Piketty showed in Capital that most modern work about the trends in economic inequality was flawed. We usually think of the industrial revolution and modern era as periods where power and wealth became much more fairly distributed. However, if you go far back enough into the records, as he did, you can see a clear trend of concentration of wealth even now in the current system. The trend was briefly disrupted by the two world wars which were so destructive to our economies. The necessary reconstruction led to massive wealth redistribution and evened the playing field somewhat.
It seems that the graphs in this tweet are another confirmation of Piketty's observation.
Didn't Rognlie @ MIT show that almost all of the out-performance of wealth was due to real estate prices? Couldn't the solution to wealth inequality therefore be a radically different approach to building codes and land value taxes? And doesn't it follow that wealthy landlords in California massively benefiting from proposition 13 and decrying wealth inequality at the same time sit at the pinnacle of political and economic hypocrisy?
There are two extreme ways to remove the inheritance problem. One would be to forfeit personal property: you can't give what you don't own. The other would be to remove the concept of family: when born you are placed in a communal system to be raised by professionals. People start with the same chances, the same level of social knowledge, network and vocabulary, you almost get to a pure meritocratic society (there are still those pesky genes).
Let's not imagine the unwanted effects and just bask in the idea of those kind of perfect societies.
How then is it possible that some four in five American millionaires inherited no more than ten thousand dollars, according to The Millionaire Next Door by Thomas Stanley?
From what I remember Piketty was simply against using the Gini Coefficient as a measure of wealth and income inequality, which happened/happens to be primarily used by such contemporary measurements.
What's interesting about this is that it barely scratches the surface.
Assets and money are just some of the things that people inherit from their parents. Many people inherit their entire careers from their parents through social connections - These people would probably be classified as 'self made' which makes the statistics seem more benign than they actually are.
I bet if you counted out all those people who were raised with a silver spoon, the percentage of real 'self made' people would probably be less than 1%.
Fortunately, we don’t have to rely on guesses, we have measures of economic mobility. In particular, how likely is it that someone born into a particular quintile moves to a higher (or lower) quintile?
When I was stationed in Germany in my twenties as an American military wife, the Berlin Wall came down and the Two Germanies reunited. An East German aunt went to visit West German relatives, then visited relatives who had immigrated to the US. She said that "Compared to East Germany, everyone in West Germany looks rich. Then you go to the US and everyone looks like on (the nighttime soap) Dallas."
My maternal grandmother came from a low level German noble family that sold the family title when they fell on hard times. Given my aunt's assessment of wealth distribution in relation to nationality, I guess mom made the right decision coming here.
(Edited to clarify my nationality in response to a question. I did not realize I left that out. Oops.)
> Fascinating chart: more than half of all private wealth has been inherited in Germany, UK, Switzerland, France — trend: rising fast!
> Ever less private wealth is accumulated through own work, increasingly more through inheritance.
A massive part of people's motivation to work is to provide for their children. That an increasing portion of wealth is inherited rather than build in an individual's working life-time is indicative that the system is function as intended.
The graph seems to indicate there was a bit of a golden area after WWII up until the early nineteens, and that the nations included on the graph are returning the regular state of affairs.
Modern inheritance should be inherently dissipative, as the estate is repeatedly divided among the heirs, amplified by death/inheritance/estate taxation. The problems arise when the wealth accumulation overpowers the dissipative effect of inheritance, combined with increasingly absurdly high wealth levels that go far beyond providing for children and grandchildren.
As for the "golden area" you mentioned; yes, the war(s) did function as great equalizing wealth redistribution force. Arguably bit of a blunt instrument to accomplish that.
Saving wealth to take care of your children is one thing but this much seems excessive and ultimately means that inequality will continue to increase as wealth is trans-generationally hoarded.
Massive inequality also portends social unrest, plagues due to people who can't afford medical care, wars, etc etc
A massive part of people's motivation to work is to provide for their children. >That an increasing portion of wealth is inherited rather than build in an individual's working life-time is indicative that the system is function as intended.
No, it just signals that the tax system treats unearned income and wealth more favourably than earned income. Political choices.
How you feel about that depends upon how you feel about in increase in unearned income flowing to the wealthy I guess.
I was just discussing this as a result of watching this video: https://www.youtube.com/watch?v=-asltUUvcGU in which they discuss the result of the western capitalist system loosely resembling a meritocracy, except in the case of inherited wealth.
An exceptionally productive individual can generate billions, but then when he dies the money goes to his heirs which may not have done anything to deserve commanding that much wealth other than having been raised by (and having the genetics of) the exceptionally productive individual, which is a far cry from being exceptionally productive themselves.
My thought was to create a cap on inheritance. Enough so that the heirs would be able to live a normal middle class life without working, but not be disgustingly wealthy like the parent. ~$5 million seemed like enough to live off interest for a lifetime. I don't think productivity would be disincentivized too much by this, as the productive individuals still get to use their wealth as long as they're living. It'd probably be pretty difficult to plug all the loopholes but I think it's worth thinking about.
edit: another thing, we could lighten some other taxes (income, property, whatever) for this increased death tax such that the overall government tax income remains roughly the same, to make the proposal more palatable. Overall, everyone keeps more of their wealth, and the playing field is leveled and we're a bit closer to an actual meritocracy.
Exactly, there is nothing wrong with individuals not doing anything useful and just modestly living on inheritance but it's a serious problem (if not the most serious for mankind) when people who just happen to win the birth lottery are able to bend societies to their will via lobbying, propaganda or outright hereditary rule.
Most of this wealth probably has nothing to do with merit. For every Steve Jobs there's a whole bunch of people who did nothing more than sit on property that appreciated in value and yielded rents.
The tax system seems to prefer this to actually earning money for some reason.
This doesn't surprise me at all. Based on my observations, I would say that at least the bottom 80% lives solely on income from labor, and accumulates no wealth. Of the upper 20%, some live below their means, some earn slightly more from their labor than necessary to live, and others make enough to accumulate capital. Once you begin to accumulate capital, you earn money from the capital itself. Some accumulate enough capital to earn enough income to quit earning income from labor entirely. Some use the excess capital income to accumulate even more capital. Capital is then passed down to heirs. So the accumulated capital is about equal to new capital generated.
A theory... It takes time to create wealth, and a lot more time elapsed before the current generations than has elapsed (or will) during the current generations, thus perhaps it’s not surprising that as time goes on, most of the accumulated wealth around us is from previous generations.
Furthermore, when a person dies, their wealth can either be destroyed/lost, inherited by heirs, bequeathed to some institution, or absorbed into the state/public... by measuring only “private wealth” as TFA does, we don’t see those latter two routes for the flow of wealth across generations, thus biasing our view toward the inherited component of wealth.
The flawed thinking that wealth is a pie of fixed size wherein gain by one is necessarily another’s loss is known as mercantilism and was long ago discredited as bunk economics.
This statistic is from the DIW, a German think-tank which is known for it's left leaning/biased views. It cost them their membership in the country's "council of economic experts" once.
PS: That doesn't mean that the claim is false. But you could - as is often the case - draw different conclusions from the data. E.g. that the European countries have heavy welfare and tax burdens that reduce social mobility and the chances of earning private wealth through work.
> E.g. that the European countries have heavy welfare and tax burdens that reduce social mobility and the chances of earning private wealth through work.
I agree with the general principle, but the US has lower social mobility IIRC than most of the EU countries. My current model is that whatever flaws our model has are currently dominating Europeans' reduction of social mobility.
Given how much better we integrate immigrants (especially in the parts of the economy that are high growth, like urban coasts), I wonder how much US social mobility is overstated. We didn't have a lot of money when I was growing up and my sister and I are both in a pretty high percentile of income, so we'd certainly show up as a data pt of social mobility. But my parents are upper class in "the old country", they both have master's degrees, and their kids' income relative to their human capital isn't really a central example of social mobility.
The wealthiest people here in the UK tend to come from families who were given estates by the crown in the 14th and 15th centuries. That saying may be true in China, but it isn't universal.
Read the chapter “Economic Outpatient Care” in Thomas Stanley’s The Millionaire Next Door to learn how poorly on average American millionaires pass to their children the skills necessary to build wealth.
I'm not certain about the figures for wealth mobility, but intergenerational income mobility is already worse in the United States than in Europe and has been for some time.
This seems natural to me. Wealth might be either inherited or gathered from people that are not wealthy and that usually requires some excuse (for example giving them temporary access to some limited resource you own like roofs or capital or selling them something you can make cheaply in large quantities at low cost).
It stands to reason that most wealth is inherited as inherited part grows gradually by gathered part (which is limited by human lifespan and pace of development of technology that creates new value).
Some inherited part is list due to gambling (on business mostly) but that just lowers pace of growth.
I suspect a lot of inequality is due to better access to wider markets. How rich could you get if your marketplace was just your village? Now, with the internet and cheap global transport, an entrepreneur has access to the globe, and so can make much more money.
How is "UK, Germany, France and Switzerland" most of Europe? Those aren't even the four richest countries in Europe. The title implies this is the case for all of Europe, but the link only claims this for four countries.
Maybe what follows is naive but wealth is not destroyed when somebody dies, it passes on to heirs. If there isn't an economic boom the share of inherited wealth is going to be larger and larger as time passes. Even succession taxes don't destroy wealth, they distribute it and probably most of it becomes private again (salaries to public servants and private suppliers of public works.)
An extreme example: in Egypt they're making money out of the Pyramids, non inherited businesses (tourism) on the top of inherited public property.
It is quite sad, but predictable, that people are trying to silence your voice with their votes. Piketty’s observations dovetail nearly with this article. And a world where r>g, and inherited wealth dominates is a world of economic inefficiency; where lucky sperm dominate all aspects of life regardless of their talent or their value.
> It is quite sad, but predictable, that people are trying to silence your voice with their votes
Would you please read https://news.ycombinator.com/newsguidelines.html, which ask you not to post like this? The parent comment has actually been decisively upvoted. It takes time for the community verdict to become clear.
Also, the "people are trying to silence your voice" thing is an internet trope that is best left elsewhere. We're hoping for thoughtful, non-repetitive discussion on this site, not boxing matches.
Edit: actually, since it looks like you're using this site for ideological battle and have done it multiple times before, I've banned this account. Please don't create accounts to break the HN rules with.
[+] [-] kiliantics|8 years ago|reply
It seems that the graphs in this tweet are another confirmation of Piketty's observation.
[+] [-] nugget|8 years ago|reply
[+] [-] zokier|8 years ago|reply
As far as I can tell, the graph is based on an earlier graph from Pikettys paper:
http://piketty.pse.ens.fr/files/AlvaredoGarbintiPiketty2015....
Compare to Figure 5
[+] [-] arkh|8 years ago|reply
Let's not imagine the unwanted effects and just bask in the idea of those kind of perfect societies.
[+] [-] gbacon|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] rajnathani|8 years ago|reply
[+] [-] golergka|8 years ago|reply
These two facts only contradict one another if you have an implicit belief that "fair" is "equal".
[+] [-] jondubois|8 years ago|reply
Assets and money are just some of the things that people inherit from their parents. Many people inherit their entire careers from their parents through social connections - These people would probably be classified as 'self made' which makes the statistics seem more benign than they actually are.
I bet if you counted out all those people who were raised with a silver spoon, the percentage of real 'self made' people would probably be less than 1%.
[+] [-] ryanwaggoner|8 years ago|reply
https://en.m.wikipedia.org/wiki/Socioeconomic_mobility_in_th...
Answer: it’s not great and getting worse, but not as dire as you portray.
[+] [-] DoreenMichele|8 years ago|reply
My maternal grandmother came from a low level German noble family that sold the family title when they fell on hard times. Given my aunt's assessment of wealth distribution in relation to nationality, I guess mom made the right decision coming here.
(Edited to clarify my nationality in response to a question. I did not realize I left that out. Oops.)
[+] [-] bradfitz|8 years ago|reply
Where's here?
Oh, from your Hacker News profile -> Twitter profile (https://twitter.com/doreen_michele) which says "Southwest Coastal Washington".
[+] [-] TheSpiceIsLife|8 years ago|reply
> Ever less private wealth is accumulated through own work, increasingly more through inheritance.
A massive part of people's motivation to work is to provide for their children. That an increasing portion of wealth is inherited rather than build in an individual's working life-time is indicative that the system is function as intended.
The graph seems to indicate there was a bit of a golden area after WWII up until the early nineteens, and that the nations included on the graph are returning the regular state of affairs.
But what does any of this mean?
[+] [-] zokier|8 years ago|reply
As for the "golden area" you mentioned; yes, the war(s) did function as great equalizing wealth redistribution force. Arguably bit of a blunt instrument to accomplish that.
[+] [-] nickthemagicman|8 years ago|reply
Saving wealth to take care of your children is one thing but this much seems excessive and ultimately means that inequality will continue to increase as wealth is trans-generationally hoarded.
Massive inequality also portends social unrest, plagues due to people who can't afford medical care, wars, etc etc
[+] [-] crdoconnor|8 years ago|reply
No, it just signals that the tax system treats unearned income and wealth more favourably than earned income. Political choices.
How you feel about that depends upon how you feel about in increase in unearned income flowing to the wealthy I guess.
[+] [-] nicolashahn|8 years ago|reply
An exceptionally productive individual can generate billions, but then when he dies the money goes to his heirs which may not have done anything to deserve commanding that much wealth other than having been raised by (and having the genetics of) the exceptionally productive individual, which is a far cry from being exceptionally productive themselves.
My thought was to create a cap on inheritance. Enough so that the heirs would be able to live a normal middle class life without working, but not be disgustingly wealthy like the parent. ~$5 million seemed like enough to live off interest for a lifetime. I don't think productivity would be disincentivized too much by this, as the productive individuals still get to use their wealth as long as they're living. It'd probably be pretty difficult to plug all the loopholes but I think it's worth thinking about.
edit: another thing, we could lighten some other taxes (income, property, whatever) for this increased death tax such that the overall government tax income remains roughly the same, to make the proposal more palatable. Overall, everyone keeps more of their wealth, and the playing field is leveled and we're a bit closer to an actual meritocracy.
[+] [-] yks|8 years ago|reply
[+] [-] crdoconnor|8 years ago|reply
The tax system seems to prefer this to actually earning money for some reason.
[+] [-] perfmode|8 years ago|reply
[+] [-] nickthemagicman|8 years ago|reply
[+] [-] laretluval|8 years ago|reply
??
Who gets to determine who deserves what?
[+] [-] gbacon|8 years ago|reply
[+] [-] joshuaheard|8 years ago|reply
[+] [-] 6502nerdface|8 years ago|reply
Furthermore, when a person dies, their wealth can either be destroyed/lost, inherited by heirs, bequeathed to some institution, or absorbed into the state/public... by measuring only “private wealth” as TFA does, we don’t see those latter two routes for the flow of wealth across generations, thus biasing our view toward the inherited component of wealth.
[+] [-] gbacon|8 years ago|reply
[+] [-] justicezyx|8 years ago|reply
[+] [-] woodpanel|8 years ago|reply
PS: That doesn't mean that the claim is false. But you could - as is often the case - draw different conclusions from the data. E.g. that the European countries have heavy welfare and tax burdens that reduce social mobility and the chances of earning private wealth through work.
[+] [-] wutbrodo|8 years ago|reply
I agree with the general principle, but the US has lower social mobility IIRC than most of the EU countries. My current model is that whatever flaws our model has are currently dominating Europeans' reduction of social mobility.
Given how much better we integrate immigrants (especially in the parts of the economy that are high growth, like urban coasts), I wonder how much US social mobility is overstated. We didn't have a lot of money when I was growing up and my sister and I are both in a pretty high percentile of income, so we'd certainly show up as a data pt of social mobility. But my parents are upper class in "the old country", they both have master's degrees, and their kids' income relative to their human capital isn't really a central example of social mobility.
[+] [-] contingencies|8 years ago|reply
[+] [-] onion2k|8 years ago|reply
[+] [-] closeparen|8 years ago|reply
[+] [-] Banthum|8 years ago|reply
[+] [-] ajeet_dhaliwal|8 years ago|reply
There’s more entrepreneurial spirit perhaps but the sons and daughters of wealth creators will still inherit.
[+] [-] gbacon|8 years ago|reply
[+] [-] eksabajt|8 years ago|reply
https://wol.iza.org/uploads/articles/176/pdfs/intergeneratio...
[+] [-] scotty79|8 years ago|reply
It stands to reason that most wealth is inherited as inherited part grows gradually by gathered part (which is limited by human lifespan and pace of development of technology that creates new value).
Some inherited part is list due to gambling (on business mostly) but that just lowers pace of growth.
[+] [-] skookumchuck|8 years ago|reply
[+] [-] mapleoin|8 years ago|reply
[+] [-] pmontra|8 years ago|reply
An extreme example: in Egypt they're making money out of the Pyramids, non inherited businesses (tourism) on the top of inherited public property.
[+] [-] alexnewman|8 years ago|reply
[+] [-] myth_drannon|8 years ago|reply
[+] [-] erdle|8 years ago|reply
failed revolution in the 1800s...
[+] [-] mbroncano|8 years ago|reply
[+] [-] marxwasright|8 years ago|reply
[+] [-] dang|8 years ago|reply
Would you please read https://news.ycombinator.com/newsguidelines.html, which ask you not to post like this? The parent comment has actually been decisively upvoted. It takes time for the community verdict to become clear.
Also, the "people are trying to silence your voice" thing is an internet trope that is best left elsewhere. We're hoping for thoughtful, non-repetitive discussion on this site, not boxing matches.
Edit: actually, since it looks like you're using this site for ideological battle and have done it multiple times before, I've banned this account. Please don't create accounts to break the HN rules with.
[+] [-] juicyfroot|8 years ago|reply
[deleted]