It seems that these infusions from savings or gift cannot be interpreted as invested consumption to be recovered with interest later, but are rather pure consumption recovered now in the satisfaction of survival. Then human cash flow, or pay less invested consumption, remains positive to the end if we recognize imputed pay. Economists should, | think, because it figures into predicting behavior as much as
literal pay. So does psychic pay.
It follows that human capital, meaning present value of all pay in the absence of invested consumption to deduct, continues after retirement. That shows that my parable of the boss and her secretary is oversimplified. Parables tend to be. The secretary may happen to have better skills as a full-time caregiver, which both she and the boss will figure to be in retirement, and so may reverse the disparity in
human capital then. All models, I guess, assume ceteris paribus (other things equal).
My retirement theory leaves much unexplained. It tries to throw a little light here and there. | believe it achieves some surprise, and even originality until we know better, in my argument that human capital continues after retirement. Yet this follows directly from Ben-Porath. Invested consumption must end when time for recovery runs out, whether or not I am right in ending it with job entry decades before, and human capital must last as long as literal or imputed pay does. The endurance of human capital through to mortality is not logical certitude, but need
not be doubted either.
Retouching the Ben-Porath Model
Ben-Porath’s life cycle model seems right enough in all features but one. Equations in his 1967 paper imply that pay measures realized work alone. This should be adjusted to show the pay rule. I would also model invested consumption as ending at independence, or a few months later to allow for initial job training. That does not contradict Ben-Porath, who leaves such a possibility open. I would further apply depreciation theory to model human depreciation as growing from a negligible
share of pay at first employment to substantially all of pay at the end.
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