Is Inheritance Justified?
Author(s): D. W. Haslett
Source: Philosophy and Public Affairs, Vol. 15, No. 2 (Spring, 1986), pp. 122-155
Published by: Blackwell Publishing
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D.
W. HASLETT
Is Inheritance
Justified?
Old ways die hard.A socialpracticemay be takenfor grantedfor centuries
before humanity finally comes to realize it cannot be justified. Take, for
example, slavery. Anotherexample is the inheritance of politicalpower.
For many centuries, throughout most of the world, the suggestion that
political power should be determined by democratic vote rather than
heredity would have been met with scorn; today we realize just how
unjustified determining politicalpower by heredity really is.
Although we no longer believe in the inheritance of political power,
most of us still believe in the inheritance of wealth, of economic power.
But might not the inheritance of economic power be equally unjustified?
This is the question to be examined here. Inheritance involves property
rights; so anotherway of putting this question is: Should propertyrights
incorporatethe practice of inheritance as it exists today?
I shall not address the question of whether individualsmay justifiably
continue to take advantage of this practice as long as it exists, by continuing to bequeath and inherit property.(As far as I am concerned, they
may.) I addressonly the justifiabilityof the practice(or institution) itself.
Finally, in asking whether the practiceof inheritance is justified, I focus
specificallyupon whether it is justified in the United States, today. Any
conclusions I reach, however, will be applicable,no doubt, beyond this
limited frame of reference, one chosen mainly for convenience. And, for
convenience also, I shall be using the word "inheritance"throughout to
refer to any large amount one is given (as opposed to earns, or wins),
whether it be, technically, a bequest, or a gift.
This investigationis dividedinto three sections. Section I presents some
facts aboutwealth distributionand inheritancein the United States today,
I wish to thank EdgarPage for many helpful commentson an earlierdraftof this article.
123
Is Inheritance
Justified?
facts that providea useful backgroundfor the discussion which follows.
Many people supportinheritance because they believe it to be essential
to capitalism. In Section II I try to show that, far from being essential,
inheritanceis actuallyinconsistent with capitalism.Or, to be more exact,
I try to show that it is inconsistent with fundamentalvalues that underlie
capitalism. For those, such as myself, who share these values, its inconsistency with them is primafacie reason for abolishing inheritance. But
prima facie reasons for doing something can be overriddenif the objections to doing it are strong enough. So, in Section III, I examine what I
take to be the most important objections to abolishing inheritance. I
conclude that the practiceof inheritance,as it exists today,should indeed
be abolished.
I.
BACKGROUND INFORMATION
Family income in the United States todayis not distributedvery evenly.
The top fifth of American families receives 57.3 percent of all family
income, while the bottom fifth receives only 7.2 percent.I
But, for obviousreasons, a family'sfinancialwell-being does not depend
upon its income nearly as much as it does upon its wealth, just as the
strength of an army does not depend upon how many people joined it
during the year as much as it does upon how many people are in it
altogether. So if we really want to know how unevenly economic wellbeing is distributed in the United States today, we must look at the
distributionnot of income, but of wealth.
Although-quite surprisingly-the governmentdoes not regularlycollect informationon the distributionof wealth, it has occasionally done
so. The results are startling. One to two percent of American families
own from around20 to 30 percent of the (net) familywealth in the United
States; 5 to io percent own from around40 to 6o percent.2The top fifth
i. Lester C. Thurow, "TaxWealth, Not Income,"New YorkTimes Magazine, i i April
These figures do not represent "income,"as defined by the census bureau,
but "income"as definedmorebroadlyso as to include also anyincome receivedfromwealth.
Somewhatmore recent figures are, of course, readilyavailable.I am, however, using the
figures set out by Thurow for two reasons. First, figures representingthe distributionof
income (as opposed to the amount of income) have variedlittle over the past twenty-five
years. Second, these figures are comparedby Thurowdirectlyto figures representingthe
distributionof wealth in the United States, figures which are set out below.
2. The latest governmentalstudy of the distributionof wealth, carried out in I983,
estimates the amount of net wealth held by the top 2 percent to be 28 percent, and that
1976, p. 33.
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Philosophy & Public Affairs
owns almost 8o percent of the wealth, while the bottom fifth owns only
percent.3So while the top fifth has, as we saw, about eight times the
income of the bottom fifth, it has about 400 times the wealth. Whether
deliberatelyor not, by regularly gathering monumental amounts of information on the distributionof income, but not on the distributionof
wealth, the government succeeds in directing attention away from how
enormouslyunequal the distributionof wealth is, and directingit instead
upon the less unequal distributionof income. But two things are clear:
wealth is distributedfar more unequallyin the United States today than
is income, and this inequalityin the distributionof wealth is enormous.
These are the first two things to keep in mind throughoutour discussion
of inheritance.
The next thing to keep in mind is that, although estate and gift taxes
in the United States are supposed to redistributewealth, and thereby
lessen this inequality,they do not do so. Before I98I estates were taxed,
on an average, at a rate of only o.2 percent-o.8 percent for estates over
$500,ooo-hardly an amount sufficient to cause any significant redistribution of wealth.4And, incredibly, the Economic RecoveryAct of I98I
lowered estate and gift taxes.
0.2
held by the top io percent to be 57 percent. R. Avery, G. Elliehausen, G. Canner, and
T. Gustafson, "Surveyof Consumer Finances, I983: Second Report,"Federal Reserve
Bulletin 70 (December I984): 865. These estimates "accountfor all financial assets, and
equity in homes and otherreal propertyas well as consumer credit and other debts [They]
exclude the value of consumer durablessuch as automobilesand home furnishings, the
cash value of life insurance, equity in small businesses and farms, and the present value
of expected future benefits from pensions or social security"(p. 86i).
The concentrationof wealth among the top few percent may be even greaterthan these
estimates indicate, since the informationgathered from the very rich was far from exhaustive (p. 862). Also, an even greaterconcentrationof wealth among the top few percent
than these estimates indicate was reportedin a governmentalstudy conducted in i962.
DorothyS. Projector,"Surveyof FinancialCharacteristicsof Consumers,"FederalReserve
Bulletin 50 (MarchI964), p. 285; alsoreportedin LesterC. Thurow,GeneratingInequality
(New York:Basic Books, 1975), p. 14. Between the I962 and I983 studies, the amount of
informationon wealth distributiongatheredby the governmenthas been relativelysmall.
An article by James D. Smith and Stephen D. Franklinindicates, however, that the distributionof wealth in the United States has remainedfairlyconstant since at least 1922.
"TheConcentrationof PersonalWealth I922-1969,"
AmericanEconomicReview64 (May
I964).
3. Thurow, "Tax Wealth, Not Income," p. 33.
4. LesterC. Thurow,TheImpactof Taxes on theAmericanEconomy(New York:Praeger
Publishers, I971), p. 127.
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Is Inheritance
Justified?
Of course the top rate at which estates and gifts are allegedly taxed is
far greater than the o.2 percent rate, on the average, at which they are
really taxed. Priorto I98I, the top rate was 70 percent, which in 198I
was lowered to 5o percent. Because of this relativelyhigh top rate, the
average person is led to believe that estate and gift taxes succeed in
breakingup the huge financial empires of the very rich, thereby distributing wealth more evenly. What the averageperson fails to realize is that
what the governmenttakes with one hand, through high nominal rates,
it gives back with the other hand, through loopholes in the law. Lester
Thurow writes, ". . it is hard to understand why we go through the
fiction of legislating high nominal rates and then nullifying them with
generous loopholes-unless someone is to be fooled. The most obvious
purpose of high nominal rates and low effective rates is to use the high
nominal rates as a smokescreen to hide the transferof wealth from generation to generation."5I do not know if the government deliberately
intends the law on estate and gift taxation to be deceptive but, due to
the complications,exceptions, and qualificationsbuilt into this law, it is
deceptive and, more seriously still, it is ineffective as a means of distributing wealth more evenly. Indeed, as George Cooper shows, estate and
gift taxes can, with the help of a good attorney,be avoidedso easily they
amount to little more than "voluntary"taxes.6As such, it is not surprising
that, contraryto popularopinion, these taxes do virtuallynothing to reduce the vast inequality in the distributionof wealth that exists today.
Once we know that estate and gift taxes do virtuallynothing to reduce
this vast inequality, what I am about to say next should come as no
surprise. This vast inequality in the distributionof wealth is (according
to the best estimates) due at least as much to inheritance as to any other
factor. Once again, because of the surprisinglack of informationabout
these matters, the extent to which this inequality is due to inheritance
is not known exactly. One estimate, based upon a series of articles appearing in Fortune magazine, is that 5o percent of the large fortunes in
the United States were derived basically from inheritance.7But by far
5. Thurow,"TaxWealth, Not Income,"pp. IoO'LIoI.
6. GeorgeA. Cooper,A VoluntaryTax? New Perspectiveson SophisticatedEstate Tax
Avoidance(Washington,D.C.: BrookingsInstitution,1979).
7. RichardA. Smith, "TheFifty-MillionDollarMan,"Fortune(November1957); Arthur
M. Louis, "America'sCentimillionaires,"Fortune(May I968); and ArthurM. Louis, "The
New Rich of the Seventies,"Fortune (SeptemberI973).
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Philosophy& Public Affairs
the most careful and thoroughstudy of this matter to date is that of John
A. Brittain.8Brittain shows that the estimate based upon the Fortune
articles actuallyis too low;9that a more accurate estimate of the amount
contributedby inheritance to the wealth of "ultra-rich"males is 67 percent.'0 In any case, it is clear that, in the United States today,inheritance
plays a large role indeed in perpetuatinga vastly unequal distributionof
wealth. This is the final thing to keep in mind throughoutthe discussion
which follows.
II. INHERITANCE AND CAPITALISM
Capitalism(roughly speaking) is an economic system where (I) what to
produce, and in what quantities,is determinedessentially by supply and
demand-that is, by people's "dollarvotes"-rather than by central planning, and (2) capital goods are, for the most part,privatelyowned. In the
minds of many today, capitalismgoes hand in hand with the practice of
inheritance; capitalism without inheritance, they would say, is absurd.
But, if I am right, the exact opposite is closer to the truth. Since, as I
shall tryto show in this section, the practiceof inheritanceis incompatible
with basic values or ideals that underlie capitalism, what is absurd, if
anything, is capitalismwith inheritance.
Beforeproceeding,however, let me say a few brief words about ideals,
or values, in general. Ideals, or values (and I use these terms interchangeably here) serve to delineate what is good; what, consequently, is
to be striven for, and to be striven for even though in no way capable of
ever being achieved fully. Take, for example, the ideal of the medical
profession that everyone be in a state of perfect health. Ideals can be
either absolute or prima facie. Absolute ideals admit of no compromise;
they are to be realized as fully as possible no matter what the cost. Prima
facie ideals do admit of compromise;they are to be realized only to the
extent that they do not conflict with, for example, more fundamental
ideals. None of the ideals to be discussed here are absolute;all are merely
prima facie. Finally, political values or ideals such as the ones we shall
be considering, are, in my view, related to politicalmorality,roughly, as
8. John A. Brittain,Inheritance and the Inequality of National Wealth (Washington,
D.C.: BrookingsInstitution, 1978).
9. Ibid., pp. 14-I6.
io. Ibid., p. 99.
Is Inheritance
Justified?
127
follows. Politicalmoralityplaces an obligationupon a government to do
what is in the generalwelfare, subject to being constrainedby rights that
people have against the government.Values or ideals, delineating,as they
do, what is to be striven for, serve as general guides to what is in the
general welfare. Accordingly,any governmentalpolicy that is contraryto
legitimate ideals is, other things being equal, unjustified. But if the contravenedideals are only primafacie, then the policy contraryto them can
be shown to be justified after all, by showing that other things are not
equal; by showing, in other words, that the policy, although contraryto
these ideals, is requiredfor other, more weighty reasons. But if it cannot
be shown that the policyis requiredfor other more weighty reasons, then
we must conclude that the policy is indeed unjustified.
I do not try to show here that the ideals underlying capitalism are
worthy of support;I only try to show that inheritance is contraryto these
ideals. And if it is, then from this it follows that, if these ideals are worthy
of support (as, incidentally, I think they are), then we have prima facie
reason for concluding that inheritanceis unjustified.What then are these
ideals? For an answer, we can do no betterthan turn to one of capitalism's
most eloquent and uncompromisingdefenders: Milton Friedman.
Distribution according to productivity
The point of any economic system is, of course, to produce goods and
services. But, as Friedmantells us, society cannot verywell compelpeople
to be productiveand, even if it could, out of respect for personalfreedom,
probablyit should not do so. Therefore, he concludes, in order to get
people to be productive,society needs instead to entice them to produce,
and the most effective way of enticing people to produce is to distribute
income and wealth according to productivity.Thus we arriveat the first
ideal underlying capitalism: "To each according to what he and the instruments he owns produces."II
Obviously, inheritance contravenes this ideal. For certain purposes,
this ideal would require further interpretation;we would need to know
more about what was meant by "productivity."For our purposes, no
further clarificationis necessary. Accordingto any reasonable interpretation of "productivity,"the wealth people get through inheritnace has
nothing to do with their productivity.And one need not be an adherent
Ii.
I962),
Milton Friedman, Capitalism & Freedom(Chicago: University of Chicago Press,
pp. I6I-I62.
I28
Philosophy& Public Affairs
of this ideal of distributionto be moved by the apparentinjustice of one
person working eight hours a day all his life at a miserable job, and
accumulating nothing, while another person does little more all his life
than enjoy his parents'wealth, and inherits a fortune.
Equal Opportunity
But for people to be productive it is necessary not just that they be
motivated to be productive, but that they have the opportunity to be
productive. This brings us to the second ideal underlying capitalism:
equal opportunity-that is, equal opportunityfor all to pursue, successfully, the occupation of their choice.12 Accordingto capitalist ethic, it is
OK if, in the economic game, there are winners and losers, provided
everyone has an "equalstart."As Friedmanputs it, the ideal of equality
compatiblewith capitalismis not equalityof outcome, which would discourage people from realizing their full productivepotential,but equality
of opportunity,which encourages people to do so.'3
Naturallythis ideal, like the others we are considering, neither could,
nor should, be realizedfully; to do so would require,among other things,
no less than abolishing the family and engaging in extensive genetic
engineering.'4 But the fact that this ideal cannot and should not be realized fully in no way detracts from its importance. Not only is equal
opportunityitself an elementaryrequirementof justice but, significantly,
progressin realizing this ideal could bringwith it progressin at least two
other crucial areas as well: those of productivityand income distribution.
First, the closer we come to equal opportunityfor all, the more people
see DouglasRae,Equalities
I 2. Fora useful analysisof the conceptof "equalopportunity,"
(Cambridge,MA: HarvardUniversityPress, I98i), ch. 4. Using Rae's terminology,the
ratherthan "prospectidealof equalopportunitybeing discussedhere is "means-regarding,"
regarding."
In spite of the usefulness of Rae'sanalysis,it is, I think, mistakenin one crucialrespect.
According to Rae, means-regardingequal opportunityreceives whatever ideological, or
moral,credibilityit has only by being confused with prospect-regardingequal opportunity
(pp. 67, 73). If what I say below about the value of (means-regarding) equal opportunity
is correct,this is a serious mistake.
13. Milton& Rose Friedman,Freedomto Choose(New York:HarcourtBraceJovanovich,
pp. I3I-40.
Friedmanalso talks favorablyof another ideal of equality, which he
I979),
calls "equalitybefore God."But equalitybefore God turns out to be a restatement of the
ideal of liberty,which is discussed below.
14. See, for example, BernardWilliams,"TheIdea of Equality,"Philosophy,Politics and
Society, ser. 2, ed. Peter Laslett and W. G. Runciman(Oxford:Basil Blackwell, I962).
129
Is Inheritance
Justified?
there will be who, as a result of increasedopportunity,will come to realize
their productivepotential.And, of course, the more people there are who
come to realize their productivepotential,the greateroverallproductivity
will be. Second, the closer we come to equal opportunityfor all, the more
people there will be with an excellent opportunityto become something
other than an ordinaryworker,to become a professionalor an entrepreneur of sorts.And the more people there are with an excellent opportunity
to become something other than an ordinaryworker, the more people
there will be who in fact become something otherthan an ordinaryworker
or, in other words,the less people there will be availablefor doing ordinary
work. As elementary economic theory tells us, with a decrease in the
supply of something comes an increase in the demand for it, and with
an increase in the demand for it comes an increase in the price paid for
it. An increase in the price paidfor it would,in this case, mean an increase
in the income of the ordinaryworkervis-a-visthat of the professionaland
the entrepreneur,which, surely,wouldbe a step in the directionof income
being distributedmore justly.
Andhere I mean "morejustly"even accordingto the ideals of capitalism
itself. As we have seen, the capitalist ideal of distributivejustice is "to
each accordingto his or her productivity."But, under capitalism,we can
say a person's income from some occupation reflects his or her productivityonly to the extent there are no unnecessarylimitationsupon people's
opportunityto pursue, successfully, this occupation-and by "unnecessary limitations"I mean ones that either cannot or (because doing so
would cause more harm than good) should not be removed. According
to the law of supply and demnand,the more limited the supply of people
in some occupation, then (assuming a healthy demand to begin with)
the higher will be the income of those pursuing the occupation. Now if
the limited supply of people in some high-paying occupation is the consequence of a "natural"scarcity-a scarcity that is not the result of unnecessary limitations upon opportunity,but is the result instead of few
people having the inborn capacity to pursue this occupation, or of few
people freely choosing to do so-then (it is fair to say) the high pay does
reflect productivity.Willingness or capacity to do what few people are
willing or have the capacity to do is socially valuable, and those who in
fact do it are thereforemaking an unusually valuable contribution;they
are, in other words, being highly productive.But if, on the other hand,
the limited supply of people in some high-payingoccupationis the result
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Philosophy& Public Affairs
of unnecessary limitations upon people's opportunityto pursue that occupation, then the scarcity is an "artificial"one, and the high pay can
by no means be said to reflect productivity.The remedy is to remove
these limitations;in other words, to increase equality of opportunity.To
what extent the relative scarcity of professionals and entrepreneurs in
capitalist countries today is due to natural scarcity, and to what extent
to artificial scarcity, no one really knows. I strongly suspect, however,
that a dramatic increase in equality of opportunitywill reveal that the
scarcity is far more artificialthan most professionals and entrepreneurs
today care to think-far more artificial.
If my suspicions are correct, a dramaticincrease in equality of opportunity not only would be desirable for its own sake (since equal opportunity is itself an elementary requirement of justice) but would also be
desirable for the sake of greater productivity,a more equal distribution
of income, and fuller realizationof the ideal of distributionaccording to
productivity.Indeed, a dramaticincrease in equalityof opportunitywould,
I suspect, do more to meet the objectionsthat many throughoutthe world
today have against American capitalism than could anything else.'5
That inheritance violates the (crucial) second ideal of capitalism,equal
opportunity,is, once again, obvious. Wealth is opportunity,and inheritance distijbutes it very unevenly indeed. Wealth is opportunityfor realizing one's potential,for a career,for success, for income. There are few,
if any, desirable occupations that great wealth does not, in one way or
another,increase-sometimes dramatically-one's chances of being able
to pursue, and to pursue successfully. And to the extent that one's success
is to be measured in terms of one's income, nothing else, neither intelligence, nor education, nor skills, providesa more secure opportunityfor
"success" than does wealth. Say one inherits a million dollars. All one
then need do is purchase long-termbonds yielding a guaranteedinterest
of ten percent and (presto!) one has a yearly income of $ioo,ooo, an
income far greater than anyone who toils eight hours a day in a factory
will probablyever have. If workingin the factorypays, relatively,so little,
15. I say this fully awareof the criticismof equal opportunity,and meritocracyin general,
made by Michael Young in The Rise of Meritocracy(Harmondsworth,England: Penguin
Books, I96I). The problemwith these criticismsis that they are based upon taking equal
opportunity(along with productivity)to be, not merely a primafacie value as it should be,
but absolute. Any legitimate prima facie value can easily be reduced to absurdityif it is
wronglyviewed as being absolute.
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Is Inheritance
Justified?
then why, it might be asked, do not all these workers become big-time
investors themselves? The answer is that they are, their entire lives,
barred from doing so by a lack of initial capital which others, through
inheritance, are simply handed. With inheritance, the old adage is only
too true: "The rich get richer, and the poor get poorer."Without inheritance, the vast fortunesin Americatoday,these enormousconcentrations
of economic power, would be broken up, allowing wealth, and therefore
opportunity,to become distributedfar more evenly.'6
Freedom
But so far I have not mentionedwhat many, including no doubt Friedman
himself, consider to be the most importantideal underlying capitalism:
that of liberty or, in other words, freedom. This ideal, however, takes
different forms. One form it takes for Friedman is that of being able to
engage in economic transactionsfree from governmentalor other types
of human coercion. The rationalefor this conception of freedom-let us
call it freedom in the "narrow"sense-is clear. As Friedmanexplains it,
assuming only that people are informedaboutwhat is good for them, this
form of freedom guarantees that ". .. no exchange will take place unless
both parties benefit from it."17 If at least the parties themselves benefit
from the transaction,and it does not harm anyone, then, it is fair to say,
the transaction has been socially valuable. So people with freedom of
exchange will, in doing what is in their own best interests, generally be
doing what is socially valuable as well. In other words, with this form of
freedom, the fabled "invisiblehand" actually works.
All of this is a great oversimplification.For one thing, a transaction
i6. Although abolishing inheritance would, I should think, do more to increase equal
opportunitythan any single other (feasible) reform,it is by no means the only reformthat
is needed for this purpose.If we are serious aboutachieving significantlymore equalityof
opportunitywithin a capitalisticframework-and I thinkwe certainlyshouldbe-we should
combineinheritancereformwith, amongotherthings, the followingtwo additionalreforms:
a programthat guaranteesaccess to highereducationforall who arequalified,and a program
to bring about equal access to medical care for all. This latter reformwould remove the
financial obstacle preventingchildrenof the very poorfrom receiving promptand reliable
medical care; promptand reliablemedical care is, in turn, necessary for preventing their
medical needs fromprogressingto the point where they have sufferedirreversibledamage
that could handicapthem for the rest of their lives. One way of achieving equal access to
medical care for all is through a programof "socialized"medicine, but this is not the only
way.
17. Friedman,Capitalism & Freedom, p. I3.
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Philosophy& Public Affairs
that benefits both partiesmay have side effects, such as pollution,which
harm others and, therefore,the transactionmay not be socially valuable
afterall. So freedom,in the narrowsense, should certainlynot be absolute.
But the fact that freedom,in this sense, should not be absolute does not
prevent it from serving as a useful ideal.
Next, those, such as Friedman,who oppose governmentalcoercion in
the realm of economic exchanges often oppose governmental coercion
of another sort as well: paternalism.In other words, they oppose governmental coercion designed to force us to do what is, supposedly, in our
own best interests. Examples of governmentalpaternalism would be a
law prohibitingthe drinking of alcoholic beverages, on the grounds that
doing so is unhealthy, or a law requiringeveryoneto wear seat belts. But,
providedthat it does not significantly affect freedom of exchange (that
is, freedom in the narrow sense), paternalismhas little to do with capitalism; therefore, "antipaternalistic"freedom does not, it seems to me,
deserve to be included among the ideals that underlie capitalism. More
to the point, neither inheritance, nor its abolishment(at least not for the
reasons put forthhere), could be correctlyviewed as paternalisticanyway.
So we need not give this conception of freedom further consideration
here.
There are others whose conception of freedom is that of not being
subject to any governmentalcoercion(or other forms of human coercion)
for any purposes whatsoever-a conception sometimes referred to as
"negative"freedom. It is true that governmental(or other) coercion for
purposes of enforcing the abolitionof inheritance violates this ideal, but
then, of course, so does any such coercion for purposes of maintaining
inheritance. So this "anticoercion"ideal, just like the antipaternalistic
ideal, neither supportsnor opposes the practiceof inheritance, and therefore this conception of freedom need not concern us further here either.
A very popularvariationof the anticoercionconception of freedom is
one where freedom is, once again, the absence of all governmental (or
other human) coercion, except for any coercion necessary for enforcing
our fundamental rights. Prominentamong our fundamentalrights, most
of those who espouse such a conception of freedom will tell us, is our
right to property.So whether this conception of freedom supports the
practice of inheritancedepends entirelyupon whether our "rightto property"should be viewed as incorporatingthe practice of inheritance. But
whether our right to property should be viewed as incorporating the
I33
Is Inheritance
Justified?
practice of inheritance is just another way of stating the very point at
issue in this investigation (see p. I22 above, and Section III below).
Consequently, this popularconception of freedom cannot be used here
in support of the practice of inheritance without begging the question.
But there is still another conception of freedom espoused by many:
that which we might call freedomin the "broad"sense. Accordingto this
conception of freedom, to be free means to have the ability, or the opportunity,to do what one wants. For example, accordingto this conception of freedom,rich people are, other things being equal, freer than poor
people, since their wealth providesthem with opportunitiesto do things
that the poor can only dream about.
I think it is clear that when Friedman, and most other conservative
defenders of capitalism, speak about the importance of freedom, they
have something like what I have labelled the "narrow"sense in mind,
along with perhaps one of the senses of freedom we have dismissed as
irrelevant to our investigation. Those who, on the other hand, espouse
freedom in the broadsense are often opponents of capitalism, and they
use the broadsense of freedom to try to show how capitalism, with the
vast inequalities of wealth to which it gives rise, is actually inconsistent
with freedom. But those who espouse the broad sense of freedom need
not be opponents of capitalismsince, arguably,capitalism,or some modified version of it, provideseven the less well off with more wealth and
opportunitiesthan does any other system and, accordingly,may be quite
compatiblewith freedomin the broadsense afterall. Indeed, it is, I think,
freedom in the broadsense that is espoused by most liberal defenders of
capitalism,those who, although they believe in the free market, are more
sympathetic to governmental aid for the poor than are conservatives.
Therefore, I include freedom in the broad sense among the ideals that
underlie capitalism even though this ideal is not supported by all defenders of capitalism, and is, in fact, supportedby many of its foes.
Let us now see whether inheritance and freedom are inconsistent.
Consider, first, freedom in the narrowsense. Although inheritance may
not be inconsistent with this ideal, neither is the abolishment of inheritance. This ideal forbidsgovernmentalinterferencewith free exchanges
between people; it does not necessarily forbidgovernmentalinterference
with gifts or bequests (which, of course, are not exchanges). Remember,
Friedman's rationale for this ideal is, as we saw, that free exchange
promotesthe "invisiblehand;"thatis, it promotesthe healthy functioning
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Philosophy & Public Affairs
of supply and demand, which is at the very heart of capitalism. Supply
and demand hardly require gifts, as opposed to exchanges, in order to
function well.
If anything, gifts and bequests, and the enormous concentrations of
economic power resulting from them, hinder the healthy functioning of
supply and demand. First of all, gifts and bequests, and the enormous
concentrationsof economic powerresulting from them, create such great
differences in people's "dollarvotes" that the economy's demand curves
do not accuratelyreflect the needs of the populationas a whole, but are
distortedin favor of the "votes"of the rich. And inheritance hinders the
healthy functioning of supply and demand even more, perhaps, by interferingwith supply.As we have seen, inheritance (which, as I am using
the term, encompasses large gifts) is responsible for some starting out
in life with a vast advantage over others; it is, in other words, a major
source of unequal opportunity.As we have also seen, the further we are
from equal opportunity,the less people there will be who come to realize
their productivepotential. And, of course, the less people there are who
come to realize their productive potential, the less overall productivity
there will be or, in other words, the less healthy will be the economy's
supply curves. So, while inheritance may not be literally inconsistent
with freedom in the narrow sense, it does, by hindering indirectly both
supply and demand, appear to be inconsistent with the "spirit"of this
ideal.
To this it might-be replied that abolishing inheritance would be even
more inconsistent with the "spirit"of this ideal, since inheritance is necessary for promotingsavings and investment and thus capital growth, or
for maintaining people's incentives to work hard, things which, for the
healthy functioning of supply and demand, are absolutely essential. We
shall see in Section III, however, that this reply is not convincing.
All conservativesare suspicious of concentratinggreateconomic power
in the hands of government. And if the Soviet Union is any indication,
these suspicions are well founded. Some conservativesare suspicious of
concentrating great economic power in the hands of corporations.On
the whole, these suspicions are well founded also; with the provisothat,
because of economies of scale, certain of these concentrationsare a necessary evil. No conservative, as far as I know, is suspicious of concentrating great economic power-via privatefortunes-in the hands of individuals. Perhaps it is time for conservative thinking to become more
I35
Is Inheritance
Justified?
consistent: the truth is, I suggest, that all great concentrations of economic power are suspicious, whether emanating from government, corporations,or individuals.
So we may conclude that, at best, inheritancereceives no supportfrom
freedom in the narrow sense. But it remains for us to consider whether
inheritance receives any supportfrom the otherrelevantideal of freedom,
an ideal many, including myself, would consider to be the more fundamental of the two: freedomin the broadsense-being able to do, or having
the opportunityto do, what one wants. So we must now ask whether,
everything considered, there is more overallopportunitythroughout the
country for people to do what they want with inheritance, or without it.
On the one hand, without inheritancepeople are no longer free to leave
theirfortunes to whomeverthey want and, of course, those who otherwise
would have received these fortunes are, without them, less free to do
what they want also.
But to offset these losses in freedom are at least the following gains in
freedom. First, as is well known, wealth has, generally speaking, a diminishing marginal utility. What this means is that, generally speaking,
the more wealth one alreadyhas, the less urgent are the needs which
any given increment of wealth will go to satisfy and, therefore, the less
utility the additionalwealth will have for one. This, in turn, means that
the moreevenly wealth is distributed,the more overallutilityit will have. 8
And since we may assume that, generallyspeaking, the more utility some
amount of wealth has for someone, the more freedomin the broadsense
it allows that person to enjoy, we may conclude that the more evenly
wealth is distributed,the more overallfreedom to which it will give rise.
Now assuming that abolishing inheritance would not lessen overall
wealth (an assumptionI shall try to show in Section III to be warranted),
and that it would indeed distribute wealth more evenly, it follows that,
by abolishing inheritance, there would be some gain in freedom in the
broad sense attributableto the diminishing marginal utility of wealth.
Next, abolishing inheritance would also increase freedom by increasing
equality of opportunity.Certainlythose who do not start life having inherited significantfunds (througheither gift or bequest) startlife, relative
i8. The more evenly wealth is distributed,the more overallutility it will have since any
wealth that "goes"from the rich to the poor, therebymaking the distributionmore even,
will (given the diminishingmarginalutilityof wealth) have more utilityfor these poorthan
it would have had for the rich, thus increasing overallutility.
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Philosophy& Public Affairs
to those who do, with what amounts to a significanthandicap.Abolishing
inheritance, and thereby starting everyone at a more equal level, would
obviouslyleave those who otherwise would have suffered this handicap
(which would be the great majority of people) more free in the broad
sense.
I, for one, believe these gains in freedom-that is, those attributable
to the diminishing marginal utility of wealth and more equality of opportunity-would more than offset the loss in freedomresulting from the
inabilityto give one's fortune to whom one wants. Abolishinginheritance
is, I suggest, analogous to abolishing discrimination against blacks in
restaurantsand other commercialestablishments.By abolishingdiscrimination, the owners of these establishments lose the freedom to choose
the skin colorof the people they do business with, but the gain in freedom
for blacks is obviously greaterand more significant than this loss. Likewise, by abolishinginheritance the gain in freedomfor the pooris greater
and more significant than the loss in freedom for the rich. So to the list
of ideals that inheritance is inconsistent with, we can, if I am right, add
freedom in the broadsense.
To recapitulate:three ideals that underlie capitalism are "distribution
accordingto productivity,""equalopportunity,"and "freedom,"the latter
being, for our purposes, subject to either a narrow or a broadinterpretation. I do not claim these are the only ideals that may be said to underlie
capitalism;I do claim, however, that they are among the most important.
Inheritance is inconsistent with both "distributionaccording to productivity,"and "equal opportunity."Perhaps it is not, strictly speaking, inconsistent with the ideal of freedom in the narrow sense, but neither is
the abolishment of inheritance. On the other hand, it probablyis inconsistent with what many would take to be the more fundamental of the
two relevant ideals of freedom:freedom in the broad sense. Since these
are among the most importantideals that underlie capitalism,I conclude
that inheritance not only is not essential to capitalism, but is probably
inconsistent with it.'s
For those who, like myself, are inclined to support these ideals, the
inconsistency of inheritancewith them creates a strongpresumptionthat
inheritanceis unjustified.But only a presumption,fornone of these ideals
are absolute. There may, therefore,be objections to the abolishment of
Ig. Inheritanceis, no doubt,equallyinconsistentwith the ideals that underliesocialism,
but we need not pursue this matterhere.
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Is Inheritance
Justified?
inheritancethat are strongenough to overrideits inconsistency with these
ideals (or to show that my conclusion about its inconsistency with the
ideal of freedom to be premature). So, before we can make any final
judgment about the justifiability of inheritance, we must examine the
most significant of these objections.
III. OBJECTIONS
In orderto examine properlythe objections to abolishinginheritance, we
should have a definite proposalfor abolishing inheritance before us, so
that we know to what, exactly, these objections are meant to apply. I
shall begin, therefore,by setting out a proposalthat incorporatesthe main
features I think any law abolishinginheritance should incorporate.
First, my proposalfor abolishinginheritance includes the abolishment
of all large gifts as well-gifts of the sort, that is, which might serve as
alternatives to bequests. Obviously,if such gifts were not abolished as
well, any law abolishing inheritance could be avoided all too easily.
Of course we would not want to abolish along with these large gifts
such harmless gifts as ordinarybirthdayand Christmas presents. This,
however, raises the problemof where to draw the line. I do not know the
best solutionto this problem.The amountthat currentlaw allows a person
to give each year tax free ($io,ooo) is too large a figure at which to draw
the line for purposes of a law abolishing inheritance. We might experiment with drawing the line, in part at least, by means of the distinction
between, on the one hand, consumer goods that can be expected to be,
within ten years, either consumed or worth less than half their current
value and, on the other hand, all other goods. We can be more lenient
in allowing gifts of goods falling within the formercategorysince, as they
are consumed or quickly lose their value, they cannot, themselves, become part of a large, uneamed fortune.The same can be said about gifts
of services. But we need not pursue these technicalities further here.
The general point is simply that, so as to avoid an obvious loophole, gifts
(other than ordinarybirthdaypresents, etc.) are to be abolished along
with bequests.
Next, according to my proposal, a person's estate would pass to the
government, to be used for the general welfare. If, however, the govemment were to take overpeople'spropertyupon their death then, obviously,
after just a few generations the governmentwould own virtually every-
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Philosophy & Public Affairs
thing-which would certainly not be very compatible with capitalism.
Since this proposalfor abolishinginheritance is supposed to be compatible with capitalism, it must therefore include a requirement that the
government sell on the open market, to the highest bidder, any real
property, including any shares in a corporation,that it receives from
anyone's estate, and that it do so within a certain period of time, within,
say, one year from the decedent's death. This requirementis, however,
to be subject to one qualification:any person specified by the decedent
in his will shall be given a chance to buy any propertyspecified by the
decedent in his will beforeit is put on the market(a qualificationdesigned
to alleviate slightly the family heirloom/business/farmproblemdiscussed
below). The price to be paid by this person shall be whatever the property
is worth (as determined by governmentalappraisers,subject to appeal)
and any credit terms shall be rather lenient (perhaps IO percent down,
with the balance, plus interest, due over the next 30 years).
Finally, the abolishment of inheritance proposedhere is to be subject
to three important exceptions. First, there shall be no limitations at all
upon the amount a person can leave to his or her spouse. A marriage,it
seems to me, should be viewed as a joint venture in which both members,
whether or not one stays home tending to children while the other earns
money, have an equally importantrole to play; and neither, therefore,
should be deprived of enjoying fully any of the materialrewards of this
venture by having them taken away at the spouse's death. And unlimited
inheritance between spouses eliminates one serious objection to abolishing inheritance: namely, that it is not right for a person suddenly to be
deprived, not only of his or her spouse, but also of most of the wealth
upon which he or she has come to depend-especially in those cases
where the spouse has, for the sake of the marriage, given up, once and
for all, any realistic prospects of a career.
The second exception to be built into this proposalis one for children
who are orphaned, and any other people who have been genuinely dependent upon the decedent, such as any who are mentally incompetent,
or too elderlyto have any significantearningpowerof their own. A person
shall be able to leave funds (perhaps in the form of a trust) sufficient to
take care of such dependents. These funds should be used only for the
dependent's living expenses, which would include any educational or
institutional expenses no matter how much. They should not, of course,
be used to provide children with a "nest egg" of the sort others are
I39
Is Inheritance
Justified?
prohibitedfrom leaving their children. And at a certain age, say twentyone (if the child'sformaleducationhas been completed),or upon removal
of whatever disabilityhas caused dependency, the funds should cease.
This exception eliminates another objection to abolishing inheritancethe objection that it would leave orphaned children, and other dependents, without the support they needed.20
The third and final exception to be built into this proposalis one for
charitable organizations-ones created not for purposes of making a
profit, but for charitable, religious, scientific, or educational purposes.
And, in order to prevent these organizationsfrom eventually controlling
the economy, they must, generally, be under the same constraint as is
the government with respect to any real propertythey are given, such
as an operatingfactory:they must, generally, sell it on the open market
within a year.
A limit of some sort could be placed upon the amount a person would
be entitled to give to charitableorganizations;I am inclined, however, to
oppose any limit. Allowing unlimited contributions would, to be sure,
weaken one of the advantagesof abolishinginheritance, that of providing
government with a major, new source of revenue, one that would serve
to lessen the burden of income taxes. For rather than allowing their
estates to pass to the government,most people would probablychoose to
leave their estates to charitableorganizations.But even if they did, the
advantage of lessening our tax burden would not be lost, for if vast
amountswere given to charitableorganizations,these organizationscould
be expected to fund much of the welfare, medical research, scholarships
for the poor, aid to education, and so on, that must (or should) now be
funded by the government, thereby lessening our tax burden not by
increasing governmentalrevenues, but by decreasing governmentalexpenses. And charitableorganizationswould become, even more than they
20. Society must not, of course, forget about orphans, and other dependents, of the
relativelypooreither; they should be adequatelyprovidedfor somehow by the state. Yet it
might be prohibitivelyexpensive for the state to care for orphansof the poor at the level
of luxury at which this exception to the abolishmentof inheritance would allow orphans
of the rich to be caredfor,thus raisinga questionof fairness.But if we accept the proposition
that (since we do not want to abolish the family) it is justified for the children of the rich
to live in moreluxurythan those of the poorwhile theirparentsarealive,then it is reasonable
for us to allow this higher standardto continue even if these parents happen to die. It is
usually traumaticenough for a child to have to adaptto the death of both parents without,
at the same time, having to adaptto an altogetherdifferentstandardof living as well.
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Philosophy & Public Affairs
are today, a healthy counterbalanceto the power of governmentin these
areas.
Among the objections to abolishing inheritance is that it would serve
to dry up charitable giving and, indeed, leave our charitable instincts,
which are among our most noble, with no (monetary) ways of being
expressed. But with the unlimited exception for charitable giving built
into this proposalfor abolishing inheritance, charitable giving, far from
drying up, would actually increase, and increase significantly. Thus the
effect of this proposalupon charitable giving, far from providingan argument against abolishinginheritance, actuallyprovidesan argument in
favor of it.
With a specific proposalnow before us, let us begin our survey of
(i)
objections to abolishing inheritance with the one that is weakest: the
objection that abolishing inheritance would be a violation of property
rights. The trouble with this objection is, quite simply, that it begs the
question. Propertyrights are not normallyviewed as being unqualified,
nor certainly should they be. On the contrary,propertyrights normally
are, and certainly should be, viewed as having built into them a number
of qualificationsor exceptions: an exception for taxes, an exception for
uses which pose a danger of injury to others, an exception for eminent
domain, and so on. As pointed out at the very beginning, the purpose of
our investigation is precisely to determine whether we should recognize
still another exception to propertyrights-an exception in the form of
abolishing inheritance-or whether, instead, propertyrights should incorporatethe practiceof inheritance.Obviouslywe cannot determinethis
simply by slamming our fists on the table and insisting that property
rights do allow inheritance, that abolishing inheritance would be a violation of propertyrights. The only way to determine whether property
rights should incorporatethe practice of inheritance is the way we are
proceeding here, the hard way: by patientlyexamining, one by one, the
various pros and cons of abolishinginheritance and then, in light of this
examination, making as accurate an overallassessment as we can.
And lest my opponent claim this to be merely an appeal to utilitarian
considerationsand hence (in his view) illegitimate,let me hasten to point
out that the "prosand cons" of which I speak need not be limited merely
to utilitarianconsiderations.Considerationsof right (other than the very
one in question), of obligation, of (nonutilitarian)value, or of anything
I4I
Is Inheritance
Justified?
else, would all be welcome additions to the debate, as far as I am concerned. The only thing not welcome is a demand that we merely accept
my opponent'sview of propertyrights without question.
(2) Let us turn next to the reason Milton Friedman supports inheritance, and does so in spite of the fact that, as we have seen, it is incompatible with the values he himself says underlie capitalism.21And, incidentally, Friedman is not alone in finding this particularobjection to
abolishinginheritance convincing;others who do include RobertNozick,
and F. A. Hayek.22 The argument upon which this objection is based
proceeds somewhat as follows. Inheritance of property("material"inheritance) is not the only source of unequal opportunity.Some people,
for example, gain an unearnedadvantageover the rest of us by inheriting
from their parents a beautifulsinging voice, or keen intelligence, or striking good looks ("biological"inheritance). If we allow people to enjoy
unearned advantagesfrom biologicalinheritance, so the argument goes,
it is only fair that we allow people to enjoy unearned advantages from
material inheritance as well. We are told, in effect, that if we continue
to allow one kind of unearned advantageto exist, we are, in all fairness,
committedto allowingall other kinds of unearned advantagesto continue
to exist also.
The fallacy in this way of arguing should be apparent.One might just
as well insist that racial discriminationis justified by arguing that, because we allowunearnedadvantagesresultingfrombiologicalinheritance
to continue to exist, we are,in all fairness,thereforecommittedto allowing
unearned advantagesresulting from racial discriminationto continue to
exist also. To be sure, we do "allow"uneamed advantagesresulting from
biologicalinheritance to continue to exist because, first of all, we cannot
eliminate them and, second, even if we could, we would not want to since
the costs of doing so would outweigh the benefits. Unearned advantages
resulting frommaterialinheritance,on the otherhand, can be eliminated.
Perhaps the costs of doing so outweigh the benefits here as well. But,
once again, we can determine whether this is so only the hard way: by
2i. Friedman,Capitalism & Freedom,pp. I63-64;
and Freedomto Choose,p. 136.
RobertNozick,Anarchy,State, and Utopia (New York:Basic Books,1974), pp. 23738; F. A. Hayek,The Constitutionof Liberty(Chicago:Universityof ChicagoPress, 1960),
pp. 9o-91. Cf. John Rawls,A TheoryofJustice (Cambridge,MA:HarvardUniversityPress,
22.
1971), p. 278.
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Philosophy& Public Affairs
a careful and patient investigation into what the pros and cons actually
are. We must not be dissuaded from this task by the above quick, but
fallacious argument with which Friedmanand others tempt us.
(3) Let us turn now to some objectionsof a more practicalnature. The
first of these is that, regardless of whether abolishinginheritance is justified or not, the simple truth is that Americansare solidly against doing
so; therefore our discussion is a waste of time. The reply, of course, is
that, unless popular opinions are sometimes challenged, how, after all,
can we ever make any progress?What if, for example, just because the
public was against it, no one in the South a century ago had been willing
to consider whether abolishing slavery was justified? If abolishing inheritance really is justified, chances are the public will eventually come
to favor it; but the first orderof business, clearly, is to decide if it really
is justified.
But we must not dismiss this practicalobjection too quickly; this objection is related to still anotherpracticalobjection,one that does deserve
to be taken seriously:the objectionthat a ban on inheritance could never
be adequately enforced. Some would argue that, by secret Swiss bank
accounts, bogus exchanges, fake salaries, and simply by passing money
under the table, large gifts could be made at any time in spite of a law
abolishing them. Therefore,it would be concluded, no matter how justified the abolishment of inheritance might be, any law to that effect
would be a futile gesture; as the sophomoreis fond of saying, it might
be good in theory, but would never work in practice.
Yet would a ban on inheritance actually be unenforceable?The possibility of gain through illegal gifts exists with current American estate
and gift tax law. Nevertheless, governmentalinvestigatorsdo succeed in
uncovering such gifts often enough for successful enforcement. The
reports of courts that handle tax litigation are filled with such cases.
Successful enforcement of this law suggests the governmentcould, similarly, enforce a law abolishing inheritance.
But, it may be replied, current estate and gift tax law provides the
wealthy with so many legal means of avoidancethat (providedonly that
they are willing to hire a clever attorney) illegal means are not even
necessary. A law abolishinginheritance,one not so easily avoidedthrough
legal means, would be an entirely different matter. With it, the "need"
to resort to illegal means would be far greater and, therefore, so would
the difficulties of enforcement.
I43
Is Inheritance
Justified?
There is, no doubt, some truth in this reply. But so far we have overlooked an importantfactor: enforcement through informal social pressure, as opposed to fonnal governmental pressure. And by "informal"
social pressure, I mean more than just the pressure that potential social
disapprovaland ostracism exert upon us; I mean also the pressure our
early training and social conditioning exert on us, a pressure so great
that most of us would not violate most laws even without any governmental enforcementof them. I doubtif governmentalenforcement would
be adequate enforcement for many laws without social pressure to go
along with it. Take, for example, the legal prohibition upon alcoholic
beverages in Americawhich, in spite of intensive governmentalenforcement, failed, and did so primarilybecause of a lack of popular support
or, in other words, a lack of informalsocial pressure for compliance with
the law. On the other hand, with the help of informal social pressure, I
doubt if there are many laws the government could not enforce adequately, even if the government'srole amountedto mere tokenism. Take,
for example, currentincome tax law; in spite of possibilitiesfor cheating
that rivalthose of a law abolishinginheritance, this law does, for the most
part, work; and it works because, although few agree with the details of
the law, most believe that, in principle, an income tax is justified. And
if most people believed a law abolishing inheritance was justified then,
through a combinationof governmentpressure and informalsocial pressure, this law likewise would, I think, work well enough.
This, however, is where the fact that most people currently do not
think such a law would be justified becomes relevant. Since most people
currently do not think such a law would be justified, that such a law
could be adequatelyenforced at the present time is indeed doubtful.And
if it could not be adequately enforced, I must conclude that, currently,
no such law should be passed. Except where absolutely necessary in
order to protect minority rights, the imposition of extremely unpopular
laws upon an unwilling public has no place in a democracy.
None of this, however,must be allowedto obscure an equallyimportant
point: the strength of a democracydepends upon there being the freedom
and willingness to question the status quo, to constantly seek a better
way. Although currently a law abolishing inheritance appears to have
little public support,if such a law really is justified, except for currently
having little public support, I believe the necessary public support will
eventually come-provided we remain willing to question the status quo.
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Philosophy & Public Affairs
So in asking here whether or not abolishinginheritance is justified, I am
asking whether or not, aside from current public opinion, it is justified.
(4) We turn next to what is, I suppose, the most common objection
to abolishing inheritance: the objection that, if people were not allowed
to leave their wealth to their children, they would lose their incentive to
continue workinghard, and nationalproductivitywould thereforefall. In
spite of the popularityof this objection, all the availableevidence seems
to indicate the contrary.For example, people who do not intend to have
children, and thereforeare obviouslynot motivatedby the desire to leave
their children a fortune, do not seem to work any less hard than anyone
else. And evidence of a more technical nature leads to the same conclusion: people, typically,do not need to be motivated by a desire to leave
their children (or someone else) great wealth in orderto be motivatedto
work hard.23
Common sense tells us the same thing. The prospect of being able to
leave one's fortune to one's children is, no doubt, for some people one
factor motivating them to be productive.But even for these people, this
is only one factor;there are usually otherfactorsmotivatingthem as well,
and motivating them to such an extent that, even if inheritance were
abolished, their productivitywould be unaffected. Take, for example,
professional athletes. If inheritance were abolished, would they try any
less hard to win? I doubt it. For one thing, abolishing inheritance would
not, in any way, affect the amount of money they would be able to earn
for use during their lives. So they would still have the prospect of a large
income to motivate them. But there is something else which motivates
them to do their best that is, I think, even more important, and is not
dependent on money: the desire to win or, in other words, to achieve that
which entitles them to the respect of their colleagues, the general public,
and themselves. Because of the desire to win, amateur athletes compete
just as fiercely as professionals.Abolishinginheritance would in no way
affect this reason for doing one's best either. Athletes would still have
the prospectof winning to motivatethem. Businessmen, doctors,lawyers,
engineers, artists,researchers-in general, those who contributemost to
See, forexample,D. C. McClelland,TheAchievingSociety (Princeton:Van Nostrand,
pp. 234-35; and SeymourFiekowsky,On the EconomicEffects of Death Taxation
in the United States (unpublished doctoraldissertation,HarvardUniversity, I959), pp.
23.
I96I),
370-7I.
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Is Inheritance
Justified?
society-are not, with respect to what in the most general sense motivates
them, really very different from professional athletes. Without inheritance, these people would still be motivatedby the prospect of a sizable
income for themselves and, probablyeven more so, by the prospect of
"winning;"that is, by the prospectof achieving, or continuing to achieve,
that which entitles them to the respect of their colleagues, the general
public, and themselves.
But even if abolishinginheritancedidlessen incentive by leaving people
with no motivationto accumulate for their children, it would, in another
respect, increase incentive. This can be illustratedby the often used race
analogy. Considertwo differenthundred-meterraces between Jones and
Smith where, in the first race, Jones is given a fifty-meter head start
while, in the second race, they start even. In which of these races will
each be most likely to run his fastest? The answer, of course, is race two.
In race one, Jones will figure that even if he does not run his fastest, he
will win, while Smith will figure that even if he does run his fastest, he
will lose; so very likely neither will run his fastest. What is true in this
example is probablytrue in the "game of life" as well: the more equal
people's starting points, the more incentive they will have to try hard.
Since abolishinginheritancewould do much to equalize people's starting
points, it should, in this way, increase people's incentives. And this increase, attributableto more equalityof opportunity,would, I should think,
more than make up for any decrease in incentive attributableto having
no one to leave one's fortune to-if, indeed, there were any such decrease.24
(5) We come now to the most technical and, potentially, the most
serious objection to abolishinginheritance:the objection that this would
24. GordonTullock claims that a better way to redistributeincome and wealth than
abolishing inheritance would be a direct tax on either income or wealth. See Tullock,
"InheritanceJustified,"The Journal of Law and Economics(October I97I). But, if I am
right, abolishinginheritancewould not, in general,decrease people's incentive to be productive (on the contrary,it would probablyincrease incentive); whereas the same cannot
be said of Tullock'smethodof still greaterincome taxes, or of a substantialtax upon wealth.
In any case, Tullockfails to realize that by no means is redistributionthe only, or even the
main, goal of abolishinginheritance;another goal, for example, is greaterequality of opportunity(i.e., "startingplaces"that are moreequal).Any tax upon income or wealth which
still permittedvast sums to be inheritedfrom varioussources would not be as successful
as abolishinginheritance,or as a modest quota (see below), in accomplishingthis goal.
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cause a substantial decrease in savings and investment, thus causing a
serious reduction in capital which, in turn, would erode our standardof
living.25Abolishinginheritance, it is said, would reduce savings for two
reasons. First, by breakingup large fortunes,it would reduce the number
of people whose wealth far exceeded their capacityto consume, and who,
therefore, were able to sink vast amounts into savings and investment.
Without these vast amounts going into savings and investment, it is
argued, overallsavings and investment, and thus capital,would go down.
Secondly, it is said that, not only would abolishing inheritance reduce
people's capacity to save by breaking up large fortunes, it would also
reduce people's incentive to save. Although, as we have seen, abolishing
inheritance probablywould not significantly affect people's incentive to
produce, their incentive to save might well be affected. If people could
not leave their wealth to theirchildren,then ratherthan leave it to charity,
or to the government, they might well decide to consume it instead. In
short: abolishing inheritance would shift people's consumption-savings
pattern more in the direction of consumption.
These points, although probablywell taken, should not be exaggerated.
Abolishinginheritancewoulddistributewealth more evenly, the relatively
few enormous fortunes of todaybeing replaced,in part, by a larger number of moderatefortunes. Thus any slack in investment attributableto a
decrease in the size of the fortunes of those with enough to invest substantial amounts would, to some extent, be taken up by an increase in
the number of people with fortunes large enough for them to invest
substantial amounts. And people's motives to save and invest would certainly not evaporate altogether with the abolishment of inheritance.26
25. GordonTullocksays that, for economists, this has been, traditionally,the "principle"
objection to abolishing inheritance (yet it is not an objection Tullock himself makes).
Although it is what he calls the principleobjection,he says the point has not been made
as stronglyin the literatureas one might expect. Ibid., p. 465, n. i. Nevertheless, Tullock
goes on to say, it is discussedin G. E. Hoover,"TheEconomicEffects of InheritanceTaxes,"
AmericanEconomicReview17 (1927): 38-49; andAlvinH. Johnson,"PublicCapitalization
of the InheritanceTax,"Journal of Political Economy22 (I914): i60-8o.
26. Of the respondentsto a study carriedout in I964, around97 percent with incomes
under $io,ooo did not mention bequest as a motive for saving, 8o percent with incomes
about
over $io,ooo did not mentionit, and, even amongthose with incomes over$300,000,
50 percent did not mention it. Robin Barlowet al., Economic Behavior of the Affluent
(Washington,D.C.: BrookingsInstitution,I966), pp. 3I-33. From this study, we see that
most people, even most of those with very high incomes, do indeed have motivesfor saving
other than that of leaving money to others.
I47
Is Inheritance
Justified?
People would, of course, still want to hold something back for a "rainy
day." People would still want to save for their retirement (and no one
knows for how many years one will need to be covered).27Investments
would still remain attractiveaside from the savings motive; they combine
the excitement of a gamble with the satisfactionof doing what is socially
useful. And many people, especially the more wealthy, would still want
to save for charitablepurposes; to have a scholarship or perhaps a university building named after them, to supportmedical research, or even
to establish a charitablefoundationto carryon with some projectin which
they deeply believe. Anotherpoint to keep in mind is that most corporate
investment-and corporateinvestment constitutes a large percent of total
investment-is generated by corporateincome. Given the separationbetween ownership and management in large corporationstoday, it is unlikely that management would be influenced by the abolishment of inheritance to reduce the percentage of corporateincome used for the
replacement of capital and new investment. Indeed, if private funding
became increasingly scarce, funding from corporateincome might well
take up some of the slack. In short, no one really knows for sure exactly
how abolishinginheritance would affect savings and investment, but the
effect might turn out to be far less than some critics think.
However the most importantreply to the investment objection is this:
even if abolishing inheritance significantly reduced investment, countermeasuresto increase investment-and to do so at relativelylittle costare readily available.These countermeasurescan be classified as either
direct or indirect. Indirect methods include, for example, reducing the
availabilityof consumer credit,requiringfull funding of all pension plans,
and taxing consumption.Directmethods, the moreinteresting of the two,
take the form of some sort of direct government subsidy of investment.
But, it should be emphasized, not even direct methods need be at the
cost of any governmentalmanagement of investments, which would be
the first step towardsocialism. Indeed, they need not even be at the cost
27. GordonTullock, "InheritanceJustified,"and RichardWagner, in Inheritance and
the State (Washington,D.C.: AmericanEnterpriseInstitute, I977), apparentlythink that,
without inheritance,there would be a rush to buy annuities. This may, or may not, be the
case. Peoplemay be morereluctantthan Tullockand Wagnerthink to partwith the control
of their wealth that these majorpurchases of annuities would entail. But, if there were a
large increase in annuity purchases, this itself might give rise to a new, major source of
investment:annuity companieslookingfor ways to invest the large sums suddenlyat their
disposal.
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Philosophy& Public Affairs
of any governmental selection of investments, something which most
supportersof the free marketwould find objectionablealso. For example,
the government could stimulate investment directly by guaranteeing all
loans to be used for creating new capital, the percent of the loan to be
guaranteed by law to be set at a figure no higher than necessary for
stimulating the amount of investment desired throughout the economy.
And by a requirement that the government not loan any money itself,
just guarantee all and only those loans which entrepreneurssucceeded
in procuringfrom independentinvestors and financiers, the government
could be precluded from ever selecting which investments to stimulate.
Anotherdirect method of stimulatinginvestment might take the form of
governmentalmatching funds where, for any amount an entrepreneur
is able to raise on his own, the governmentmatches it with some additional sum which would be set by law at whatever would be necessary
for stimulating the desired amount of investment.
At this point one might object that all direct methods, at least, have
one crucialdrawback:they wouldbe veryexpensive. Perhapsso. (It would
depend on how much of a need to supportinvestment, if any, the abolishment of inheritance gave rise to, something which, once again, we
have no way of knowing in advance.)We must remember,however, that,
by abolishinginheritance, the governmentwill experience either a major
new source of revenue (people's estates) or a major reduction in its expenses (attributableto a major increase in private charity). Either way,
the governmentis likely to end up with enough additionalfunds so that
these methods for stimulating investment, even if expensive, would not
require any major increase in taxation.
Further discussion of the details and relativemerits of different methods of stimulating,savings and investment is far beyond the scope of our
present investigation. The point is simply that, as Lester Thurow says:
"If more savings are desired, they can be had."28And, as we have seen,
they can probablybe had at relatively little cost, whether the cost be
measured in dollars,or in terms of governmentalinterference with freedom of investment. So, once again, we see that a major objection to
abolishing'inheritanceturns out, upon closer examination, to be unwarranted. But it is now time to turn to some objections that are warranted.
The only question is how serious these objections are.
28. Thurow, "TaxWealth, Not Income,"p. 107.
I49
Is Inheritance
Justified?
(6) First, there is the objectionabout administrativecosts. As we saw,
in order to prevent the government and charitable organizations from
eventually owning virtuallyeverything, they would be requiredto sell to
the highest bidderall real property,including shares in corporations,that
passed to them from people's estates. Administeringthese sales would
be a major and costly burden. Yet even today, with inheritance, much
of the propertyfrom most estates where there is no surviving spouse is
put up for sale. But these sales are conducted privatelyby the heirs of
the estates, the administrativeburdenthus being shared by many, rather
than falling upon the government. Of course if inheritance were abolished, not all of the burdenof selling propertyfrompeople'sestates would
fall upon the government either; numerous charitable organizations
would, together, shoulder much, if not most, of the burden. And the
decedents themselves can be expected to have sold more of their property
sometime before their death than they would have were inheritance allowed. But the government would probablystill have a sizable amount
of property to dispose of. This administrativeburden, along with the
additional burden of administering any subsidies for investments that
might become necessary, qualifies as a genuine disadvantageof abolishing inheritance.
(7) Finally,abolishinginheritancemight be objectedto on the grounds
that it deprivespeople of propertythat clearlywould have more value for
them than for others. Take, for example, precious family heirlooms. Although their monetary value for those within and outside the family is
the same, for those within the family they have, in addition to their
monetary value, a sentimental value as well. Abolishing inheritance, it
might be argued, would deprive families of these precious heirlooms,
allowing them to pass to others for whom they have far less value. But,
more serious yet, consider the son or daughter who has taken over the
family business or farm, and who has neither the training nor desire to
pursue any other occupation. Again, for such a person the business or
farm can be expected to have value far above the mere monetary value
it has for others; indeed, he or she may have built a whole life around
it. Yet abolishinginheritance would take the business or farm away from
this person and allowit to pass to someone for whom it had far less value.
The familyheirloomproblemseems less serious than that of the family
business or farm. According to the proposalfor abolishing inheritance
we are considering, if the decedent had providedfor it in his will, family
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Philosophy& Public Affairs
members would have a chance to buy any family heirlooms before they
went on the open market and, except for the most expensive heirlooms,
they would normallyhave the means to do so. If the decedent had provided
for it, a son or daughter would be given the same chance to buy a family
business or farm. But even with the ratherliberal credit terms built into
this proposal for sales to those specified by the decedent (io percent
down, and 30 years to pay the rest) probablymost sons and daughters
would not be in a strong enough financial position to take advantage of
this opportunity.
Yet it is importantto realize that even the familybusiness/farmproblem
is, today,ratherlimited in scope. There was a periodin Americanhistory
when disruptingoccupationalcontinuityfrom parent to child by abolishing inheritance would have had grave consequences for the nation as a
whole. Higher education, and other occupationaltraining,were not readily availablefor most people; more often than not, children learned their
occupation from their parents so as to carryon with the family business
or farm after their parents died. To disrupt this continuity by abolishing
inheritance, therebydeprivingvast numbers of people of the only job for
which they were adequatelyprepared,might well have been a national
economic disaster. Inheritance,in those days, might well have been one
of society's main devices for achieving continuityfrom one generation to
the next in the productionof goods and services.
But those days have long since passed-and, incidentally, I see little
reason for trying to resurrect them. Today higher education and other
forms of occupationaltraining are readily available;people are far more
mobile than before;children do not, for the most part,follow in the exact
footsteps of their parents anymore; and continuity from one generation
to the next in the productionof goodsand servicesis now achievedinstead
largely through the separationof ownership from management that is
found in today'slarge corporations.Disrupting occupational continuity
from parent to child by abolishing inheritance might have serious consequences for the limited number of children who would like to carryon
from their parents, but the number is indeed limited.
It might be pointed out, however, that the objection to depriving children of familybusinesses orfarms goes beyondjust the bad consequences
of doing so. This objection, so it might be said, also involves a matter of
justice; after a child has already built his or her life around a family
I51
Is Inheritance
Justified?
business or farm on the understanding that he or she will be able to
inherit it someday,for society then to change its mind, abolishinheritance
and take the business or farm away, would be unjust. I agree. But what
this proves is not that abolishing inheritance is unjust, but that if it is
abolished, its abolishment should not be applicable to those who have
already built their lives upon the understanding that propertycould be
inherited; rather, its abolishment should be applicableonly to those not
yet born, or too young to have been thus misled.29In sum, although the
potentialloss of family heirloomsand, even more so, of family businesses
and farms does seem to be another genuine disadvantageof abolishing
inheritance, this disadvantagedoes not appearto be overwhelming.
It is time now to take stock of where we stand. In the previous section
we found that inheritance is inconsistent with the ideal of distribution
according to productivity,with the ideal of equal opportunity,and probably with the ideal of freedom in the broad sense. Thus we began this
section with a presumptionagainst inheritance being justified. But this
was only a presumption;it could be overriddenif we succeeded in finding
objections to abolishinginheritance that were strong enough to outweigh
this presumption.In this section we have been examining the most common and most seriouspotentialobjections.Mostof them, however, turned
out, upon closer scrutiny, to be unfounded. The two objections that did,
in part at least, survive our scrutiny were the one concerning administrative costs, and the one concerning family heirlooms, businesses, and
farms. It remains only to ask whether these objections are strong enough
to tip the balance back in favor of inheritance.
It is impossible to determineexactly how great the administrativecosts
of abolishing inheritance would be. This, as we saw, depended on the
extent to which government would have to be involved in the sale of
propertyfrom estates, and the extent to which it would have to subsidize
investments, two matters that we cannot know in advance. There was
some reason to believe that administrativecosts might not be extensive.
But even if they were extensive, they would have to be far more so than
it is reasonableto believe they ever would be to overridethe presumption
29. The best way would be to abolish inheritance graduallyover a number of years so
as to avoid any frantic rush to have children before the "deadline,"and so as to avoid the
injustice of one child being able to inherit without restriction,while his younger sibling,
born after the "deadline,"can inherit nothing.
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Philosophy& Public Affairs
against inheritance. For this presumptioninvolves considerationsof justice and freedom against which mere administrativecosts should have,
I would think, relativelylittle weight.
But what about the second objection to abolishing inheritance: that it
would deprive families of family heirlooms and, more seriously, family
businesses and farms? In weighing the importanceof this objection we
need to keep in mind the main rationalebehind it: by abolishing inheritance, we preventpeople within the decedent'sfamilyfrom getting what
would have been of far more value to them (for sentimentalreasons, etc.)
than to those who do get it.30 No doubt abolishing inheritance would
redistributewealth so that some of its value would, in this way, be lost.
But to offset this loss would be a very significant gain in the value to
which this wealth, upon being redistributed,would give rise; a gain
attributable,as we saw in Section II, to the diminishing marginal utility
of wealth; to the fact that, other things being equal, the more evenly
wealth is distributed,the greaterits overallutility, or value. Indeed, this
gain would, I should think, morethan offset any loss attributableto family
businesses and farms going to those to whom they have less valueespecially since, as we saw, any such loss would be far less serious than
it would have been during an earlierperiodin Americanhistory.
So we must conclude, I think, that the family heirloom/business/farm
objection and the administrativecost objectionare not, neither by themselves nor combined, weighty enough to overrideour initial presumption
against inheritance. And even these two genuine disadvantagesof abolishing inheritance could, to a large extent, be avoidedby a certain tempting compromise proposalaccording to which gifts and bequests would
not be abolished,or even taxed, but instead a limit would be placed upon
the amount in gifts and bequests any one person could receive in a
lifetime. In other words, this proposal calls for the establishment of a
lifetime accessions quota.3'The key to this proposalwould, of course, be
30. In the case of family farms, there is a furtherrationale:by preventingpeople from
inheriting them, the farms will, in being sold, be fragmented into a number of small,
inefficientunits. The problemof fragmentation,however,does not appearto be veryserious;
if significant fragmentationdid occur, and did prove to be inefficient, it could easily be
remedied by some sort of legislationrequiringthat any farms sold by the governmentin
settling a person'sestate be (normally)sold only as a whole, and requiring(perhaps) that
any resale within a periodof, say, five years also be only as a whole.
31. A quota would be far superiorto a lifetime accessions tax: it is, first of all, simplera not insignificantadvantage!-but, even more importantly,a quota would indeed place a
I53
Is Inheritance
Justified?
the figure at which this quota was put. Any set figure, say $50,000, would,
due to changes in the value of the dollar, soon become outmoded. So,
rather than some set figure, it might be wiser to choose a figure that,
according to some predeterminedformula, would adjust itself automatically to changing conditions over the years. I would tentatively suggest
a figure equivalentin amount to the average dollarvalue (rounded off to
the nearest ten thousand) of all the estates of all Americanswho, at age
twenty-one or over, died during the five years previous to the year in
which the quota is to be applicable.This figure would, I think, make the
quota modest enough so as not to compromise unduly the advantages
that could be achieved by abolishing inheritance altogether (immense
concentrationsof economic power would still be broken up, wealth, and
therefore opportunity,would still be distributedmore evenly, etc.). Yet,
on the other hand, this quota would be large enough so as to avoid, for
the most part, the administrativecosts of abolishing inheritance. Relatively few people would have estates larger than, say, five times the
average, and since most people would know at least five eligible people
to whom they would want to leave their wealth (children, grandchildren,
nephews, nieces, close friends, loyal employees, and the like), relatively
few estates would thereforerequire any more from the governmentthan
an appraisalof assets, something which the government already does
under current estate and gift tax law anyway. And many people would
have a motive for saving and investment they would not have if inheritance were abolished-this motive being that of leaving wealth to these
individuals. Finally, this quota would be large enough to significantly
alleviate the family heirloom/business/farmproblem as well.
One final point: if, through either abolishinginheritance altogether or
establishing a modest quota, family members could not inherit or buy a
valuable business or farm upon the owner's death, then it might be
bought, jointly, by the employees of the business or farminstead. A large
number of employees, by splitting the financial burden among themselves, could perhapsaffordto purchase a valuablebusiness or farm while
a small number of family members could not-especially in view of the
fact that, whatever profitshad previouslygone to the decedent would, if
the employees purchased his interest, now go to them, thus increasing
ceiling, as a tax wouldnot, upon how much any one personcouldreceive fromall sourcesthe lack of any definite ceiling being perhapsthe most insidious loopholeof all.
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their salaries to the point where they might well be able to handle the
monthly payments. Furthermore, the government could, and I think
should, encourage joint purchases by employees with "supportivelegislation"designed to make such purchases easier by granting emnployees
very favorablepurchasing terms. (In returnfor these favorableterms the
governmentcould requirethat allfuture, full-time employees be required
to purchase an equal share as well, so that the establishment would then
never have "secondclass citizens.")As joint owners, workerswould have
some control over their own destiny; they would periodicallyelect management; they would share in profits and losses; they would, in short,
enjoy what may be referredto as "workers'democracy."This democracy
would not, of course, be a "direct,"but rather a "representative"one,
where the elected managers-normaRlyhighly trained, and highly paid,
professionals-would be in full charge of everyday affairs (just as in a
political democracy), yet answerable, ultimately, to the workers. I am
inclined to think most workers'democracies would be highly desirable.
The potential gains from such arrangementsare considerable: they include a decrease in worker alienation, an increase in the tolerabilityof
working conditions, and a greater share for workers in the profits from
their own work.32In general, the gains to be realized in going from a
"totalitarian"business establishment to a workers' democracy parallel
those in going from a totalitarianstate to a political democracy.If either
abolishing inheritance altogether or establishing a modest quota, combined with the right kind of supportivelegislation,did succeed in creating
a gradual, and voluntary, evolution toward workers' democracies, this
would, I suggest, be a significant bonus.33
Throughout the world today, capitalismis on the defensive. Its many
enemies point to the extreme inequalities of wealth it generates, to the
shameless inequalities of opportunity,and they ask if such a system
32. Formoreon the potentialgains,see DavidSchweickart,Capitalismor WorkerControl?
(New York:Praeger,I980).
33. RonaldChesterbelieves that any reformin inheritancelaw that would greatlyreduce
the vast inequalities of opportunityattributableto inheritance today might provide yet
another bonus. Chester writes that "numerousobservers,including J. B. Mays (who is
British) and Americanssuch as E. H. Sutherlandand Daniel Bell believe that preaching
equal opportunitywithout its fulfillment has made Americansocial structure powerfully
criminogenic."Chester,Inheritance,Wealthand Society(Bloomington:IndianaUniversity
Press, I982), p. I6I. So greatlyreducing these vast inequalities of opportunitymay, he
argues, pave the way towardsignificantreductionsin propertycrime.
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Is Inheritance
Justified?
deserves to survive. Frankly,I am not sure it does. Yet it is a system with
virtues as strikingas its deficiencies: it is extraordinarilyproductive,and
it generates importantfreedoms.34A system with so much going for it is
worth trying to remedy from within. This will, I think, require major
changes, not the least of which will be to unburden capitalism of an
outmoded practice of inheritance.
34. On the relationshipbetween capitalismand certainfreedomssee, for example, Friedman, Capitalism & Freedom,especiallychap. i.