This is the conclusion of Thomas Picketty's 2013 book, "Capital in the 21st Century." Due to the historical averages of the rate of return on capital, he concluded empirically that wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors.
I also think it's worth calling out that his follow-up, "Capital and Ideology" in its latter sections includes several suggestions for counteracting the trend to increasing inequality. One of these is basically that _every_ person should have a windfall inheritance when they're in their early adulthood, which would give them opportunities to pursue education, try starting a business, or whatever else. And naturally, this needs to be funded by taxes on the very wealthy.
So he supports education vouchers and healthcare vouchers for everyone? Because that's what "wealth you can spend down for some specific purposes" is, in a practical sense. That's a welcome attitude, given that these things are often dismissed ideologically.
(Also, we generally want people to have some retirement income in their old age when they can't work, and the goal of letting young folks spend down their "inheritance" seems to be in tension with that.)
I think that muddies the water as much as saying that someone who supports UBI also must support foodstamps and housing vouchers. The point is pursuing greater _equality_. We are all heirs to a society that has produced enormous value; why should a small minority of kids get a huge extra unearned boost?
Purpose-constrained assistance is not _equal_ to inheritance, in that heirs to private wealth aren't generally subject to those constraints. Money that the recipient can choose how to spend gives greater freedom than assistance in that dollar amount. E.g. my understanding is a perennial issue with housing vouchers is that landlords often don't want to accept vouchers, so they are less effective than their face-value in dollars would be.
> why should a small minority of kids get a huge extra unearned boost?
That unearned boost is already available to anyone who manages to bequeath sufficient amounts of wealth to the next generation, and conversely becomes unavailable to those who squander that wealth instead. That doesn't really change all that much if you introduce redistribution: either way, there will always be plenty of kids who will spend the money foolishy, and forfeit that "extra boost".
It's a very hard problem to solve because it involves people's culturally ingrained attitudes; but being bequeathed a sizeable inheritance in the first place at least implies that one's attitude to managing wealth has already stood the test of time.
> being bequeathed a sizeable inheritance in the first place at least implies that one's attitude to managing wealth has already stood the test of time.
I don't believe so. At best it means perhaps your parents knew how to manage wealth. It doesn't imply the child inheritors will manage it well, or better than anyone else. At worst, it might simply mean the parents had so much wealth they were unable to spend it all before dying, and so some of it went to their offspring.
The USA tax code potentiates this. First $12m tax free, step up basis allow tremendous wealth to be bequeathed without financial penalty.
Trusts, when set up correctly, can do so as well.
Once inherited, the first $90,000 (married couple) of qualified dividend income is tax free. Plus, standard $29,000 (married couple) deduction means that the first $119,000 of investment income can be tax free. You will see the wealthy either try and start a company or not work. Why work a job where about 30% of your income is taxed when you can stay home and not work. If you inherit your parents' home, you can easily live without working.
Current safe dividend yields are about 6% so all it takes is inheriting $1.5m. There are 24 million millionaires in the USA so there may be quite a few that take advantage of this. When the wealthy start giving their children their inheritance while they are still alive ........
Currently, you can give your children up to a total of $12m combined in your lifetime, before taxes have to be taken out.
> That unearned boost is already available to anyone who manages to bequeath sufficient amounts of wealth to the next generation
> but being bequeathed a sizeable inheritance in the first place at least implies that one's attitude to managing wealth has already stood the test of time
I think twice in two paragraphs you managed to conflate the person leaving the inheritance and the person receiving it. The "unearned" part of the unearned boost is clearly only available to person receiving an inheritance, rather than the person who bequeaths anything to the next generation. A person being bequeathed an inheritance does not imply anything about that person's attitude or aptitude.
> why should a small minority of kids get a huge extra unearned boost?
This is what gives incentive. You do your best, next generation of your genes lives better. If you muddy that connection too much, you got 2 problems on your hands. Some leachers will try to freeride. And some people will stop earlier than they code since they don't see incentive to work more for little gain for their direct descendants.
IMO USSR was a great case study for this. Building wealth was very limited, especially in allowed ways. Thus many people just stopped caring. Do as little as you can to pass by. Drink your days aways. The state will take care of your and your kids basic needs anyway. If you work your ass off - there will be very little change to you and your kids. Unless everybody works their asses off. But turns out in such cases mass apathy wins. And society crumbles.
For the record, I do support free education. And it must be as high quality as possible. You don't want to waste talent because it was born in a poor family. But there needs to be plenty of incentive for that talent to do their best. And inheritance-heavy wealth structure doesn't ensure that either.
I didn't need education vouchers, I had a full ride off of my academic achievement. Money for effective therapy and stable housing, however...
The point of currency is the fungibility. Everyone has different needs, that (I'm told) no bureaucracy is equipped to manage. So, no, not vouchers. Cash. And then we focus on the social and communal aspects of people being equipped to make smart decisions with it.
People whine about "wealth distribution" day and night, but at the end of the day what alternative is there to combat the (continually increasing) concentration of wealth at the top? At some point there will have to be redistribution, in some form, and the sooner society comes around to that the better off we'll all be.
The alternative of last resort is always violent revolution[1]. Wealth redistribution is the olive branch.
There seems to be an open question among the wealthy and political class of how far inequality can go given the modern police state and effectiveness of technology in accomplishing the goal of maintaining or exacerbating the current political economy.
1. See historical populist grivences against aristocracy that result in social restructuring.
Overwhelmingly, violent revolution doesn't actually bring about the goals of the revolution. It just installs a new power structure with variations on all the old problems. Sometimes much worse.
So it isn't really a "last resort". It's more of a "well you didn't compromise, so now our choice is to burn the whole system down"
Wholeheartedly agree. For the peasants, revolutionary goals are rarely fulfilled. For the previous elite though, they rarely find continuity of power post revolution.
The sans-culottes didn't quite accomplish their goals(at least immediately), but Louis XVI among other elites didn't survive.
Toussaint Louverture et al didn't accomplish their goals, but the French no longer controlled Haiti.
Even Lenin and Trosky didn't accomplish their goals, but the Romanov didn't leave the Ipatiev House alive.
Like many conflicts, one side doesn't have to win for one to lose.
All true, which brings up the question how much better will the world be with a new elite. Also, maybe today’s generation of revolutionaries will do something different.
This feels true to me. So my question is - and I don't know the answer yet, though I continue to seek such - when do we, as a humanity, break this cycle? When, and how, do we override the greed impulse, the impulse for power and control and domination of others? When do we begin to leverage a superior cognitive capacity enough to gain true enlightenment and break free from the bonds of behaviour which, while necessary as we evolved, is no longer required, and replace it with an egalitarian perspective and an accompanying stewardship model of life on earth?
You don't. Biology is a weird and wonderful thing and all these behaviours are ingrained deep. You arent changing anythibg without likely making it way worse through unforeseen outcomes. What we have to do instead is harness these emotions for financially wiping out the weak wealth inheritors mich more effectively so that it is rare to get more than 3 or 4 generations of these people with no skill growing the pot. One generation of imbecile/useless person needs to be likely to wipe out the pot.This would take the form of such things as (but not limited to) drastically limiting the controls one can keep on inheritances through time so more money ends up in inheritors hands with no restrictions sooner, finding a way to make private equity mich riskier/more evemly allocated so that the expected return for rich people is lower (but skilled rich can still earn high returns), more effectibely limiting corporate market power abuse by more effectively breaking up oligopolies (dont have to go back to prerehnquist levels of trust breaking but need to jead back in that direction some), etc.
We are pretty much there already. The average person in a developed Western country is pretty much a billionaire when compared to the living conditions of even the wealthiest people in ancient history. It's only the impulse of greed and envy towards others that leads us to believe otherwise.
I'm always reminded of the video where one monkey is rewarded with a cucumber and one with a grape[1]. Certainly getting a cucumber is infinitely better than not having a cucumber, and yet the monkey protests.
Despite having higher cognitive functions, that impulse still exists and can only be suppressed for so long and so far. No one has infinite capacity to maintain what they see as unfairness indefinitely, especially when it seems that humans make their own rules.
Traditional responses see that as either good (which I think is your implication) or terrible, a la "bread and circuses" where people are too complacent to demand any real changes. I would say that the "average person" is a tricky model, here in the US there are people sleeping on the sidewalk, but they have smartphones in their pockets. Are they better off than a Roman emperor? I would say no.
Thanks for pointing this out. It helped me contextualize the argument.
It is a combination of "Other People Have It Worse Than You Do" but uses the past as a point of reference.
We could just as easy compare ourselves to our presumably better off future and say that we have it worse off than them so we deserve to improve things now.
Not quite. Some things are fundamentally restricted in supply - for example and most pertinently, decent housing where people need to live. It is hard to feel like a billionaire when you have to share cramped living spaces that take most of your income.
> Overwhelmingly, violent revolution doesn't actually bring about the goals of the revolution. It just installs a new power structure with variations on all the old problems. Sometimes much worse.
There are examples either way, and sadly you seem right.
I recently read but now can’t find a discussion around this that argued that extreme times promote extreme individuals. A violent revolution is clearly an extreme time and any leader that emerges is likely to have fought hard for their position.
There is an argument that Karl Marx provided a guide for the aristocracy to work out the point that inequality would provoke a revolution then back off slightly from it.
Like yes, but also no? The aristocracy no easier to organize than the peasantry. They, through individual self-interest, graze on the commons of wealth and power and are subject to its tragedies just the same.
I'd rather die some billionaires minimum wage security squad protecting his gold plated yacht than let some violent freeloaders take my shit and install some cuban-tier communist hell-hole where there's no incentive to produce even basic grain stocks.
Life expectancy rose to a multi decade (all time at that time?) record peak during the great depression in US and starvation was exceedingly rare. Even at one of its worst the outcome was remarkably robust against starvation.
How about we start with the largest wealth holding: property.
One individual can own an entire town and charge people to live there indefinitely. This gets passed via inheritance and no longer equates to the initial building value.
On a micro scale, the timeframe for owning investment properties should be limited. They provide a service, but over a long period of time the owner is simply a leech.
Wealth redistribution and making it easier for new businesses to enter markets and compete. These often go hand-in-hand; safety nets allow people to take risks, and new competition prevents markets from colluding and ceasing competition.
Apparently he improved the conclusion in his second book.
In the first one it was bittersweet as he only stuck to historical evidences and what he found was that the only periods of decreasing economic inequalities were wars.
For people against the wealth redistribution as a concept (whether it's UBI, better welfare programs, increased minimum wage, etc), what do you think the end-game looks like for continued growth in wealth inequality?
The only answer I can see is that your customer base shrinks as fewer people are able to buy.
Or you get violent revolution as the poor are sick and tired of being priced out of even being able to afford housing and they decide they have nothing left to lose.
The Walton family wealth, for example, is a capitalised stream of rents predicated on underpaying store staff and abusing market power with suppliers. That's a wealth transfer. That's redistribution.
The Duke of Westminster is worth $11 billion because his ancestor was besties with William the Conqueror (not william the earner).
These are wealth transfers and redistributions that, ideally, ought to be undone.
I don't have that connotation for the word and I'm not sure I can find support for it either.
If I have 5 objects and five people and I give one to each that's a distribution. If I give them all to one person, that's a distribution. If I start with the first distribution and concentrate all of the items to one person, creating the second distribution that's still the same distribution.
Roughly, literally, "to give apart", i.e., to break up a resource from fewer to more owners.
I'm a big fan of poststructuralism but social spaces generally require that people understand each other. We can't just go redefining words on personal whims unless the people you're communicating with have consented to be a part of that metatextual process. This isn't that kind of space.
Literally nothing in the definitions you're linking to mentions anything about owners. And the definitions given at points just re-enforce the ambiguity. Definition 5 is "To apportion (more or less evenly)." I think one could reasonably read "more or less evenly" to mean "either more evenly or less evenly" or "relatively evenly".
Definitions include "An apportionment by law (of funds, property)" and critically "The apportionment of income or wealth in a population" with the example usage "The wealth distribution became extremely skewed in the kleptocracy." I.e. becoming extremely skewed didn't mean it was no longer a "distribution" in virtue of being concentrated.
And especially in a space where lots of people have a technical background, we're very likely to be thinking of the wealth distribution explicitly as a probability distribution (also listed as a separate definition), _especially_ we've already used the concept of quantiles on that distribution. Englishing flexibly, I think it's totally reasonable for "distribution" to refer to either the function assigning probability mass, _or_ to the act or process of making such a function true.
People in this thread are mostly using this word in a reasonable way. You're the one seeking to redefine words by insisting that only an entropy-increasing change is a "distribution".
That's a lot of contortion to attempt a defiance of etymology. And anyway the conversation was about redistribution, that prefix of course demanding an additional contextual layer on which the word is applied. Trying to imply that in general redistribution should be ambiguous enough to be synonymous to concentration is firstly just muddying language to make conversation harder and second taking us further from the point of the conversation anyway. Since when is it in the interest of any discussion that "words mean things" becomes controversial?
Words mean things. This word doesn't mean what you want it to mean, either according to the other people in the thread you're interacting with, or the source you decided to cite.
Etymology is not the sole determiner of meaning. We can call an area on the moon a "mare", and know this comes from the Latin for "sea", but "mare" in the context no longer means "sea".
This word does indeed mean exactly what I want it to mean, you're cherry picking other aspects of the definition to somehow overwrite the original rather than to acknowledge that we both can be right in certain ways. I'm right about what this word literally means, you're right that carelessness wins the day when it comes to language drift.
> And naturally, this needs to be funded by taxes on the very wealthy.
This is the part where the math never works out.
If you look at the richest people, they have something like tens to low hundreds of billions of dollars. Which is less than the amount of money the federal government already spends every week. If you taxed the top 100 billionaires at a rate of 100%, it would fund the existing federal government (and no new programs) for about a year, and then there would be nothing left for next year.
The funding for programs like that never comes from the "very wealthy" because there just aren't enough of them for that. It comes from the upper-middle class. Which is fine, but let's not delude ourselves that we can get there by only taxing Bill Gates and not your local cardiologist.
Except that they already pay kind of high taxes. These are the people who make six figures but don't have a personal full-time tax accountant to engage in international tax avoidance shenanigans. They're how the state and federal governments in the US together spend around 50% of US GDP.
So the problem isn't that we don't have enough tax revenue -- holy crap does the government have a large budget -- the problem is what we're spending it on. We should be spending less on the military and means-tested assistance programs and instead use the money for a UBI.
> This is the part where the math never works out.
I think this is a bit naive because you're considering money to be fixed and treating the system as a zero sum game. In terms of revenue, the US government gets ~55% from individual income tax and 12% from corporate, with a total revenue of 403B/yr. But also turning the "dial" on tax doesn't only affect the revenue. Every "dial" turn turns other "dials" but this doesn't result in a constant value across the system, even in a fixed instance of time. There are dial configurations which dominate other dial configurations but the system is insanely coupled. Neither this argument nor the "just increase taxes" argument is great because they do not capture the nuance necessary for an effective strategy. What that is? I'm not an economist, but I can tell you the system is rather complex and there's good reason we're all talking past one another and that's because we're solving different optimization problems and even when we recognize that we generally don't recognize that we're not agreeing on coefficients of terms nor what variables are at play. I think we need to first recognize the complexity of these issues and most of he time should kinda just shut up unless we're being clear that we're discussing to learn rather than teach.
Of the criticisms to Piketty, not having done the math isn't really one of them.
I don't have Capital and Ideology close at hand, so I can't check how he worked it out, but consulting some other sources:
- the top 1% in the US apparently have around $45.7T in wealth [1]
- there are around 22M people in the 20-24 age bracket and 23 in the 25-29 age bracket [2]
So suppose there are 5.5M people turning 21 every year. Giving them each $100k (yes, less than the Piketty proposal for the EU, but in the ballpark, and gives us round numbers) would cost $550B/yr at present. If this were funded as a flat wealth tax only on the top 1%, it would amount to around a 1.2% wealth tax, not accounting for evasion etc. So literally, 99% of the population could pay more in taxes, the 1% would be taking a hit, but honestly so long as long-term average returns are more than 1.2% above inflation, you could still have inter-generational wealth that gets bigger over time.
Of course, many would naturally prefer for a wealth tax to be progressive; the ultra-rich should pay a larger share than the pretty-rich. This would have the impact of shrinking long term dynastic piles of wealth, but not fully eliminating them, and reducing the impact on people at the low end of the 1%.
The top 1% of households in the US starts around $10M. That sounds like a lot, but consider it includes retirement accounts, value of a home etc.
For a couple in that bracket at about retirement age (and who might own their home and be expecting to retire on their savings), those people might be looking at a household income of $300-400K per year.
I don't know, but it seems pretty unreasonable to start hitting them with an extra $120K tax bill annually.
This is again the basic point that the other poster was making.
It's so much that if you make the median US income, you have to make it for ~300 years -tax free- to save up $10M.
It's 50 years, tax free, on a good developer salary.
It's so much that with 5% interest rate you can pay those $120k in tax and still get $380k a year, placing you among the top 5% wage earners in the US, while doing nothing more than own.
Is so much, that when I dream about becoming independently wealthy, the amount I dream of is half of it.
For people in retirement age it's even more obvious that it's a lof of money. Like, how do you even spend that much money before you die?
As you probably understand by now, I definitely don't think it's unreasonable to hit them with an extra $120K bill a year, because $10M is a lot of money for any individual, or couple, to own.
I mean, sure if you completely ignore investment returns; otherwise your numbers are bogus.
The “safe” rate of retirement drawdown is generally accepted as 4% because inflation, bad years in the markets etc.
In case it isn’t obvious, taxing wealth is basically taxing the older people in society, because they had more of a chance to accumulate wealth.
Hitting people at retirement with a 25% marginal tax increase is just wrong and an unworkable policy proposal.
Piketty’s proposal may work in countries with functional pension schemes, but not in the U.S. where personal wealth accumulation is necessary to extent a solid middle class lifestyle into retirement.
Use 4% then. You're left with 280k (400-120) a year. That's 9 times the median US income, and very close to being in the top 5% income. Not to mention that capital tax is usually lower than income tax.
Even ignoring investment returns completely, $10M is enough for anyone to live extremely comfortable the rest of their life, just using this money!
Taxing the very rich (as the top 1% is) is reasonable, also when they are retired.
You speak as if the money itself can't be used, only the returns. As if it's somehow 'not a lot of money' if it's not possible to live indefinitely on the capital gains alone.
But I agree that it's unworkable, but only because this is a powerfull group (wealth is power after all). I think it's completely unrealistic for that reason alone. But it's a good idea, and $10M is a lot of money.
Would the crudest flat rate scheme be unappealing to people just above the threshold to which it applies? Sure. I don't think anyone's seriously advocating for Bezos and the successful small business owner to be paying the same rate.
AnthonyMouse created a strawman to fight; getting from "very wealthy" to "only the top 100 billionaires" is kinda crazy. To use that to assert that the math just doesn't work on using a wealth tax to fund universal inheritance is kinda untenable.
I think "wealthier than 99% of people in a rich country" is fair to call "very wealthy" but I can see how others would differ. I also hope you can see how the person with >10M in net worth would not be happy to pay 1.2% but can likely swing it (and under this crude hypothetical, stops paying it if they fall to merely being richer than 98.9% of their peers), but that the 100k would be life-changing and transformative for young people.
Piketty's proposals for a wealth tax have varied over the years, but have at points in the past included 1% above 1M euros, 2% above 5M euros, 5-10% above 1B euros. He's trying to re-imagine a more equal society; the redistribution can't be small.
> the top 1% in the US apparently have around $45.7T in wealth
"The top 1%" mostly isn't billionaires, it's cardiologists and lawyers and programmers. It's people who labor for money, not people who inherited it. Most of that wealth is their homes and retirement accounts.
This is the problem I have with these proposals: They get sold as applying to dynastic wealth but in actual fact end up applying to many people who sacrificed years of their lives to go to school or start a business.
> So literally, 99% of the population could pay more in taxes, the 1% would be taking a hit, but honestly so long as long-term average returns are more than 1.2% above inflation, you could still have inter-generational wealth that gets bigger over time.
That's the point. There is no reason to use a wealth tax instead of the existing taxes that we already have unless you're going to use a confiscatory rate.
Existing taxes could -- and already do -- generate enough revenue to fund that kind of program, if we would stop wasting the money on less efficient existing expenditures.
But a confiscatory wealth tax would be self-defeating. It would generate less money, because it would give the wealthy a perverse incentive to spend rather than invest, depriving the government of all the future tax revenue on their investment activity -- which long-term exceeds the amount of the principal.
You have to get at the problem from the other end. What you want isn't to make it harder for wealthy people to make money, it's to make it easier for ordinary people to make money. Reduce barriers to entry so anyone can start a business -- and that business can compete with dynastic incumbents, and dethrone them. Increase competitiveness of markets so capital gets lower margins and more of the surplus goes to customers and workers.
Just taking the money doesn't fix it. You have to address the structural economic conditions that led to that result to begin with.
Taxing the very wealthy heavily isn’t intended to fund the state. That argument is a red herring. It should be done to reduce the concentration of power that comes with dynastic wealth, which corrupts society. Arguments to maintain our status quo are typically ideological.
Note also that Bill Gates is giving away a vast majority of his wealth for philanthropic purposes. So if you tax Bill Gates, it turns out you're actually taking mostly every cent of that money from starving kids in Africa and elsewhere. That's something to think about for sure.
The math doesn't work out by design due to favorably shaped policies. A sizable amount of wealth is hidden away extra-jurisdictionally or consists of intentionally undervalued assets or isn't captured in statistics.
Lots of very wealthy people keep wealth in tax shelters, but that reduces their tax burden, not their net worth. Bill Gates doesn't secretly have a trillion dollars.
> If you taxed the top 100 billionaires at a rate of 100%, it would fund the existing federal government (and no new programs) for about a year, and then there would be nothing left for next year.
The point to taxing billionaires is not that "the government needs their money to spend". The government will spend the money anyway regardless of whether it has it. The point to taxing billionaires is to even things out and nudge society to be more equal counter to market forces continuously concentrating wealth. I'd fully support a tax on billionaires where the money just gets burned in a furnace.
> The point to taxing billionaires is to even things out and nudge society to be more equal counter to market forces continuously concentrating wealth. I'd fully support a tax on billionaires where the money just gets burned in a furnace.
Then you're going about it the wrong way.
The main thing having billions of dollars gets you is the ability to choose who runs a large corporation. If you take away the money but not the corporation, all you're doing is transferring the power to run that corporation to some Wall St assholes instead of the founders. The corporation is still just as big and whoever is put in charge of it still has just as much power.
The thing that actually concentrates wealth is large corporations. The solution, then, isn't taxes, it's antitrust and fighting against regulatory capture. It's to make corporations smaller and more numerous, so they each have less power.
Which would not only solve the actual problem, it would also solve the nominal problem of billionaires having too much money, because the way you get billionaires is by having corporations that are too big. It causes the people who got in when they were small to have "too much money". Don't let them get that big and that doesn't happen anymore.
It turns out the thing that Picketty missed was that he grouped land with Capital. Land should be treated differently as it can not be created or destroyed. If you seperate out the data into land and capital (w/o the land) then all of the outsized returns come from rich people hoarding land[1]. This is in line with the observations of Riccardo[2].
Sorry if this is nitpicking, but valuable land absolutely can be created (Boston) and destroyed (climate change) on human timescales.
I'm sure the amount of land that can realistically be created and destroyed within a few lifetimes is negligible compared to the amount of land in existence, but compared to valuable inhabited land it might actually be significant. Coastal land tends to be pretty valuable, and that's where (almost) all the creation and destruction occurs.
Edit: Actually, the interview you reference is not even really talking about land.
> When you say “land,” you’re not talking about land in the Jane Austen sense, that is, agricultural land under the ownership of the lord of the manor, right?
> It’s not agricultural land, it’s the value of urban land.
Obviously urban land can be created and destroyed as cities expand and contract.
Yeah, I'm talking about land in the Henry George sense. Maybe a better word would be "natural resources". In this framework you don't just have Labor and Capital, but you have Labor, Capital and Land. Labor uses Land to create wealth, and Capital gives Labor the tools to be more effective in wealth creation.
It's not nitpicking, it's central to the issue. One could consider that, as far as Western civilization is concerned, colonialism was an exercise in "land creation" - and the various wars of the 20th century, temporarily in the case of bombings and permanently in the case of mine-setting, a type of "land destruction".
Low interest rates decade made this pattern seemingly no longer hold, but I think we are getting right back to the old pattern for sure.
The next question is what to do about it. Wealth tax is controversial and hard to implement. It seems to me that simplifying the tax code such that capital gains and various forms of non-salary income didn't have preferential treatment would be an important first step. Further, an actual meaningful inheritance tax that isn't easily avoided by various trust schemes.
This is true if you view the world from a zero-sum perspective. If the rich are winning, then the poor must be losing.
But I would argue the world is not zero-sum. Modern life for middle class or poor class people is a lot better than the vast majority of history (the 2 notable exceptions are post WWII USA and post Cold War USA, when America was punched through as an undisputed global superpower).
We are a looooonnng way away from 19th century standards. Like seriously, would you desire to go back in time to 1890? Okay, have fun if you're not white. Good luck with polio and leprosy. Hope you're not bored with reading (if you can read) because video barely exists.
> decreases in class mobility and increased concentration of social power
> The parent comment seems to focus on the latter
Okay but it's still not a very good argument. Like really? That's when you literally had to be _born_ noble, like your blood ancestry. That's why a bunch of people died in the French revolution, Russian revolution, etc
The Gilded Age, the stereotypical example of a time with high inequality (which we have, in fact, now surpassed by any reasonable measure) was in the 19th century in the USA.
We had no hereditary nobility (not in name, anyway). The robber barons were all (to the best of my knowledge) "new money"—their families made their fortunes right here in America by getting in on the ground floor of brand-new industries (very much in the same way that startup founders are trying to do today) as the Industrial Revolution was ramping up...and then becoming monopolists and extracting all the money they could (very much in the same way that startup founders are trying to do today).
I don't think "class mobility" is a thing that we have to have. I don't think its a problem that needs fixing.
I also don't think its a problem that there is a big gap between rich and poor.
I _do_ think we need to make sure that our governments are well funded, and that it can afford to feed, house, and make safe all of its people, no matter how disabled, unlucky, or lazy.
I also think we need to have protections in place so that the wealthy can't use rent seeking behavior to feed on those with less money.
> I don't think "class mobility" is a thing that we have to have. I don't think its a problem that needs fixing.
Really? If there were zero class mobility, that would mean that no matter how hard someone works, no matter how good their business ideas are, they'll never become more wealthy than their parents were when they were born (at least, compared to someone who sat around doing nothing). And it would mean that no matter how inefficiently or stupidly a rich person blows their money, they'll never become less wealthy than they already are. Bloodline would become a better predictor or wealth and status than luck, charisma, investment opportunities, or hard work.
Even if we lived in a world where even there poorest of the poor were provided for, I wouldn't be okay with zero class mobility. It would basically be acceptance of inherited birthright privilege.
When I hear class mobility, I think moving categories, not moving up and down in your own category.
I believe strongly that people need to be rewarded for getting out of bed in the morning and doing something productive. I fear the UBI because I think its human nature to choose to do nothing. I think people who claim people will still work on a UBI are kidding themselves.
So in context, I believe it's important that everybody's material wealth is going up. We don't need laws that somehow make it easier for you to go from nothing to a billion dollars somehow.
I have no problem with existence of the rich per se. What I have a problem with is them using their money as 'speech' to buy politicians in order to erode regulations and rights that make life worse for everyone else.
> Like seriously, would you desire to go back in time to 1890? Okay, have fun if you're not white
The ancestors of the people living in Gaza were much better off than their descendants today, being bombed while the US Navy sits off shore to enable the massacre (coming via bombs made in the USA). Same is true of many in the world. Hunter gatherers in the Amazon were not being massacred by mining companies back then to the extent they are now.
> But I would argue the world is not zero-sum. Modern life for middle class or poor class people is a lot better than the vast majority of history
Zero sum is not a binary. For things where we are able to increase output using technological progress to the point where supply sufficiently meets demand, sure, it doesn't feel zero sum. Nobody is arguing that we need to fix that -- the challenge is actually preserving the situation in these cases (it's bad to kill the reward signals that make the economic engine go).
For things where we cannot rapidly increase output, things that have unlimited demand but very limited supply, the rich are likely to monopolize. In those cases, it is zero sum. Public spaces (think of the beach access controversies with people like Vinod Khosla), farmland, housing, fresh water, college admissions. Housing and land in particular are really tough.
Strategies like wealth redistribution (but _also_ other related policies!!) are needed to mitigate the latter.
Wealth centralization is also anathema to democracy -- just ask proof of stake folks. When the wealthy get to make all the laws, you won't want to live in that society.
> Housing and land in particular are really tough.
Housing and land are not "tough". There's plenty of dirt cheap land even in highly developed countries; it just happens to be outside the most popular locations. But if we want housing to become both cheap and livable we must invest in those "unpopular" places, even as we also try to build more housing in the more high-demand locations. There's just no avoiding that.
My point stands. Getting investment into those places is tough. Towns and cities don't construct themselves. Construction is especially sensitive to monetary policy.
Land by itself is not useful -- if you can't make a living what's the point of having land? Land is most useful when it's in proximity to opportunity, and opportunity-adjacent land is scarce and only getting scarcer.
I wonder if that's really true, I'm going to do some web searches latter because I think its interesting, but I doubt a young person who has an online only tech job, and can therefore live anywhere, could even afford an undeveloped parcel of land in the middle of nowhere.
I think the point is that humans need a lot of infrastructure to live. Reliable water/sewage, internet connectivity, schools / day cares if you have kids, access to healthy food (google "food deserts"), etc.
Ahh, no, I think there is an interesting question here, can a young person today go out west and build all that stuff from nothing. (Like people did a few hundred years ago)
Can you buy a small parcel of land, dig a well for water and a hole under the outhouse, plant veggies, have some chickens, pigs, perhaps a goat.
Can you do it in range of a cell tower for internet, do you need some satellite solution. How much solar and how big a battery do you really _need_. How would today's tech change the life of the settlers?
I did some web searches for here in Australia, and I didn't parcels of land much less than 10k, and they looked liked barren desert to me. More like 100k if you want nice looking forest in the middle of nowhere.
> can a young person today go out west and build all that stuff from nothing. (Like people did a few hundred years ago)
Maybe a specific young person with a lot of relevant experience and strong desire for this sort of life could, but it would be pretty hard and the initial costs are nothing to sniff at.
Water is especially prohibitive. The American West is going through massive aridification and the water table is overdepleted in many places. Gotta watch out for water rights too.
Electricity and internet are doable if you can afford the right systems.
Food is really hard unless you're willing to buy everything at dollar general. Modern farming is highly reliant on artificial sources of nitrogen. And it's just not a good use of your time if you have a tech job. Social needs of humans cannot be overlooked.
People even a couple hundred years ago would move whole communities. They had access to abundant natural resources and divided responsibilities differently.
Maybe you're just interested in van life but + farming? It's expensive and probably a bad investment overall, but makes more sense than owning random cheap but poorly situated land outright.
It’s true that we’ve come a long way as a society (in many places), but just because we’re better off, doesn’t mean we’re in a good place.
I hope we can look back 100 years from today and reflect on how bad things were in these times.
Global society is a zero sum game until we get to a place of over abundance. With such limited (often artificially limited) resources, when the rich are winning, the poor in fact are losing.
I think the feeling that this imbalance is accelerating is real. The ever widening technology gap enables the wealthy to leverage powerful tools that simply aren’t available to much of the world population. It’s far easier to game the system than it has ever been.
> Modern life for middle class or poor class people is a lot better than the vast majority of history
I 100% agree with you.
I'm upper middle class and I live better than any king or any robber baron ever lived up until the early 20th century.
Better dental care, better surgical operations (which saved my life when I was 18 or so btw and which save my daughter the day she turned 7 years old btw), better car, better soundsystem, better clothes, etc.
We also know a more lot about what's healthy and what is not. Personal hygiene, including of those you have intimate relation with...
> Like seriously, would you desire to go back in time to 1890?
No. Not as a king. Not as the richest man on earth.
On the other hand, you have to work for a living, don't have a private cook, prostitutes/concubines if that's your thing etc.
I think I'd very much prefer to be a king in 1890 than McDonald's worker today. There's a risk I'd die of infection that's easily treated today, but, on the other hand, I'm not flipping burgers through majority of my waking hours.
The world is complex. Some things are zero-sum (like land), some are not (like education).
While the low/middle class are certainly more comfortable these days, there is not yet enough evidence that this can be done sustainably in perpetuity. After all, if the entire world lived like the average US citizen, we'd quickly run out of resources (another zero-sum example, btw)
I think you're confusing zero-sum between people at different economic levels and zero-sum between people at different points in time.
Yes, people at a given economic percentile today have many things better in absolute terms compared to poor people at that same economic percentile X years ago. (This is obviously true for large enough X. Everyone's got it better today than the Cro-Magnons did!)
That does not mean the present system is not zero-sum in its relative distribution of wealth among people today. Every dollar in a billionaire's bank account is a dollar that could be in someone else's instead.
> Every dollar in a billionaire's bank account is a dollar that could be in someone else's instead.
This is true, but billionaires don't just have a billion dollars sitting in bank accounts. The billions in wealth comes from ownership of property and companies. Some of this may be considered "zero sum" in the way you describe (e.g. a billionaire that owns and rents out single family homes).
However, I would guess the majority of that wealth is not "zero sum" in the way you describe, such as a warehouse robot (or the warehouse itself). What are you going to do with a warehouse robot? It has no value to you, or almost anyone else.
> Every dollar in a billionaire's bank account is a dollar that could be in someone else's instead.
This is not an example. Today the government can print more dollars out of thin air. So no, dollars is not zero-sum.
Even then, dollars is only an approximation of value, the thing that really matters. And value is also not zero-sum because of technological innovation and the existence of waste. If we are smarter about how apply our resources, literally more people can have more, and no one has to lose. (One example is people in the US simultaneously being food insecure while the nation also has tremendous food waste).
that would be an interesting idea in the 2000s, when everyone wanted to be an entrepreneur.
This very forum is (ostensibly) about entrepreneurship. Since 10 years ago however, the common advice is to ditch the startup and go work for the bigtech behemoths instead.
The biggest factor in whether people become rich is simply luck.
Why else would a small number of people who are by far not the most intelligent or capable among us, and who happen to live in a few select countries, be the ones who own 90+% of the world's resources?
Sadly, even Silicon valley tells a grim story. How many successful founders go on to repeat their success in another venture? How many don't even bother to try and instead become "philanthropists" or pundits of some kind, promoters of their personal brand, still trading off of that one burst of luck they had?
We all know that most people with big successes would absolutely never subject themselves to the "meritocracy" again, once they have already established financial dominance over others...
If the world were meritocratic we would not tolerate people living uneducated in slums and those with resources would invest heavily in human capital. Do they? Absolutely not, they build gates around their homes to protect themselves from the masses. The pass zoning laws to limit the density of dwellings so that the poor won't live nearby, etc.
I think you are straw manning their argument. I believe it's clear from context that they are referring to something different than material conditions.
> Like seriously, would you desire to go back in time to 1890?
This is a completely frivolous argument. We should all sit tight and be content because we're not being lynched or dying of dysentery?
We live in a world where a tiny number of people sit on mountains wealth that will last them a hundred lifetimes while the vast majority ration themselves what limited education, food, shelter and healthcare they can afford in a given month or year. A few have unfathomable plenty and most live in a world of constant scarcity. That's the world we live in today and that is the world we must grapple with. The 19th Century has jack all to do with it.
More specifically, the post-WWII era is ending and now we're reverting to the mean of most of human history, which was oligarchic wealth and authoritarianism. It's sort of a tragic irony that the largest generation thus far saw the 1945-1975 period as "normal" and how things should be, because it was actually a highly anomalous point in history generated by a perfect storm of factors (the demographic peak from previous medical advances, multiple huge agrarian economies rapidly industrializing, a huge war that resulted in massive downward wealth redistribution) which will not repeat, and now it's coming to an end.
I think it's more useful to think of "a huge war" as the effect of the cause of allowing nonsensical wealth concentration via allowing the individual wealth concentrators to use the media, the banks, and governments (the nation's militaries) to enforce hegemony at home and abroad through debt and the use of violence to collect. International trade (as it did in the early 20th century global wars) becomes a vice, as indebted nations are divided between the wealthy that seek to preserve the value of their currency by bone-grinding the locals, fascist forces that seek to become the next bone-grinders, and socialists and idealists whom would rather at the end of the day see debt restructured around social welfare. We've consistently only chosen the first two options throughout all human history.
In the US about 60% of people do not own land without debt. And the majority also struggle to pay for healthcare and education without incurring debt. Only around 25% of Americans are debt free. Various surveys show between 15-30% of Americans think they could cover 6 months of expenses with their assets.
It's such a bad assumption that historical returns on capital will persist. Capital is subject to supply/demand just like other things. The more of it there is, the lower the returns are. Anyone who works in finance/investing will tell you (including old Warren Buffett), it's a lot harder to generate returns these days than 50 years ago. There is just so much capital sloshing around.
It's an interesting model and in my opinion, provides a much better model for the 'fourth turning' pattern than the mechanism put forward by the authors. The predictable return on capital Picketty points to after all only happens during times of stability, during times of instability wealth disparities actually decrease. If too much concentration of wealth leads to crisis and crisis is a 'distributing' mechanism this is basically a self-correcting dynamic.
For the opposite (not quite converse logically!) argument that unrest and wars lead to economic equality, I recommend Walter Scheidel's "The Great Leveler".
Perhaps there is a better alternative to this. Rather than simply waiting for "times of instability," society at large could take a more proactive approach.
There is at least one exception to this, which is that as technology improves, it necessitates the creation of new capital to utilize that technology commercially, and the people involved in creating it (whether as founders or wage workers) stand to capture a lot of the value in delivering it.
Case in point, see how valuable it is these days to be an AI scientist or software engineer. Both are involved in the creation of capital in the form of AI models and software, both are paid a lot and able to adequately catch up in wealth to old money.
Piketty's claim seems empirically obvious, but also virtually obvious to anyone who has created a gaming economy. The rich get richer faster than anyone can catch up, so you have to introduce artificial constraints like increasing prices for rich people.
As I said in a different comment in this thread, Piketty's claim does not hold for all capital, it only holds for land. This is perfectly in line with theoretical predictions by David Ricardo[1]. The solution to this is a Land Value Tax as proposed by Henry George[2].
> Due to the historical averages of the rate of return on capital, he concluded empirically that wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors.
You're obviously incredibly unlikely to become a billionaire.
If someone inherits billions - you're not going to out-labor them to become richer. Only luck will help there.
So where is the cutoff?
You can easily out-labor someone who inherits $2M at 50. >10% of people in the US amass >$1M (without counting their home equity) by around 50...
How many people are inheriting more than $2M? 0.5% of people?
You're never going to out-labor luck. It's always going to be better to be lucky than work hard. But luck doesn't scale, and hope isn't a great strategy.
I'm in favor of inheritance taxes. But this doesn't seem like the main driver of inequality....
>I'm in favor of inheritance taxes. But this doesn't seem like the main driver of inequality....
I mean, Piketty's work shows that it is...
I'd like to see a scandi style tax system and social safety net. Inheritance taxes at the point where 90% of small business and farms won't be affected. Progressive carbon taxes. Massively increased social safety net that includes paid education, healthcare, and unemployment generous enough that one won't be destitute if they try to start their own business and fail (look at the rate of small business formation in the scandi countries!)
There's a common refrain in conservative circles that they're more in favor of 'equality of opportunity over outcome'. Right now we clearly have neither.
I believe this was true throughout almost all history, and 20th century was a fluke where a lot of people lost what they could inherit, and other lots of people made their capital from hard work.
I see people joking about this all up and down this thread, but rich peoples wealth is not sting around in gold bars waiting to be stolen by poor people.
All that will happen in a violent uprising is a lot of people will die, and peoples houses will burn down, but nothing will happen to those numbers in a spreadsheet.
You missed my point, a looter might get a new car or tv, but that's not wealth. A looter is can't take ownership of television network, or a social media website, or a coal mine, or a rail way, or like anything actually worth anything.
Now instead of a violent uprising we talk about electing a democratic government that's prepared nationalize our nations infrastructure we'd be talking real wealth redistribution.
>> wealth will continue to concentrate to the point to inheritors, to the extent that individuals become increasingly unable through labor to achieve parity to the inheritors
Adjusted for inflation, John D. Rockefeller had 340 billion dollars of wealth in 1918. What has that fortune grown to? It hasn't. It is gone. He gave it away.
Adjusted for inflation, Andrew Carnegie had 370 billion dollars of wealth in 1901. What has that fortune grown to? It hasn't. It is gone. He gave it away.
John Jacob Astor's fortune? Gone. Vanderbilt's? Gone.
Looking at a few different lists, those are the 4 wealthiest people in US history. They either gave the money away or their heirs spent it all.
If wealth was going to automatically concentrate, it would have. It didn't. Rockefeller's 340 billion invested in the stock market from 1918 to today would roughly equal the entire net wealth of the US. That didn't happen for the Rockefellers and it didn't happen for any of the other many fortunes in the past.
What Picketty "concludes empirically" does not in fact happen. If it did in fact happen, all the wealth of the US would be in the hands of one person.
To figure out if wealth will concentrate in the hands of inheritors, you need to know many different things.
Will people give their wealth to their children or will they give it away? Zuckerberg, Gates, Buffet, Ellison, all giving their money away.
Will people give their wealth to a single child? Elon Musk has 10 kids. If he gave away money to each child, his wealth would not be concentrated. (Oops, 11 children. Even less concentrated.) If those children went on to have multiple children, the inheritance gets diluted even more.
Some rich people, believe it or not, actually spend money. People who inherit wealth rather than earning it seem to be particularly good at spending wealth faster than it grows.
He must surely be an embedded character with such a prestigious background, promoted in the media, talks at the WEF, etc. Whatever he is proposing will be milk toast to the billionaires - a lighting rod to direct peoples' frustration to somewhere that won't cause any harm to those billionaires.
Institutions:
Paris School of Economics
School for Advanced Studies in the Social Sciences
London School of Economics
Massachusetts Institute of Technology
I'm making the point that the way legislation etc is drafted, the clauses that are allowed - the whole captured system really, that allows the very rich to be able to increase their wealth through inheritance, is problematic if it is seen to be unfair. People will get angry, as inflation, carbon taxes, etc start to bite. The billionaires will feel some heat.
In order to manage that tension, you need certain people who appear to be against you, but are actually in your pocket. Picketty is surely one of those. He will say contentious things, that appear to be critical of billionaires, but his real job is to help manage popular discontent, by sucking up the air from others whose response that would be more problematic to those billionaires.
You don't have to inherit billions from your parents to have a huge leg up on everyone else. There are examples all over the place from something as extravagant 'a small loan of a million dollars' to 'an introduction to a vp at ibm', to paying their kids tuition to the best private schools. I am extremely suspicious of any wealthy person who claims to be 'self made' when in reality they had a paved path to success.
Are we calling them "self-made" now for strapping some http requests to old, purposefully gate-kept banking systems? Or is it the ones that we allowed to horizontally expand with zero regulatory system to stop them? Or is it the ones who ruined housing the world over? So many useful people.
> ~80% of current billionaires in the U.S. are self-made first generation.
I see conflicting evidence to the claim[0,1,2]
I'd argue that you also got to be really careful with these studies. Defining "self-made" is not a straight forward issue. In some sense, no person is self made as we're all products of our environments and the opportunities presented to us. If it were consistent you wouldn't see these numbers swing between studies, so don't just pick the highest one. Metrics are deceptive because their subtleties and you need to carefully consider their alignment.
>> Defining "self-made" is not a straight forward issue
Forbes has an interesting (to me at least) self-made score that assigns ten categories from "Inherited fortune but not working to increase it" to "Self-made who not only grew up poor but also overcame significant obstacles", https://www.forbes.com/sites/gigizamora/2023/10/03/the-2023-....
Yeah this is the major issue and I think there's a big difference in how people internalize the notion of "self-made" vs how others actually utilize the terminology. Definitely part of this is due to human psyche where we (generally) place importance on our actions rather than our environment (which makes sense due to this is what we have (more) direct control over). There is also a significant number of people who have high incentives to weaken the definition and many do become true believers.
1/10 = Inherited fortune but not working to increase it
10/10 = Self-made who not only grew up poor but also overcame significant obstacles
Here's some clearer example of what may lead to confusion.
- Forbes gives Elon a self made score of 8/10. That's high, for this list considering what 10 means but 8 also is large with "middle-class or upper-middle-class background" (including Zuck and Bezos). Certainly Elon is significantly self-made (his family certainly weren't billionaires) but there is ambiguity about what class he grew up in. According to his dad[0], he paid for Elon's trip to Canada and his education (also discussing the sale of a private aircraft) while Elon claims he grew up poor and came to the Americas with only with $2.5k to his name and ended with $100k in student debt ($100k 1987 = $187k 2023). Certainly there is animosity between father and son and I'm willing to believe Elon believes he's telling the truth (not synonymous with being the truth). But Elon claims a 10/10 self-made score while the dad is saying something closer to a 7 (which is still quite privileged by the average person's standards: "got head start from wealthy family"). Elon's net worth is (Forbes) estimated $245bn and rank #1.
- Forbes equally ranks Bezos and the wiki page is kinda wild[1]. At birth his mom was a high school senior and father was a uni-cyclist but he also attended a Montessori school at age 2. At 4 his mom remarried and his step dad (Mark Bezos) worked for Exxon as an engineer. But Jeff also says Amazon was a family effort and it looks like his parents loaned him $245k ($480k 2023) and they're also billionaires now due to "early investment." I think it is safe to say most will consider Bezos much more self-made than Musk especially considering his dad (Mike) was a Cuban refuge refuge and still a student when his parents married. Without a doubt the average person would call Bezos self made and even believe he struggled and his success is highly conditioned on his work and ability to take advantage of ample opportunities at the time. Bezos's net worth is estimated $170bn and rank 3.
- Now one spot up (9/10) we have Sergei Brin[2] (link for history, you're on HN, you know who Sergei is...). Born in Soviet Russia to a math professor father and engineer mother. The wiki article discusses job loss, troubles getting out of Poland, and let's be honest, professors and NASA engineers are not the wealthiest of people, but neither are they poor (he also attended a Montessori School. I'm not shilling, I'm mentioning because private schools are expensive so puts some objective signal on family wealth). I think the average person would without a doubt not just think Sergei is self made but went through significant struggle, no matter where on the spectrum of "middle class" he grew up on (prof + engineer is reasonably upper middle). Sergei's estimated net worth is $110bn and rank 10.
- At 10/10 is George Soros[3], born in 1930 Budapest to (non-observing) Jewish parents I think we all know what happened. They didn't leave Hungry till post war (1947). There is mention that his family was themselves a bit antisemitic at the time and in 1944 were able to pose as Christians. No matter the personal beliefs I think it would be __difficult__ to claim that Soros is highly self-made and __without a doubt__ had struggles that few others can relate to in terms of severity (this history likely explains his passion for politics). Soros's net worth is estimated $6.7bn and ranked 396
Assuming all this is reasonably true, there's a crazy amount of difference between ranks 7 and 10. I honestly think most people would think a Forbes 7 is a 2 or 3 out of 10 and would interpret a 7 as vastly self made.
Edit: also kind crazy we live in a time where this can all be found and compiled in ~30 minutes. That's definitely a privileged environment, at least to my personal belief.
> if they are represented as cardinal somewhere I wouldn't agree with that.
I'd disagree. While in a well defined ordinal metric you can always map to a cardinal system by means of grouping (losing precision), but that well defined condition is a bit of a killer. Certainly in language it is not true and I'm suspicious that one could find well defined metrics with global optima that account for all reasonable variables. This is why cardinal systems are highly effective for voting systems (social choice) as it is accepting that the conditions that one is ranking preference on is not universally agreed upon and thus is baking in a noise term to the model. Not to mention is far more computationally efficient (fuck man, we gotta rebuild the entire self-made graph every time someone enters or leaves the list and an entire recompute when metrics/variables change (and they will)).
> I assume that "I think it would be __difficult__ to claim that Soros is highly self-made" has a missing not somewhere?
Ops, yeah, that is correct. Soros is one of the clearer examples of someone being self made. But we can see the other examples are far less clear and understand how someone my place significantly different weightings on the various variables at play. But I think with the exception for holocaust deniers, people are going to generally agree that "Jew during Nazi occupation" trumps almost anything else.
On the Musk/Bezos stuff, I think one read of any comments or interviews with Elon's estranged father (who amongst various acts, has fathered a child with his own step-daughter) indicates pretty quickly that the guy is a bit off, at best. This [1] is the article Wiki chose to cite to justify the claim that Elon grew up in wealth. Here are the combined comments from his father from the article:
"We went to this guy’s prefab and he opened his safe and there was just stacks of money and he paid me out, £80,000, it was a huge amount of money. He then gave me the opportunity to spend £40,000 on an emerald mine. I said, ‘Oh, all right’. So I became a half owner of the mine, and we got emeralds for the next six years. We were very wealthy. We had so much money at times we couldn’t even close our safe. One person would have to hold the money in place with another closing the door. And then there’d still be all these notes sticking out and we’d sort of pull them out and put them in our pockets."
In a normal world, this is about the time you turn off the recorder and thank the guy for coming in, not citing it as established fact. Of course we don't live in anything like a normal world though.
The article is saying that the inherited wealth of the remaining 20% of today's billionaires is greater than the wealth of those new-made billionaires, there's no contradiction there at all. And obviously you'd expect most new billionaires to have a net wealth close to the $1bn mark, so all it would take is each of the 20% to inherit four times as much on average.
This page lists nine people who inherited over $50bn each, and another 23 who inherited between $4bn and $50bn, totalling just over $1.1tn of inherited wealth. Easy to see how that would outweigh the wealth of a larger number of new billionaires.
And another large chunk are first generation inherited. Like self made mom or dad just kicked the bucket. This myth of multi-generational, dynastic absurd wealth is.... nonsense with few exceptions.
It's weird because prior to the 21st Century this used to be almost entirely how wealth was generated.
But I think the argument of inheritance being a major wealth driver should be simple to understand from a few base principles. This is invariant of money and is related to capital in the broader sense (i.e. resources) which is also going to be invariant to many economic systems. One of the most important ones is momentum.
Momentum seems to often not be considered in these discussions but makes discussions of trickle down economics rather insane. Let's look at a more realistic discussions. Your stock portfolio should not be bounds, full of bonds, and nothing but bonds. You have to diversify and actually even include some risky investments. We usually talk about this in percentages of investments but this doesn't actually make any sense because it's actually percentage of risk vulnerability. E.g. Elon can lose 244B of his 245B and still gave essentially the same quality of life (similarly doubling his wealth won't change anything in a meaningful way). But let's also look deeper at percentages. Let's say I make an investment of $10k (a nice size for someone early on in their career) and I'm about to do really well and get 500% return on that (killer value!), I now have $60k to play with. Now let's say another person puts a $10M investment and only gets a measly 1% return. They gained $100k so have $10.1M to play with.[0] The other problem with percentages is that you can "increase your luck" by taking on far more risk. If we both take our 10{k,M} and diversity into 1k pots and each pot has a x% chance of returning 500%, which person do you think ends up with more winners? Or if we do a fixed number of pots but divide by percent of money, you're going to find a very different expected return value.
Consider this factor when you're also considering cost of living arguments. I'll take that SV software job at $300k/yr where I can only invest 10% of my income (30k) per year over a $100k/yr job in middle America where I can invest 20% of my income (20k). COL calculators are always based on percentages and so not taking this into account (as well as a lot more abstract things) and it doesn't matter of in SV I'm spending 70% of my income on housing but 30% elsewhere if this is the end result (only focusing on building wealth for a clearer argument. Other factors matter and wealth isn't everything. But employers, you can't just use COL adjustments, it's a bad deal for the employees and they know it)
Now I said it is invariant of money, because capital is capital. Land, factories, gold, potatoes, whatever, that's all capital. It can't ever be evenly distributed, even with all good faith actors, because the value of those changes wildly and fast (value != money, its more abstract). Throw in how non-homogeneous everything is (e.g. land, housing, location are not fungible resources) and you got a crazy fucking mess. It's no wonder you can't make a successful 5 year plan, the world is chaos and the models need to be exceptionally complex. You have to embrace the chaos in some way.
TLDR: math isn't always intuitive because neither percentages nor raw values exclusively tell the whole story (don't get me started on mean, median, and variance). People love to (often unintentionally) lie by using whichever fits a better narrative. A holistic approach is needed (i.e. context) with clear definitions of objective functions and more importantly clear understandings of the metrics (a whole other can of worms that people think is far simpler than they actually are).
[0] To put it another way, if you're retiring with $10M in investments you're retiring with a passive income north of an L3 at Google. This is why John Bogle is happy with only $50m (which grew) because he understood that there's very little more money can do for him and that a simple 2% a year on that gets him a million every year and so the value is not a high score but being human. This isn't really a philosophical argument because literally capital generally follows an S curve in its utility, not linear and usually not exponential (though S looks exponential at some points).
The book was very provocative in economist circles, but even the critics mostly lauded the empirical work at collecting historical data. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...