The real horrors and injustice of inheritance

[moorobot]

A poster recently posted a link to the christian science monitor containing ostensible facts about inheritance. I decided to research this topic in some actual peer-reviewed, professor written, scholarly journals and found a piece by Samuel Bowles and Herbert Gintis called 'The Inheritance of Inequality' in Journal of Economic Perspectives 16 (2002) 3-30. You can read the article for yourself if you want at Samuel Bowles website . Just click on frequently requested past papers, it is the second one listed.

First and foremost, I should mention that I did not learn of the following (first) fact from the paper, nor is it, strictly speaking, about inheritance. However, the poster of the last 'inheritance post' told us not to be worried about inheritance because it is redistributed by "voluntary transactions" anyway. Assuming it is redistributed, how does the market redistribute it? A: In the United States right now 1% of the people own 40-50% of the wealth, while 50% of the population have zero or a negative net wealth (If all their debts were called in they would be bankrupted). That is horrible and unjust, ethically and politically, for all the obvious reasons.

Secondly, although people cannot plausibly be held responsible for being born in Scarsdale as against being born in Harlem, we can predict with a good deal of accuracy where they will finish up just from the knowledge of their place of birth. An example from the above linked paper illustrates this: in the U.S. the ammount of advantage and disadvantage that is transmitted from one generation to the next is striking. Furthermore, this is an example based on income, not wealth, which is even easier to transfer, of course.

'A son born to the top decile has a 22.9 % chance of attaining the top decile and a 40.7 % chance of attaining the top quartile. The son of the poorest decile has a 1.3% chance of attaining the top decile and a 3.7% chance of attaining the top quintile. Children of the poorest decile have a 31.2% chance of occupying the lowest decile and a 50.7% of occupying the lowest quintile, while...the probabilty that a child of the richest decile ends up in the poorest decile is 2.4%, with a 6.8% chance of occupyingg the lowest quintile. [Studies] suggest that direct transmission mechanisms may be at work at various points of the income distribution. For example, wealth bequests may play a major role at the top of the income distribution, while at the bottom, vulnerability to violence or other adverse health episodes may be more important" pg 5 on the website article.

Real Equality of opportunity, where art thou?

[Borodog]

[ QUOTE ]
A: In the United States right now 1% of the people own 40-50% of the wealth, while 50% of the population have zero or a negative net wealth (If all their debts were called in they would be bankrupted). That is horrible and unjust, ethically and politically, for all the obvious reasons.

[/ QUOTE ]

No, it isn't. Do you see why?

I've explained this before. The vast majority of "wealth" is tied up in capital, machines and tools and the like. The owners of the capital benefit through profits, while consumers benefit through the competition of capitalists to provide ever more newer and better products at lower prices, increasing everyone's standard of living. I gain the benefit of literally hundreds of billions, if not trillions of dollars of capital every day, without having to own any of it. Oil rigs, refineries, gas stations, car factories, mining operations, forests, mills, thousands of trucks and container ships, telecom infrastructure including orbiting satellites, radio and cell towers, power plants and transmission lines. I get the benefit of it all, and yet I own none of the capital.

The only way a capitalist accumulates a vast fortune is by greatly improving the lives of an enormous number of people.

[Sharkey]

[ QUOTE ]
The only way a capitalist accumulates a vast fortune is by greatly improving the lives of an enormous number of people.

[/ QUOTE ]

An extraordinary statement.

[hmkpoker]

[ QUOTE ]
[ QUOTE ]
The only way a capitalist accumulates a vast fortune is by greatly improving the lives of an enormous number of people.

[/ QUOTE ]

An extraordinary statement.

[/ QUOTE ]

The only exception to the rule that I can think of is incidents where the consumer buys things that ultimately make his life worse. Cigarettes and gambling come to mind.

However, is that the capitalist's fault, or the idiot consumer?

[Riddick]

[ QUOTE ]
[ QUOTE ]
The only way a capitalist accumulates a vast fortune is by greatly improving the lives of an enormous number of people.

[/ QUOTE ]

An extraordinary statement.

[/ QUOTE ]

So if I create the cure to cancer, AIDS, and Diabetes all in one cure, and then I earn $100 billion in a single year by selling the cure, the fact that I accumulated this vast amount of wealth would be extraordinary? Would it be horribly unjust and unethical?

[andyfox]

"I gain the benefit of literally hundreds of billions, if not trillions of dollars of capital every day, without having to own any of it."

I don't think anyone's arguing with the fact that we all can and do benefit from the economic productiveness of other members of society. Your phrase "having to own any of it" implies (to me) that you're saying that consumers of the oil rigs, etc. have burdens that at least counterbalance the greater economic benefits of ownership as opposed to just usage. Am I correct in this assumption? I know people who own oil rigs and they live much better lives than most of the people I know who don't.

[Borodog]

[ QUOTE ]
"I gain the benefit of literally hundreds of billions, if not trillions of dollars of capital every day, without having to own any of it."

I don't think anyone's arguing with the fact that we all can and do benefit from the economic productiveness of other members of society.

[/ QUOTE ]

Of course that's what they're arguing, they just don't know it.

[ QUOTE ]
Your phrase "having to own any of it" implies (to me) that you're saying that consumers of the oil rigs, etc. have burdens that at least counterbalance the greater economic benefits of ownership as opposed to just usage. Am I correct in this assumption?

[/ QUOTE ]

I have no idea, since I don't even know what this means.

[ QUOTE ]
I know people who own oil rigs and they live much better lives than most of the people I know who don't.

[/ QUOTE ]

So what? What is the problem with someone selling units for a low cost to millions of people who want those units, and thus becoming wealthy? Why would anyone bother to try to increase the supply of goods to their fellow men if they couldn't personally benefit from their efforts?

I think if the people who owned the oil rigs stopped providing oil, hundreds of millions of people, if not billions, would be dead in a few weeks. The popular of the planet can only be sustained because of industrialized agriculture, which runs on oil. Who are you to measure how much better oil tycoons make anyone's life?

My life would be disastrously shittier without oil. I pay the oil tycoon a paltry sum that doesn't affect his lifestyle at all for something that dramatically improves mine. Who is receiving more "economi benefit' now?

[andyfox]

My sense is the discussion is not about whether more people live better lives with oil making modern agriculture more efficient than it would be without it, but rather over whether more people would live better lives if ownership were more evenly distributed than it is now.

BTW, your line, "Of course that's what they're arguing, they just don't know it," is wonderful. I say this without judghing whether it's true or not.

[Riddick]

[ QUOTE ]
but rather over whether more people would live better lives if ownership were more evenly distributed than it is now.


[/ QUOTE ]

I would like to pipe in that:

Ownership is something that is competed for. The individual or group of individuals who provide the most benefit to consumers earn the ownership (absent government intervention). Therefore, forcibly redistributing the ownership places ownership in the hands of (significantly) less competence, on top of removing at least some, who knows how much, incentive for competing and achieving better consumer satisfaction, and therefore the consumers (society) suffer.

[Borodog]

[ QUOTE ]
My sense is the discussion is not about whether more people live better lives with oil making modern agriculture more efficient than it would be without it, but rather over whether more people would live better lives if ownership were more evenly distributed than it is now.

[/ QUOTE ]

They would not. They would live worse lives, because "ownership", over time, evolves into a capital structure that provides consumers the highest standard of living, in the very opinions of the consumers themselves.* I.e., they spend their money buying the things that satisfy them the most, said money being earned at jobs producing the things that people demand the most. Consumers shift capital and labor away from wasteful uses toward productive applications.

Redistributing ownership of capital away from those who use it the most efficiently to satisfy consumers necessarilly shifts it to those who do not, and hence the general standard of living cannot but go down.

* This neglects, of course, the wealth positions that have been accumulated through legalized plunder and mercantilism (political entrepreneurship rather than market entrepreneurship). If we stopped government interventions in the market, than all sorts of inefficiencies and frictions that lower the general standard of living would go away.