Intergenerational Transfer Schemes as Incomplete Social Contracts

Intergenerational transfers are often viewed as emerging from social contracts that specify the terms of trade for some pattern of exchange among generations. Here it is argued that such a view should incorporate contractual incompleteness and the impossibility to ex ante rule out the renegotiation of the social contract. In the present setting, such issues preclude that social contracts implement first-best decisions. Yet, a situation with an incomplete and renegotiable social contract is superior to various other scenarios, including the no-contract solution.