybody loose in the capital market. That's what Hong Kong has just done, it's a semi-disaster. So what are the other elements that go on? Limited financial understanding, widespread, certainly in the American public, offerings of financial firms are aimed at their market, like offerings in every other consumer retail operation, and annuity markets as we know have a severe selection problem, as well as having even more of a complexity problem than the accumulation phase where you're buying stocks and bonds. Two items I won't touch upon, where pensions can play a role, is spreading capital market risk more widely among people who don't yet have any capital through a pension system, and recognizing labor risk being non-marketable. Again, taxes address that, but the pension system can play a role in that. I won't get to any of that. So let me touch very briefly on some of these pieces. I start with financial literacy. There's a sizable literature asking people questions, finding out what they can do. A sizable literature following up what happens after attempts to improve financial literacy. It doesn't go very far, and it doesn't last very long. It helps some. But here's an example. Basically, people don't understand compound interest, which means if you're accumulating over a 40-year career, this is a rather important fact not to get straight. So what's in the market for these people who don't understand much? This is quite old because I haven't found anything up to date with the same care. What I love is it's focused on just S&P 500 funds because they all tend to track fairly well, and so the difference in fees is the big part of the difference between these, as well as some mild differences in services. So I write checks off my Vanguard mutual funds because they let me do that, and that seems to me much more sensible than having the money in a checking account that pays no interest. So two pictures come out of here. One, on average, the fees are much lower for institutional demanders than it is for individuals, and that hasn't changed. And secondly, there is a huge spread in the S&P 500 charges across these seemingly identical ones. What I do have that's up to date, obviously, first of all, fees in the U.S. capital market have come down steadily all through from that to today, but the spread has not gone away. This doesn't have the cleanness of all these index funds being the same, so there's good reason why there are some differences, but it doesn't spread out over that kind of range sensibly. Another thing that I think is really interesting to look at is the difference between the asset-weighted average fees and the simple average across the different funds. What this is telling you is that people with more money do a better job of investing it for themselves, and the pension system, national pension system, has got to be concerned with the whole population and particularly with the part of the population that won't do an adequate job for themselves. Now, I remember when in the U.S. the case was being made for going to individual accounts rather than our social security system, and I remember over here hearing somebody say, so there'd be a 1% fee, 1%, that's a small number, it's not a big deal. In response to that, I said what happens if you have an annual fee and you have a 40-year career, which social security is built around, and so I took a growth rate of wages that are being taxed and a growth-weight real return and cranked out how much less you have at different fees than if there were no fee, and there's close to a 20 to 1 ratio there because in a 40-year career your typical dollar is there for 20 years. It's not exact on that, but it doesn't give you a bad setting. And what other evidence have I found for the supply of financial assets for accumulation are paying close attention to the understanding of their potential market. Of course, behavioral economics, which has become so hot and which I am a big fan of, is decades behind marketing that was paying attention to all the same factors going back at least to the 20s and probably at an individual basis, not at a written-up basis, centuries earlier than that. So here's a study of the European market and the issue of complexity, the issue of the more there is a hidden risk factor, the more complex is the description. So the Consumer Financial Protection Bureau, to my mind, has a vital role to play in the U.S. capital market. So let me, first of all, remind you pension plans come in a wide variety of ways, this defined contribution and defined benefit. The pure cases of them are the familiar things, which were the early answers to going there, and now things have gotten much more complex in the mix, and various countries also have a non-contributory pension, a universal basic income for all of the elderly, and that's done with various kinds of removals. So let me focus on what's happened in defined contribution pensions. The turning point in this is what happened in Chile in 1981 under the Pinochet military dictatorship. They had a terrible pension system. They had a white collar system and a blue collar system that basically did redistribution from the blue collar system to the white collar system. They had poor incentives, they had inadequate financing, everything you could think of was wrong, and the government just wiped it out. There was grandfathering of rights in a variety of ways, but they wiped it out and started over with a defined contribution system together with two things. One was there was, first of all, a guaranteed minimum benefit for people who contributed at least 20 years, and secondly, a safety net for the elderly, which was very, very low, but it existed, and it exists in most countries, and I won't mention it again. I'm going to stay focused on the pension system. And that was a pension plan, which to begin with, they thought competition would take care of things, and they turned people loose, and they discovered the typical salesperson was an attractive young woman in a short skirt, and there were kickbacks because they didn't really want to save, and then they'd move from one of these to the other, and the fees were going up because the advertising expenses were big, and Chile put in place a sequence of reforms on the process around the system and on the portfolios being offered that made the thing steadily better. It's still a complaint in Chile that the profitability of the four large funds that now dominate the market is significant, but it's really not very bad anymore, but Chile made it look easy, and the second thing they did was they set aside a significant surplus in the general budget to finance the transition, so they made financing the transition look easy, and as a result, a lot of countries followed the Chilean model, and many of them learned that Chile made it look easy, but it wasn't. Now, the other aspect that's up here is in 1981, Chile had what turned into a good plan. It works well for the set of people that it works well for, but they didn't have a good system because there was a lot of the public for whom it was not a good system, and it took to 2008 the first Michel Bachelet regime to do the major change. They brought in a basic solidarity pension, which was aimed at providing pension either for someone who had nothing or as a top-up from the low-defined contributions aimed at the bottom 60% of the public, and then in 2008 they did the two parts of that, and in the second Bachelet administration, they have just had a commission reviewing all of the public as attitudes toward an experience with the pension system, and they're having an ongoing debate on the next round of legislation. So what happened after Chile in Latin America enthusiastic responses once it was out and mature and looking good? One country I saw literally the law that was passed, they had taken the Chilean law, crossed out the word Chile repeatedly, and wrote in their own name, and that was the law, but the regulatory oversight to run it just wasn't there, and then with the end of communism there was again a bunch of countries, the pension systems that were in place for communist countries were not viable in a market economy, and so my first exposure to that was being invited to do something about the debate as Poland was trying to figure out what to do, and some of the Polish people were arguing for imitating Chile, so in that paper I wrote about Chile, and then something happy to measure in this building, I was invited by Rudy Dornbush and Mario Draghi to write an extensive chapter about Chile for a book that they were, Brookings Volume, that they were editing, and then a number of countries have realized often around the fiscal costs that this wasn't such a good idea. So why the system is extraordinarily unpopular in Chile? The surveys of the public show a huge desire to end the system, and there are two big reasons for that. One reason is this was done by a military dictatorship, it doesn't have democratic standing, and let's just wipe it out as part of continuing to wipe out history. This was heard by the commission repeatedly. Secondly, though, was when this was rolled out, it was rolled out with of course a lot of selling to the public of how good this was going to be, including estimates of what the replacement rates were going to be, given this new system compared to the old system. And it didn't work remotely like that, and the prime reason it didn't work is Chile, like the rest of Latin America, has a large informal sector where there is no contributions being paid, no taxes being collected. So if you're not, the calculations done to begin with were for full career people, and for full career people it's a pretty good system. It accumulates well, the fees has nice diversified portfolios, the fees are actually lower than they are in the private market in Chile, and so it's a pretty good system, but that's a small minority of the Chilean public, and if I had put up the same kind of numbers for other Latin American countries, it doesn't work for any of them. So the thing I want to talk about is what can you do to get a system that works better in advanced countries? The informality just doesn't work with the contributory system, so to address informality you need to decide how much of a non-contributory system you're going to design and how large you're going to make it. So just to pick everyone's favorite example of this, the Netherlands non-contributory benefit goes to everybody over the right age. That age is finally starting to move, and it's above the poverty line. So if you've spent the relevant 50 years in the Netherlands, you're above the poverty line. It's taxable income, but there are no other connections, other places have done different things. But let me focus on this being a finance group, different ways that different countries have done bad things in their defined contribution systems. The stuff I'm talking about now is joint work I'm doing with Nick Barr, we're writing another book on pensions, and good pension design is the planned title, and I sometimes think it ought to be bad pension design as the planned title. So in Australia they put in a mandate, a sizable mandate, but employers pick the financial firm to handle the funds. And each financial firm designs a default for the people who don't pick among the portfolio options. And one of the problems they have in Australia is what are called lost accounts. You move from employer to employer, and then this previous employer has gone out of business. Now where did I have that account? Can I find it? And so that's a, and the kind of thing that the newspapers cover quite widely, but secondly, defined contribution accounts have a large fixed cost element, particularly if you combine some advice to people as they nearing retirement of it. So if you have multiple accounts, it's a lot more expensive system. Australia had done nothing about dealing with this problem, and you can see from that picture that they have a much more expensive system than they need to. And they're currently going through a multi-year sequence of commissions to change things. I just submitted something on the design of the default from it. The issue is what kind of role do you want the government to have in a system like this, given a large fraction of people who don't have any financial sophistication. And the example I want to talk about is Sweden. Sweden did an overhaul in the mid-90s, put in Sweden and Italy simultaneously, economists in both places, invented the idea of a no-show defined contribution system, a brilliant, brilliant idea. It's a defined benefit system in the sense there's a set of rules that determine what you have, and there aren't financial assets that you're holding in your account. But they treat it for communication purposes as if it were defined contribution. So they tell you each year you've deposited so much in the account, and your account has earned this rate of interest. That rate of interest is indexed to wages. And when you hit retirement, we will do an actuarial calculation, and you'll get a benefit coming out of that. So it's a very clever way of dealing with some of the trend issues, dealing with some of the risk issues, very cleverly done. But they also put in a premium pension. And what's interesting here is that they had a cross-party committee that included all but the furthest left and furthest right party. And they decided they didn't want to raise the tax rate. They were just going to divide the tax rate between what the left wanted and what the right wanted. And of course, recognition of the fiscal problems if you're building up asset accumulations, as the premium pension does. So they divided it that way. And politically, the left was free to design its part however it wanted, and the right was free to design its part however it wanted. And there are some interesting things that came out of it. One of them is the annuitization that happens at the end, which I'm going to talk about momentarily. But the left wanted to encourage women to work. There are no survivor benefits for the elderly in the system. There is a transition survivor benefit for three years, that's it. On the right, on the other hand, you can not only buy a joint life annuity rather than a single life annuity. You can transfer your full account to your spouse or cohabiting partner. Very different answers. So what do they do? The ideology on the right says you've got to give people a lot of choice. So they said any mutual fund in the market that meets certain criteria can be part of the options given in the pension system. So right now there are 843 different funds, and each individual can choose up to five of them. Initially, there was a big pressure on people explaining they were supposed to pick their funds. But of course, about a third of people didn't. So of course they designed a default, and being in Sweden they designed a very well-designed default. In fact, it functions very much like a sovereign wealth fund. And it has an equity fund, it has a fixed income fund, and it has a life cycle mix of them for the complete default if you choose nothing. But they'll ask you two questions you can answer or not. Would you like us to target a later retirement than your first eligibility? Yes or no? That will change the mix. And secondly, would you like a somewhat riskier portfolio or a somewhat less risky portfolio? So they got three of them for dealing with that. I was in Sweden when this process was happening and was amused to hear from some Swedish economists that they were tearing up the form to be mailed into the government because the default was the best thing going, and they knew you couldn't choose the default. Well, the default was such a good thing going that political pressure mounted, and now you can choose the default. So let me look at the system as a whole and then look at the default. So the Swedish government collects all the contributions. The Swedish government does all the record keeping and deals with these 800-odd mutual funds on a net basis, depending on the taxes collected and how they're to be allocated and any changes in portfolio that people have. The administrative cost of that is seven basis points of the now sizable accumulation. It's hard to compare across countries because it's going to look big when you're starting up and comes down as it grows. But that is vastly smaller than almost anything in particular, say Australia. If you want to take your fund from the private market and also have it in the pension system, then because the government is doing the record keeping for you, you've got to give a discount, and the discount is 49 basis points. And then for all of the system, the capital management fee is 23 basis points. That's after the rebates have cut in. They interestingly report the transaction costs. The fee is paid for buying and selling. You don't usually see that. You usually just see the administrative fee. But what about the default fund? Well, the equity fund is 14 basis points. The fixed income is five, and you can see it's way below the average, when the average also includes them. And that's not trivial because 45% of the Swedes with accounts are in the default fund. There was a third originally since then, almost every year. It's been over 90%. The last few years, it's been over 98%. These are mostly young people. They're going into the default. They can go out anytime they want, but the expectation is they won't. So again, relative to standard economics, choice is expensive. Choice by people who don't know what they're doing is expensive. It becomes more expensive when the suppliers are aware of that and are taking advantage of that. So the accumulation message to my mind is quite clear. And the default, Nick Barr and I proposed for Australia, is there should be only one default run by the government. And while you're at it, let the government collect the contributions because they're already collecting taxes. And then, go from there, you'll have record keeping, you'll have lost accounts dealt with. This is the easy part of pension things. The hard part is what do you do if you have a defined contribution system for the way people will spend the money? People want some lump sums to have good expenditures. People will need some lump sums for dealing with expenses that are not fully insured already. People recognize a life expectancy risk, so annuitization is important. And some people care about bequests. So how do you put together a package around that? Very hard to do. What the Swedes have done is on the one hand, the notional defined contribution system is a defined benefit system. And so you get an annuity, full stop. With the premium pension, they decided to mandate annuitization. And even though this was coming from the right and they pushed hard for relying on the private market, they recognized there wasn't enough demand for annuitization for it to make sense. So they did two things. One is they took the standard annuity that was in the market, thinking people would understand it. And that's one option. And you can do it single life or joint life. And you can just leave your money in your account and they will do a calculation to give you an annuity based on realized rates of return and realized life expectancies. Other countries that want to give people choice, and I think having everything annuitized, is not optimal. But of course in Sweden they also have sizable occupational pensions. So this isn't the whole story. So in the UK, they're wrestling with this now. I don't have anything to report on what they've done. But their financial conduct authority took a look at what people did back when partial 70% annuitization was mandatory. They removed that under the rubric pension freedom. And so the financial conduct authority studied to what extent people just took the pension offer of the firm that was handling their accumulation and how many of those were not getting as good a deal as you could find in the market. And as you can see the numbers there, that was large. Chile starting in 2008 with the other reform has been trying to modify two things. One is the nudge to get people to do some annuitization. And the nudge they have is you are limited how much you can take out in any year unless you've bought an annuity that's at least as large as the guaranteed minimum income. So they're protecting the FISC. But then they've set up a website and required people to go through the website to try to educate them. I haven't seen anybody do a study of the extent to which this is succeeding. There is a jump up in the extent of annuitization in Chile, but that is all. One of the complications which there is no literature about is if you have an annuity system, we know you don't want it in nominal terms. What should it be indexed to? And this is something on which I'm not aware of any significant literature. I took a look at John Campbell's textbook on finance, 500 and some odd pages on accumulation, and the word annuity does not appear in the index. I called John. He said, no, it's just not there, not there. So this is an interesting question and something that's hotly debated. For example, right now in the U.S., U.S. Social Security is indexed on the CPI for workers, because that was the only one that existed when Congress set up the system in 1972, which is still in place. The Republican chairman of the Social Security subcommittee of House Ways and Means wants to change to the change CPI, which is estimated to rise about 30 basis points less per year than the standard one. The chained one makes additional adjustments for the ability substitute. The Obama administration was prepared to go along with that on the grounds. It was a more accurate measure. But the question they didn't address is what is it a more accurate measure of? And the leading Democrat on the committee wants to change to an experimental index, which was put together just looking at the expenditure pattern of the elderly and pulling the other numbers from the regular CPI. That actually goes up faster. So I wanted to research this issue, much to my surprise. The future of Social Security has become a hot topic in the U.S. I hadn't paid any attention to it other than mildly staying in touch. But I started receiving requests to come and give talks about Social Security. So I decided I wanted to take a look particularly at this indexing issue. And the U.S. National Academy has put together a very distinguished commission of economists who work with index numbers and fat, fat volume that I dipped into. And the point they're making is first you need to know what the calculation is, and then you need to know what the purpose is that you're using this for as an index. And the calculation, of course, is to leave you on the same indifference curve, given the price changes, assuming your indifference curves are the same in this year as they were last year. One of the things I can assure you about aging beyond 65 is your preferences are changing year by year. And so are your health care expenses. So the issues that they brought up on the difficulty of using it was first of all they collect the data from retailers. Nowadays with online stuff and computerized stuff in stores where people have identified themselves, you can do more than that, but that's not in the CPI. And so what you can't do is say with confidence it's different for the elderly than it is for younger people. I mean we know it is, but we only know it is in a crude sense. And secondly, the CPI is based on total consumption. So it's weighting the views of people with high consumption more than anybody else. Somebody, and I don't remember who did it, cleverly called that a plutocratic index. A democratic index would ask the same question for tranches of the population, percentiles say, and then think what kind of average of these numbers do we want for different people because what they consume is different and particularly how they feel about quality changes is different. So just to give one example, when something that was an option for an automobile becomes standard in the automobile, the price change just adds in the price of the option for the previous year. But some fraction of the people didn't buy it. So this is not an accurate measure for the people who didn't buy it. So the other element is how do you really want to think about quality change? Because some of quality change is improvement for some of the people. Some of it is things that don't matter. It's just built in. Some of it is fashion. The example I like to cite is bestselling novels. The Canadian system, I didn't try to track down the U.S., they just take the average price of this year's bestsellers compared to the average price of last year's bestsellers and it's the right thing to do. But what does the theory tell you to do? The theory says you've had a huge drop in prices for these individual goods. Last year they were sold in bookstores and now they're remainder. They're available for a quarter of the price. And what do you do about the new bestsellers? Well, last year you estimate at what price demand would have been zero. And so we've had a huge fall in prices from that price down to here. They don't do that, but insofar as the latest iPhone is a fashion item, not really doing things for you that you didn't want, then it's like that. It's a different animal and quality adjustments are a big deal and particularly this is viewed as an issue around health care. Or as it's been put, do we want people to live on less because they're going to live longer at the level at which it's being triggered by health care? So what do different countries do? Canada, France and the US, their basic system is indexed by prices. Norway and Sweden use wages minus a constant. And they have different constants. The Sweden one, which is I think 1.6 was an estimate of real wage growth. So they're targeting prices but doing it absorbing some of the wage fluctuation risk. Norway, I think it's 0.75, I have no idea where that came from. Finland and Switzerland do a weighted average of the two. Finland is 80% prices, 20% wages. Switzerland for one piece of the system is 50-50. Countries increasingly are saying there are these risk elements and we're willing to put some of that risk on the elderly. They shouldn't be treated as if they have infinite risk aversion. And so Germany, Spain and Sweden have all done things that put part of it on there. Back to my early slide. This is within the pension community, a famous quote from Bob Merton on how a pension system can do a big improvement in an overlapping generations model where human capital is not marketable. There is a large literature you're relieved to know I won't bore you with. It's a very easy problem to solve in a two-period OLG model with a representative agent. And boy, you can get big improvements and you get the same kind of big improvements doing defined benefit rather than defined contribution, sharing of risks because you're sharing them more widely so you carry more equity. You get into more sophisticated stuff and it gets very complicated. If you'd like to see more of this, as I said, this is worked with Nick Barr. We started working together in 2005 when we were both on a mission for the Chinese government. You can not available in German, but in a number of countries where there was an ongoing serious debate, pension people did the translations to feed it into their debate. And let me finish with something from the forward of the book from Nick Stern, which I think is part of my sense of why this is so important. Thank you, Peter. Not only the older people. No, thank you very much. I will open the floor. I'm listening to you plenty of questions, I must say.