Libertarian to Liberal: Inheritance Breaks the Game 4/8/10 Revision

4/8/10

A full one-third of all assets bequeathed, or $3.5 trillion, will go to the ultrarich, the top 1 percent of the nation's families, according to Avery and Rendall. A second third is destined for the top 10 percent of affluent Americans, and the remaining third will be parceled out among the other 90 percent of the population.

http://www.randomhouse.com/catalog/display.pperl?isbn=9780767908351&view=excerpt

http://www.estatesettlement.com/unlimitedweath.pdf

11/12/09

When I learned the fact that over half the wealth in the United States is inherited, I left Libertarianism, my political position since I was old enough to even consider it, and have become a Liberal.

Many fortunes have a "dark secret", like the Lascelles family (EDIT 3/27/10 - and possibly the deWulfs) whose fortune came from slavery and was passed on through the generations.

http://www.yorkshirepost.co.uk/features/Slavery-and-a-family39s-fortune.1100243.jp

Here is some support for my claim; they have an Excel file with their data at the website:

"Half of those on the Forbes 400 list started their economic careers by inheriting businesses or substantial wealth. Of these, most inherited sufficient wealth to put them immediately into Forbes' heaven. Only three out of ten on the Forbes list can be regarded as self-starters whose parents did not have great wealth or own a business with more than a few employees. "

http://www.faireconomy.org/press_room/1997/born_on_third_base_sources_of_wealth_of_1997_forbes_400

Then there's these:

"Even so, nearly one-third of the Forbes 400 richest Americans inherited their positions on the list, and another one-third were heirs to businesses that grew sufficiently to land them on the list."

http://www.ndol.org/ndol_ci.cfm?kaid=125&subid=163&contentid=251800

Gale & Scholz (1994) extended the debate further by presenting evidence on the importance of inter vivos gifts, including payment of college tuition, using the 1986 SCF. Using the flow-to-stock conversion methodology (and general mortality tables), they concluded that inter vivos transfers account for at least 20% of U.S. wealth (32% if college aid is included) and bequests account for at least 31% of U.S. wealth.

http://www.business.uiuc.edu/weisbenn/RESEARCH/PAPERS/NBERAging_TransferWealth_2004_181-201.pdf

In addition, I wrote this on a forum to support my claim:

Today, less than 13 percent of all households making less than $20,000 have ever received inheritances.[11] Only among families making over $100,000 does the frequency of inheritance exceed 25 percent.

http://www.heritage.org/Research/Soc...ity/bg1811.cfm

As rich households have more wealth than poor households, this fits in with the "official" inheritance proportion of personal wealth as 30%, which is what I saw before. This does not take into account the other 20% which is in the form of "intergenerational gifts" and the like. Rich folks are good at playing games with the law and money.

we distinguish between intended transfers (for example, gifts to other households) and possibly unintended transfers (bequests). We estimate that intended transfers account for at least 20 percent of net worth, and possible significantly more.

http://www.irp.wisc.edu/publications...s/dp101993.pdf

30% + 20% = 50%

I'm sure you've seen other numbers. What about the methodology of this analysis do you think was flawed? Do you have another source that you think is better?

Forbes says that the Waltons - a family of heirs - make up half of the top ten richest people in the world. Prince Alwaleed Bin Talal Alsaud is up there too.

http://tinyurl.com/6f2vx

I doubt anyone with a royal title who is on the Forbes list got nothing from his family. But let's check.

He says he started out in 1979 with a loan of just $30,000 from his father. He also mortgaged a house that his father had given him, raising approximately $400,000. And each month, as a grandson of Ibn Saud, he receives $15,000.

http://www.economist.com/displayStor...gin_payBarrier

http://en.wikipedia.org/wiki/Prince_...n_Talal_Alsaud

Now let's look at Bill Gates and Warren Buffet:

[Bill Gates'] family was upper middle class; his father was a prominent lawyer, his mother served on the board of directors for First Interstate BancSystem and the United Way, and her father, J. W. Maxwell, was a national bank president...

At 13 he enrolled in the Lakeside School, an exclusive preparatory school

After [Warren Buffet's] father was elected to Congress

They both came from wealthy, powerful families.

http://en.wikipedia.org/wiki/Bill_gates
http://en.wikipedia.org/wiki/Warren_buffet

Karl Albrecht came from a fairly modest family, BUT:

Karl Albrecht ($20 billion) inherited his mother's corner grocery store

http://www.emarotta.com/article.php?ID=238

Paul Allen also went to the same exclusive prep school Gates did, worked with Gates on the computers that the "mother's club" bought. How many "mothers' clubs" could buy top of the line technology like that for their children? Allen had access to all Gates did.

Now, some of these people seem to have earned most of their wealth, but all ten in the top ten come from families who jump started their road to riches via family investments of one sort or another.

http://www.armchairgeneral.com/forums/showthread.php?t=81568&page=2

Also see

http://www.playtheimmortalgame.com/board/showthread.php?threadid=117678&page=1

1/14/10 It seems to me the flaw in the Libertarian laissez-faire model of the economy is money laundering. Libertarians seem to demand that victims be able to prove that wealth was stolen from them in a court of law in order for it to be considered "unrightfully acquired". Thus, if you can launder your money - as so many wealthy families have done for generations - it's ok for you to gain wealth through force and fraud. We know how that works in the 'hood. However, Libertarians seem to criticize the process when poor people do it over a short period of time while ignoring when wealthy people do it over generations.

3/4/10

"Walter Block, in "Libertarianism vs Objectivism; A Response to Peter Schwartz" (pg 16-17):

How does the libertarian deal with stolen property? Obviously, it must be returned. It is that simple. But, suppose the theft took place a long time ago. Suppose that your great grandfather took a ring from my greatgrandfather. Through the succession of inheritance, you got the ring. You are, of course, not guilty of a crime. You didn’t steal anything. But, you are still the holder of stolen property. Justice surely consists of making you disgorge the ring and give it back to me, since I would have inherited it. Is there a statute of limitations? No. There is no statute of limitations on justice. Justice is the highest goal in the legal realm. When a law, such as a statute of limitations conflicts with one of our basic axioms, it must be jettisoned. So, if the theft took place three hundred years ago, and I can prove that you have my ring, it should be handed over from you to me.

[...]

While this aspect of libertarian theory sounds very radical, in practice it is less so. This is because the claimant always needs proof. Possession is nine tenths of the law, and to overcome the presumption that property is now in the hands of its rightful owners requires that an evidentiary burden be overcome. The further back in history was the initial act of aggression (not only because written evidence is less likely to be available), the less likely it is that there can be proof of it. So, certain thefts will have to escape the libertarian passion for justice, because time places a veil over these past events. But, the ideal is clear: If there is stolen property and it can be proved that it was stolen, it should be returned."

http://www.drizzten.com/blargchives/001308.html