18 June 2007

Inheritance (1)

The phenomenon of wealth that is acquired from a relative appears to have few sympathisers. Even pro-market supporters often have little time for it. Socialists tend to be scathing about it. Anthony Giddens, for example, argues that inherited capital "violates reciprocity”. The recent e-petition against inheritance tax argued it was “double taxation”, but provided no economic arguments in favour of transfers per se.

The logic behind such disapproval relative to other market phenomena is based on the idea that entrepreneurial capital is “earned” and therefore more “deserved”, while capital which someone gave you is not earned at all. However, it is not clear that the logic for this distinction is sound.

Take the case of a self-made millionaire giving capital to an individual who is not a relative, e.g. an artist or composer. This is no less a “market” phenomenon than any other. The millionaire buyer wants something (e.g. a cultural product, whether or not he gets a proprietorial stake in it) in return for his money. The distinguishing feature is that the number of buyers responsible for generating the capital accumulation is one, rather than being in the thousands or millions.

Where the recipient is a family member, it is possible to extend this logic. The millionaire expects to get some benefit, e.g. some kind of quasi-immortality. Rather than a million people paying for (say) astronomical bodies to be named after them and making the supplier of this service wealthy, we have one person “paying” his or her son or daughter to do something with the money which will promote the family name or the memory of the donor. Why is the latter thought to be less tolerable than the former?

Other articles
Anthony Giddens on inheritance tax
Stumbling & Mumbling on hating the rich
Our Word is our Weapon on inequality
Stumbling & Mumbling on slavery and inheritance
e-petition against inheritance tax

1 comment:

Marcin said...

Those who dislike inheritance typically fail to discharge the burden of proposing an alternative use of wealth left lying around, and why that would be better.

Simply giving it to the treasury would waste it. Any other use would tend to increase 'consumption' in the sense of non-recoverable disposals, including gifts to legatees, possibly in return for securities of various kinds.