Replies to Barr, van Ewijk, Heath, Karnein and Schokkaert

Risk PoolingMy commentators raise several challenges to my conception of a collective pension scheme as a multigenerational corporate body that efficiently pool risks across generations. 1 I begin with Joseph Heath's most fundamental challenge: his claim that 'the intergenerational cooperative system does not actually pool risks (which leads me to register a mild complaint about the title of Otsuka's book, for suggesting otherwise)'.Rather, this 'retirement system' generates returns on savings during people's working yearsi.e. the portion of their earnings they contribute to a pension fundthrough the productive investment of those savings, the compounding returns of which they enjoy during their retirement years.Heath is right to draw attention to the central role played by the productive investment of pensions contributions.I wish I had registered its importance in Otsuka (2023).Moreover, I am in agreement with him that the compounding of returns over time on the productive investment of pensions contributions is other than intergenerational risk pooling. 2 Nevertheless, I would still maintain that collective pensions pool risks across generations.As I indicate in the last paragraph of Section 1 of 'Risk pooling, reciprocity, and voluntary association' (this volume), the creation of a corporate body that will endure indefinitely across multiple generations is what renders it safe to remain heavily invested in productive assetsboth publicly traded equities (stocks and shares) and illiquid private equity (such as the infrastructure into which large pension schemes invest).Pension schemes are thereby able to fully reap the risk premium that equities enjoy over bonds, which is the higher expected return necessary to induce people to invest in the former rather