Financial Theory with John Geanakoplos - 13. Demography and Asset Pricing: Will the Stock Market Decline when the Baby Boomers Retire?

Financial Theory (ECON 251) In this lecture, we use the overlapping generations model from the previous class to see, mathematically, how demographic changes can influence interest rates and asset prices. We evaluate Tobin's statement that a perpetually growing population could solve the Social Security problem, and resolve, in a surprising way, a classical argument about the link between birth rates and the level of the stock market. Lastly, we finish by laying some of the philosophical and statistical groundwork for dealing with uncertainty. 00:00 - Chapter 1. Stationarity and Equilibrium in the Overlapping Generations Model 16:38 - Chapter 2. Evaluating Tobin's Thoughts on Social Security 35:07 - Chapter 3. Birth Rates and Stock Market Levels 01:02:30 - Chapter 4. Philosophical and Statistical Framework of Uncertainty Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses This course was recorded in Fall 2009.