Inheritance
Initial note:
I am not suggesting any particular policy solution to the problem I identify here, which is the unreasonable advantage conferred by inheritance; identifying a solution is, I expect, far beyond my capabilities, but I am trying to demonstrate that there is, in the first place, a problem to think about.
When people talk about equality, they want to talk about rich and poor, but only on their terms. They want to talk about average incomes of races of genders. It is, for example, much more comfortable for rich people to talk about racial inequality, and how we should help a given racial group to raise its mean income, than to talk about poverty in the first place. Talking about racial equality, though it is a very interesting topic in its own right, is also a useful distraction, a diversion tactic which allows the richer half of the population to appear caring with little real threat to the economic ascendancy inheritance has granted them. We could even call this 'distraction equality' or something like that.
When someone talks about racial equality, or indeed gender equality, one might bring up equality of inheritance. Do they believe in equality of inheritance? If they do not, and they almost certainly do not, then why they should inherit more than someone else. If they should, then in what sense do they believe in equality?
Alternatively, one might ask why a black person should be considered disadvantaged compared to a white person who inherits much less, or a woman compared to a man who inherits much less. There are, of course, some interesting and valid answers to this question, but none that seem to me to justify ignoring the question of a big fat inheritance as a striking advantage in life.
Purported supporters of equality will generally feel entitled to inherit more than the many who inherit less, and justify that aspect of rich and poor in terms of what has been "earnt". However, the overwhelming majority of rich people's acquisition of wealth is dependent on parental support and inheritance, which are not earnt.
Many see the economy as a meritocracy. The interesting thing is that people who claim that the economy is fundamentally fair and meritocratic refer to market mechanisms and the selection of economically desirable traits in wealthy people, but fail to mention inheritance. Are they including inheritance in the fair and meritocratic economic mechanisms or not? As inheritance has a rather extreme influence on who is wealthy, they must either hold that the other mechanisms of the economy are somehow seriously distorted such that they need inheritance to correct them, or that the other mechanisms of the economy are fundamentally fair and meritocratic and that inheritance, which is not meritocratic, is therefore a serious distortion.
Asking someone if their children can do without an inheritance is more or less to ask them if the economy is fair. One might ask if the economy is fair, and then ask if their children can do without an inheritance, and then ask again if the economy is fair.
Further discussion regarding Milton Friedman's defence of inheritance
Milton Friedman defends inheritance as follows (internet address below; I have stripped the discussion to its main points and numbered the points to refer back to them):
(1) "the greatest incentives of all, the incentives that have driven people on have largely been the incentives of family..."
(2) preventing inheritance encourages people to "dissipate their wealth in high living" and "frivolous entertainment" which means there is no incentive to invest, improve technology, etc.
(3) it is "amazing" how the market system "has in fact encouraged people and enabled people to work hard and sacrifice, in what I must confess I often regard as an irrational way, for the benefit of their children"
(4) therefore the limitation of inheritance (or elimination; in this debate he was actually asked about 100% inheritance tax) "would destroy a society"
(1) may or may not be the case. I am not sure it could be measured, but I tend towards not. The most dramatic cases of self-sacrifice are of men drawn primarily from the childless younger men who are sent to sacrifice themselves for their societies as a whole, not for their children. In former times, the welfare state, education system, an healthcare system available to ordinary and poorer people were those provided by the church, especially the monasteries. (Henry VIII's dissolution of the monasteries in the period 1536-41 must have been a catastrophe for the poor, even if it had not been accompanied by the programme of hanging vast numbers of the poor for vagrancy in the same reign, but that is a different story.) These services were provided not for the celibate clergy's own children in particular, but for the broad mass of society, and they were not motivated by profit or fear for their children, but at a loss by a spirit of Christian charity. In general, both war efforts and Christian charity seem largely incompatible with "free market" theories of human selfishness. Supporters of universal human selfishness do of course confirm that they are selfish by the assertion of the universality of human selfishness. History, however, has been dominated by ideas of collectivity and charity that Friedman's understanding of human psychology seems to lack.
(2) carries an interesting implied critique of bothering to become wealthy in the first place, but to address the specific point of investment and technology: A government is perfectly able to put public money into investment and technological research. Ha-Joon Chang states "Capitalist economies are in large part planned... All of them finance a significant share of investment in R&D and infrastructure" [23 Things, p199] On page 206 he goes into more detail:
Moreover, in all capitalist economies, the government plans the national technological future by funding a very high proportion (20-50 per cent) of research and development. Interestingly, the US is one of the most planned capitalist economies in this regard. Between the 1950s and the 1980s, the share of government funding in total R&D in the supposedly free-market US accounted for, depending on the year, between 47 per cent and 65 per cent..."
Governments have shown themselves more than capable of directing investment and technological research, but an economist like Friedman presumably favours keeping wealth in the hands of the rich rather than seeing it in the hands of the statem whether through state ownership or taxes. This is an ideological viewpoint common among the rich. Admittedly if one a priori opposes government involvement in the economy, one would therefore oppose government increases in investment and research that would possibly accompany reduced inheritance, but the underlying argument that investment and technological research would collapse is easily undermined by the ability of the state to respond.
To be honest, I am not sure that Friedman has a firm basis to offer argument (2) to start with. Families with children are likely to be spending more, not saving more. Men might well work harder and earn more for their families, but women may well spend more time at home caring for children. Many women and some men avoid having children specifically to work and advance their careers, and I have no idea of Friedman's evidence that they "dissipate their wealth in high living" and "frivolous entertainment".
(3) carries an interesting implied critique of bothering to spend so much on your children, or save so much for them.
The four points combine to argue that people work hard for their children. It seems that Friedman is saying that the disadvantages children face if they do not inherit are a necessary blackmail tool to ensure hard work from adults. If such a blackmail tool is required, it mould be more humane to punish, even imprison people who do not work hard enough than to see their children's lives spoilt for the parents' laziness. I am not saying the lazy should be imprisoned, but if Friedman sees such dark incentives as necessary, it would be an improvement on ruining the offspring's lives.
(4) is the conclusion derived from (1) (2) and (3), which I have addressed. Also note that the conclusion addresses the question as originally asked, that is to say about a 100% inheritance tax.
https://www.youtube.com/watch?v=MRpEV2tmYz4
Alternatively, one might ask why a black person should be considered disadvantaged compared to a white person who inherits much less, or a woman compared to a man who inherits much less. There are, of course, some interesting and valid answers to this question, but none that seem to me to justify ignoring the question of a big fat inheritance as a striking advantage in life.
Purported supporters of equality will generally feel entitled to inherit more than the many who inherit less, and justify that aspect of rich and poor in terms of what has been "earnt". However, the overwhelming majority of rich people's acquisition of wealth is dependent on parental support and inheritance, which are not earnt.
Many see the economy as a meritocracy. The interesting thing is that people who claim that the economy is fundamentally fair and meritocratic refer to market mechanisms and the selection of economically desirable traits in wealthy people, but fail to mention inheritance. Are they including inheritance in the fair and meritocratic economic mechanisms or not? As inheritance has a rather extreme influence on who is wealthy, they must either hold that the other mechanisms of the economy are somehow seriously distorted such that they need inheritance to correct them, or that the other mechanisms of the economy are fundamentally fair and meritocratic and that inheritance, which is not meritocratic, is therefore a serious distortion.
Asking someone if their children can do without an inheritance is more or less to ask them if the economy is fair. One might ask if the economy is fair, and then ask if their children can do without an inheritance, and then ask again if the economy is fair.
Further discussion regarding Milton Friedman's defence of inheritance
Milton Friedman defends inheritance as follows (internet address below; I have stripped the discussion to its main points and numbered the points to refer back to them):
(1) "the greatest incentives of all, the incentives that have driven people on have largely been the incentives of family..."
(2) preventing inheritance encourages people to "dissipate their wealth in high living" and "frivolous entertainment" which means there is no incentive to invest, improve technology, etc.
(3) it is "amazing" how the market system "has in fact encouraged people and enabled people to work hard and sacrifice, in what I must confess I often regard as an irrational way, for the benefit of their children"
(4) therefore the limitation of inheritance (or elimination; in this debate he was actually asked about 100% inheritance tax) "would destroy a society"
(1) may or may not be the case. I am not sure it could be measured, but I tend towards not. The most dramatic cases of self-sacrifice are of men drawn primarily from the childless younger men who are sent to sacrifice themselves for their societies as a whole, not for their children. In former times, the welfare state, education system, an healthcare system available to ordinary and poorer people were those provided by the church, especially the monasteries. (Henry VIII's dissolution of the monasteries in the period 1536-41 must have been a catastrophe for the poor, even if it had not been accompanied by the programme of hanging vast numbers of the poor for vagrancy in the same reign, but that is a different story.) These services were provided not for the celibate clergy's own children in particular, but for the broad mass of society, and they were not motivated by profit or fear for their children, but at a loss by a spirit of Christian charity. In general, both war efforts and Christian charity seem largely incompatible with "free market" theories of human selfishness. Supporters of universal human selfishness do of course confirm that they are selfish by the assertion of the universality of human selfishness. History, however, has been dominated by ideas of collectivity and charity that Friedman's understanding of human psychology seems to lack.
(2) carries an interesting implied critique of bothering to become wealthy in the first place, but to address the specific point of investment and technology: A government is perfectly able to put public money into investment and technological research. Ha-Joon Chang states "Capitalist economies are in large part planned... All of them finance a significant share of investment in R&D and infrastructure" [23 Things, p199] On page 206 he goes into more detail:
Moreover, in all capitalist economies, the government plans the national technological future by funding a very high proportion (20-50 per cent) of research and development. Interestingly, the US is one of the most planned capitalist economies in this regard. Between the 1950s and the 1980s, the share of government funding in total R&D in the supposedly free-market US accounted for, depending on the year, between 47 per cent and 65 per cent..."
Governments have shown themselves more than capable of directing investment and technological research, but an economist like Friedman presumably favours keeping wealth in the hands of the rich rather than seeing it in the hands of the statem whether through state ownership or taxes. This is an ideological viewpoint common among the rich. Admittedly if one a priori opposes government involvement in the economy, one would therefore oppose government increases in investment and research that would possibly accompany reduced inheritance, but the underlying argument that investment and technological research would collapse is easily undermined by the ability of the state to respond.
To be honest, I am not sure that Friedman has a firm basis to offer argument (2) to start with. Families with children are likely to be spending more, not saving more. Men might well work harder and earn more for their families, but women may well spend more time at home caring for children. Many women and some men avoid having children specifically to work and advance their careers, and I have no idea of Friedman's evidence that they "dissipate their wealth in high living" and "frivolous entertainment".
(3) carries an interesting implied critique of bothering to spend so much on your children, or save so much for them.
The four points combine to argue that people work hard for their children. It seems that Friedman is saying that the disadvantages children face if they do not inherit are a necessary blackmail tool to ensure hard work from adults. If such a blackmail tool is required, it mould be more humane to punish, even imprison people who do not work hard enough than to see their children's lives spoilt for the parents' laziness. I am not saying the lazy should be imprisoned, but if Friedman sees such dark incentives as necessary, it would be an improvement on ruining the offspring's lives.
(4) is the conclusion derived from (1) (2) and (3), which I have addressed. Also note that the conclusion addresses the question as originally asked, that is to say about a 100% inheritance tax.
https://www.youtube.com/watch?v=MRpEV2tmYz4
Comments
Post a Comment