Editorial
Orio Giarini

Financial sustainability of social protection systems
Maite Barea

Phased Retirement: Who Opts for It and Toward What End?
Yung-Ping Chen and John C. Scott

Part-Time Pensions and Part-Time Work in Sweden
Eskil Wadensjö

Is the fertility decline a consequence of the growth of the welfare state? Evidence from historical data
Mikko Puhakka and Matti Viren

The biology of aging
S. Gustincich, M. Biagioli, R. Calligaris, Z. Scotto Lavina and S. Zucchelli

Health Care System in the Industrialised Countries and the Role of Private Insurance
Alfeo Zanette and Monica Ricatti

Longevity, Systemic Models and Business Risk
Andrea Battista

Abstracts from The Employment Dilemma and the Future of Work
Orio Giarini and Patrick M. Liedtke

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The first question that any reader who had a look at the inside cover information on this report would ask is: Why would somebody reprint a text whose major work was done exactly 10 years ago? The answer is simple and two-fold: firstly, quite simply because we have run out of books. There is still a strong demand for this publication and we have been reproducing off-print versions of the original and then the slightly updated manuscript for a number of years now. But secondly, and more importantly, because in the recent past a new wave of thinking about the future of work and how to organize the socio-economic system has found its way into the mainstream. Interestingly enough, our ideas back in 1996 are being discussed anew.
If the authors have one qualm about their work of ten years ago, it’s our failure to stronger influence the political and economic debates in this area. Not that we could reproach ourselves or our public for the general lack of success or visibility of the work. The report has been translated into eight languages since its original appearance, was reprinted in some countries in several editions and became an economic best-seller in Germany. In addition, the authors were invited to discuss with the highest politicians in several countries, toured the whole of Europe and North America with their ideas, participated in expert conferences and parliamentary hearings, contributed to special national and international working groups, appeared in numerous talk-shows, TV events and radio interviews, and published scores of breakout papers based on this book.
And still, many of the shortcomings that we pointed out and analyzed a decade ago are still not resolved. Concepts like the fourth pillar (i.e. part-time working of the elderly), the importance of unremunerated work, the increasing flexibility and demands of the working environment, the need to renegotiate the contract between the workless and society, between the pension contributors and the benefactors etc. are still with us; perhaps even more pronounced than they were before.
Modern societies are trying to develop concepts that allow them to protect their citizens and at the same time stay competitive in the globalized markets. The approach of the new welfare state is no longer to arrange for full coverage of (ideally) all risks but to replace the existing extraordinarily expensive systems with more targeted and efficient approaches. They achieve this by requiring people to take on more risks individually and to organise their adequate protection themselves. This is the so-called ‘risk shift from public to private’, a concept we have been developing for a number of years. In reality, usually as a consequence of half-hearted or partial reforms, this has often led to an erosion of the protective systems rather than their real modernization. Genuine protection mechanisms, like insurance, provide cover for those risks that an individual cannot (or does not want to) bear. Today’s social security systems do anything but that, often protecting large groups of people against risks that they need no (or different) protection for, while excluding or leaving out others. We propose several possible solutions, among the most ambitious: (1) Organising a basic layer of remunerated work for those who cannot find employment otherwise, keeping them active and engaged; and (2) the encouragement and empowerment of the elderly to stay in employment for many years beyond age 60 or 65, but at terms (part-time work is the key component) that are more suitable to them.
Despite all this, it is very encouraging to see how the general discussions about how to reorganise the modern welfare state are beginning to shift into what we would consider the right direction. Besides these abstracts we also reprint a slightly edited version of our original report in the hope that the new availability of this book too will continue to make a positive impact. It can be requested at: risk_institute@genevaassociation.org.

Taken from the original report in english: The Club of Rome (1996): The Employment Dilemma and the Future of Work, the foreword dates from august 2006.
Orio Giarini: Former Secretary-General, The Geneva Association.
Patrick M. Liedtke: Secretary General and Managing Director, The Geneva Association (www.genevaassociation.org).

1. Introduction

It is certainly the case that in recent years, conference programmes, the contents pages of magazines and the daily, weekly national and international press have been crammed full of items on the issue of social security in general, and more particularly those aspects relating to complementary social security.
Despite this the issue of payment of retirement pensions, i.e. the final stage of the welfare system of which the accumulation stage is a mere, though essential tool, has undeniably been relegated to the back burner of public debate, possibly owing to priorities in time. Now it is time to create a reservoir of welfare resources, and in the future — not necessarily the near future in Italy’s case — their distribution to the pensioners of tomorrow will have to be dealt with.
Even from a scientific viewpoint, certain schools of thought¹ have only recently provided interesting contributions, not only based on an (albeit valuable) mathematical-actuarial approach, but rather on a wide multidisciplinary approach (from macroeconomics to finance) which is vital in tackling a phenomenon affecting human life, i.e. an event which is par excellence at the centre of everybody’s interest.
When it comes to business behaviour, available surveys on important issues related to management and ‘key’ risks suggest that the issue is not at the centre of attention of corporate managers, and even less do they suggest that there is widespread strong structural and organisational preparation for tackling the phenomenon at all levels of the insurance industry.
For example, mention should be made of the recent Tillinghast survey (2004) on the subject of risk management, which showed a multifaceted situation in which the attention paid to demographic aspects was increasing but still insufficient.
Whereas 84% of those interviewed stated that they tend to develop demographic risk measures, 69% try to include that risk in the overall Enterprise Risk Management process and only 39% declared that they were satisfied with the tools at their disposal for the management of that risk.
This may seem surprising for economic players such as life insurance companies, which for at least a couple of centuries have monitored, assessed and summarised human life — or rather the length and quality of its evolution. Clearly, together with its numerous repercussions — from the ageing of the population structure at any moment in history to the consequences for the labour market and pension systems, to the dynamics of family life — the progressive extension of human life itself is an essential element which cannot be neglected: it is really ‘the greatest of challenges’, a kind of final fulfilment of the historical function of life insurance the institutional role that insurance companies may be called upon to play in that context.
As to the role and institutional function of insurance companies, one should be explicit: we are dealing with activities and tasks that can and should be carried out not because of some kind of ‘hunting preserves’ preset by law but because of specific characteristics linked to their intrinsic nature as insurance companies.
The above remarks are all the more correct and relevant given that the increase in longevity is a widespread, well known, systematic and theoretically irreversible phenomenon for the advanced western world.

Andrea Battista: Managing Director of Duomo Assicurazioni, Cattolica Group.
Reference is made in particular to the research directed by the Wharton school of Philadelphia and for Italy Cerp in Turin.

In the industrialised economies, health plays a central role in the individual scale of values. As a result of the advances in medicine that have generated new expectations in the fight against disease, the demand for quality of life has become part of our daily experience. Citizens no longer accept the inevitability of illness and absolutely reject sickness and pain.
Governments are faced with a new scenario: on the one hand, citizens are prioritizing the quality of health care services, on the other health costs are constantly on the rise, as a result of scientific and technological developments in medicine and an aging population. These are the main forces behind the demand for additional health care services, the increased cost of which is to be borne by the State.
Health is the most crucial issue when it comes to building political consensus. Policy-makers must strike a balance between the increasing expectations of people vis-à-vis health care and the constraints imposed by public expenditure, particularly in countries like Italy where, in spite of the improvement of the quality of service, people are rather dissatisfied with the national health care system.
The solutions applied so far share the aim of rationalizing the costs of both the supply of and demand for health services and of costs’ financing. The measures adopted have produced similar results in all countries: hospitalization time has been reduced, cost-control has improved, market mechanisms have been implemented to manage resources, citizens have become conscientious consumers, and the number of sources of financing has increased.
In spite of their impact on efficiency, reforms implemented thus far have not succeeded in stabilizing health care expenditure as a share of GDP; thus, health care remains one of the causes of public budget deficits and is likely to remain so in the future, as a continued increase in spending is anticipated.
Using sources of financing in addition or as an alternative to public sources is a prerequisite to solving the health issue. In a public system burdened by slowness and rigidity, and faced with the need to rationalize costs, private insurance becomes a key tool to give citizens freedom of choice and provide flexible and customized solutions. In addition, insurance can be used to meet the funding needs resulting from the increasing number of people who are not self-sufficient and whose health care costs can hardly be borne by individuals alone.
This study gives an outline of health care systems in the industrialised countries and aims at exploring future opportunities for private health insurance. The first part focuses on the health care systems of the main industrialised countries and their reforms aimed at improving efficiency. The second part deals with health care demand and spending trends. Finally, the role of private insurance in financing health care systems, the supply of services and the potential of private insurance to improve overall efficiency are examined.

Alfeo Zanette and Monica Ricatti: Ufficio Studi of the Assicurazioni Generali.

Gerontology and biology consider the process of aging a continuous, universal, progressive, intrinsic and deleterious phenomenon that can progressively reduce the capability of a certain organism to maintain its homeostasis within a given environment, increasing the risk of illness or death.
In this article, we will examine the most recent theories on the biological mechanisms of aging. We will analyze the biochemical and physiological characteristics of aged organisms and senescent cells cultured in vitro. Furthermore, we will focus on the implications of data obtained from genetic experiments, in which modified longevity is achieved in animal model systems. We will then describe some examples of human genetic disorders, in which patients show signs of premature aging. In the end, we will discuss the possible implications of these most recent discoveries for the development of anti-aging drugs.
2. Various theories of aging

A question a biologist might ask is whether the aging process might lead to a clear advantage during natural selection and evolution. The progressive loss of cerebral and physiological functions, the increased vulnerability to environmental toxins, the higher rate of pathologies and the decline of fertility are specific features of the aging process that are difficult to reconcile with a specific advantage during evolution. Why isn’t aging completely blocked by natural selection? A reasonable answer to this question suggests that aging and death prevent the accumulation of a great number of living organisms that would be incompatible with existing resources. Nonetheless, this model is based on a risky anthropomorphic view of the problem: wild animals rarely survive till aging. Most usually, wild organisms succumb at a rather young age due to extrinsic causes, such as accidents or incidents with not exactly ‘friendly’ predators. Therefore, aging is not essential for survival, and thus is not subjected to selective pressure¹. In this context, the nobel prize Medawar hypothesized, in his Mutation Accumulation Theory, that only those organisms that survive ‘extrinsic’ causes of death can display the effects of genetic mutations accumulated in their germlines². Thus, only germlines are subjected to a very limited natural selection.
As a consequence, the longevity within a certain species is probably optimized as a function of its ecological niche and its ‘extrinsic’ mortality. Evolutionary adaptations, such as the ability to fly or the development of an enlarged and more complex brain, can reduce ‘extrinsic’ mortality and therefore are associated with an increased longevity.
Biologists wonder whether a genetic program for aging exists. The presence of such genetic program should not come as a surprise. In nature there are fundamental and well characterized metabolic pathways that, under specific signals from the outside (external environment) or from the inside (surrounding cellular tissues), can cause programmed and physiological cell death (apoptosis) of million of cells. Nevertheless, no combination of known genetic mutations has been able, so far, to generate an immortal animal or human being, even though some genetic alterations can modify longevity in laboratory animal models.
An intriguing theory, the Disposable Soma Theory, starts from the observation that complex living organisms need to optimize the consumption and usage of available metabolic sources^3,4. The amount of metabolic energy is, in fact, limited and requires a specific program of disposal and usage. In a very simplified classification of the possible types of energy disposal, we can identify two categories of energy-dependent activities:
1. maintenance of cellular physiological conditions, through continuous repair of macromolecular components within cells and tissues;
2. survival in a given environment and reproduction.
The molecular and metabolic mechanisms for cellular homeostasis require a large amount of energy. Nevertheless, 90% of wild animals succumb during the first year of life both for the inability to preserve a proper body temperature and for the encounter with predators. Thus, every organism needs a compromise: during the first phases of life it is mandatory to fight against external hostile conditions and to reproduce. Consequently, this choice implies the use of a minimal amount of energy for the maintenance of the cellular systems in order to keep them compatible with life. The small quantity of energy consumed inevitably causes an accumulation of cellular damages that has no consequences on the initial survival but participates in the aging process.
Based on this theory, it is possible to predict some biological mechanisms of aging:
1. aging results from an accumulation of cellular and molecular damages of various sources that cannot be repaired;
2. longevity is mainly controlled by regulatory genes of cellular and molecular repair;
3. the expression of those genes and, thus, the usage of metabolic energy can be regulated;
4. the germline, which is immortal, displays the highest level of repair and survival;
5. the mechanisms of aging are stochastic.

Giovanni Armenise-Harvard Foundation Laboratory, Department of Neurobiology, International School for Advanced Studies (I.S.A.S./S.I.S.S.A.). Address: AREA Science Park – Basovizza, 34012 – Trieste, Italy.
1 Kirkwood, T.B.L. (2005): “Understanding the odd science of aging”. Cell, no. 25, 120 (4), pp. 437-47.
2 Medawar, P.B. (1952): An unsolved problem of biology, Lewis, London.
3 Kirkwood, T.B.L. (1977): “Evolution of ageing”, Nature, 27, pp. 301-304.
4 Kirkwood, T.B.L. (2005): “Understanding the odd science of aging”, Cell, no. 25, 120 (4), pp. 437-47.

The demographic structures of many European and Western economies are changing substantially. Low fertility and longer expected lifetimes are behind this fundamental transformation. Both are presumed to have a substantial effect e.g. on fiscal policy. In fact, ageing and fertility decline are currently considered to be the main problems in Europe and other industrialised economies. A report by the European Commission (see Oksanen 2003, p. 11) goes even so far as stating that “the increase in public expenditure is mostly caused by declined fertility and increasing longevity…”
Both ageing and fertility decline are taken as ‘facts of life’, which cannot be affected by any policies. In other words, they are exogenous. Moreover, these changes are usually considered to be ‘problems’, which sounds somewhat surprising. At least an increase in the life-span is usually thought to increase individual’s lifetime utility and well-being. Why is it now a problem?
The exogeneity assumption might be true more with ageing, but definitely not with fertility as we argue below. But how does fertility change? Obviously, any change requires non-marginal change in institutions and relevant variables, but we cannot simply rule out all possibilities of affecting fertility behaviour even in the medium run. Both historical data and cross-country comparisons show that there are (have been) huge differences in fertility behaviour.
In this paper we try to summarize some key relationships which seem to exist between fertility and the key background variables. In particular, we pay attention to the size of the welfare state (and within the welfare state, the pension system). We present some empirical evidence that the fertility decline is related to the expansion of the government and its activities. Our evidence might help in designing policies, which will have less harmful effects on labour supply (retirement age) and fertility. If our thesis is correct, it would be dangerous for governments to try and solve the fiscal problems due to ageing with higher taxes and larger transfers, since fertility decline might still accelerate further, and make matters actually worse.
We proceed as follows. In section 2 we scrutinize the relationship between key determinants of fertility. In section 3, we delve deeper into the determinants of fertility by discussing how the relationships may change when we, instead of pair wise correlations, look at conditional correlations. Finally, some conclusions are drawn mainly for policy purposes in section 4.

We thank the Yrjö Jahnsson Foundation for financial support.
Mikko Puhakka: Department of Economics, University of Oulu, P.O. Box 4600, FIN-90014 Oulu, Finland, email: Mikko.Puhakka@oulu.fi.
Matti Viren: Department of Economics, University of Turku, FIN-20014 Turku, Finland, e-mail: http://eng.newwelfare.org/?p=19 1. Introduction