Afternoon Must-Read: Heather Boushey: On “Capital in the Twenty-First Century”
…where the presumption is that our society marches always towards greater equality or less discrimination, even if slowly. But if Thomas is right… this era could be at an end… Downton Abbey… no other way for Grantham’s three daughters to maintain their standard of living other than marrying well. So, the show’s first season focuses on whether the eldest daughters would concede to marry her cousin Matthew. If Thomas is right, then once again, the rules over inheritances will make all the difference for the potential for women’s equality…. In 2014, only one-in-ten U.S. billionaires were women (11.4 percent) and the female share of self-made billionaires is only 3.1 percent…
This reminds me of what I wrote back in 2002:
Back before the industrial revolution bequests were a major component of acquired wealth. With a society-wide total capital-output ratio of 3:1 and a
generation length of 25 years, roughly 12 percent of a year’s output will change hands and pass down through the generations through inheritance every year…. My guess is that every year bequests turned over to the receiving cohort were equal to between 16 and 24 percent of annual output. This is more than ten times the contribution of net investment to wealth. Contrast the dominance of inheritance over net investment before the industrial revolution with the situation today…. Net investment… [of] between 12 percent and 16 percent of total output…. This balance between [net] accumulation and bequests is in sharp contrast
to the more than 1:10 ratio of the pre-Industrial Revolution past…
If one imagines that creative destruction shifts an extra 7% of so of today’s output from losers to winners each year, then the ratio of accumulation to bequests today is not 1:1 but rather 3:2–an even more striking contrast with the pre-industrial past.
And Thomas Piketty thinks we are likely to go back there, so that choosing the right parents and marrying well will once again be of overwhelming importance in upward (or avoiding downward) mobility…