Inheritance: An Historical Perspective
J. Bradford DeLong
University of California at Berkeley and NBER
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/
October 2001
preliminary and incomplete: conference draft: not for citation
2
Abstract
Inheritance loomed much larger as a component of each cohort’s wealth in
the past than it does today. Low rates of accumulation and relatively high
ratios of non-human capital wealth to annual income guaranteed that the
overwhelming bulk of wealth came through inheritance. Yet the use that
the pre-Industrial Revolution rich made of the inheritance system strikes
as us odd: they used it not to enhance the well-being of their descendants
as a group, but instead to try to maximize the social position of the
prospective head of the lineage—the line of descent of the eldest male.
Eighteenth-century America saw a sharp break with this Old World
pattern. Primogeniture remained the default rule longest in the South, but
even in the South it had vanished by 1800. Equal division (among sons at
least) meant that inheritance played a smaller role in the concentration of
wealth. And the dynamics of a rapidly-expanding settler economy meant
that inheritance played a smaller part in the wealth of any cohort.
The Gilded Age of the late nineteenth century in America saw a sharp
upward leap in the concentration of wealth accompanied by a substantial
increase in the capital intensity of the economy. Thus inheritance became
more salient, yet it remained embarrassing. The Lockeian argument that
John D. Rockefeller had earned his fortune by the sweat of his brow and
his acts of Schumpeterian entrepreneurial vision (plus the distribution of
well-laced sums to the members of the Pennsylvania legislature) did not
apply to the fortunes of his children. Hence the coming of social
democracy to America was accompanied by high notional statutory rates
of tax on inheritances.
The past year has seen another turn of the wheel, and legislative changes
that promise the end of inheritance “Death Taxes” in less than a decade.
Whether they are a temporary change or a permanent shift in Americans’
attitude toward the legitimacy of large inheritances remains to be seen.
DeLong, “Inheritance: An Historical Perspective”
Conference Draft, October 2001
3
I. Introduction
In the pre-Industrial Revolution Old Days in the Old World, inheritance was of decisive
importance to every rich lineage. Low rates of net saving meant that the overwhelming
bulk of the wealth holdings of any cohort came through inheritance (or inter vivos
transfers). A primogeniture-based inheritance system designed to concentrate wealth in
the line of descent of the eldest male led to substantial concentration of wealth. To the
pre-Industrial Revolution rich, the stakes of the inheritance game were very large and the
prizes very uneven. How well one manipulated the inheritance system was nearly the
only first-order factor in whether one’s children rose or fell in the ranking of wealth and
status.
The shift to the New World transformed inheritance. A shift in perceptions of the purpose
of inheritance transformed primogeniture (nearly everything to the eldest male) to
multigeniture (equal division among the children—or at least among the male children).
The shift from a land-scarce, slowly-growing economy to a land-rich, rapidly-growing
frontier-settler economy made inheritance of much less importance as a determinant of
one’s peak wealth accumulation. A society dominated by inheritance of place and wealth
was replaced by one dominated (in theory, at least) by thrift and industry.
The Industrial Revolution in America brought still further changes in how inheritance
worked. Large increases in the economy’s capital intensity and an extraordinary rise in
the concentration of wealth during the Gilded Age raised the salience of inheritance as a
determinant of the distribution of wealth if not as a determinant of the total wealth of any
cohort. Yet the passing-on of the Rockefeller, the Mellon, and lesser fortunes did not fit
with the ideology of America as a land of equality of opportunity, or indeed with the
justification of the Gilded Age fortunes as the results of acts of bold foresight and
Schumpeterian innovation.
DeLong, “Inheritance: An Historical Perspective”
Conference Draft, October 2001
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Thus the coming of social democracy to America brought with it high notional statutory
rates of tax on inheritance: the standard Lockeian arguments did not seem to establish a
right to this particular form of property. Yet the standard legislative dynamics that give
concentrated interest groups a good chance of rewriting the legislative fine print in their
favor worked to make inheritance taxes largely ineffective as social devices for wealth
equalization and redistribution.
In this context it is interesting to look forward to the effects of the recent legislative
changes that promise the end of the “death tax” in less than a decade. The sharp rise in
income and wealth inequality in the 1980s and 1990s raised the salience of the
inheritance taxes among those who might wind up paying them. The relative
ineffectiveness of existing inheritance tax law meant that the revenue losses from
inheritance tax repeal were not large. Nevertheless, it remains odd that the bold assertion
that one of the rights of Americans was to inherit a large fortune did not call forth the
same ideological counterreaction that the transmission of the large fortunes of the Gilded
Age had.
It remains to be seen whether this legislative episode is just a temporary blip, or marks a
permanent shift in how Americans view large-scale inherited wealth.
DeLong, “Inheritance: An Historical Perspective”
Conference Draft, October 2001
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II. Pre-Industrial Patterns
The Transmission of Wealth
Before—and to a lesser extent during—the Industrial Revolution, the intergenerational
transmission of wealth in general and inheritance in particular played a much larger role
than it does today in the distribution of wealth, and thus in the distribution of economic
(and often political) power. In fact, it is not too much to say that inheritance was the
crucial factor determining the distribution of wealth. Societies before the Industrial
Revolution saw shorter life expectancies and generation lengths. They saw a ratio of nonhuman capital wealth to production that was surely not less than is seen today. And they
saw extraordinarily low rates of net capital accumulation. These three features of preindustrial societies together guaranteed that inheritance was the single first-order factor
affecting the wealth of any particular cohort.
Rates of population growth in Eurasia in the 1500-1800 period averaged perhaps 0.25
percent per year (see Livi-Bacci (1992)). Moreover, that low rate vastly outstripped
average rates of population growth found in pre-1500 eras. Our guesses of average rates
of growth in output per worker over Eurasia in 1500-1800 are in the range of 0.12 percent
per year. This is an upper limit, for any faster rate of growth over that period would
require that standards of living in the first half of the last millennium have been at levels
too low to support human life (see Pritchett (2000)).
At a society-wide reproducible capital-to-annual-output ratio of 2:1, such rates of growth
imply net investment shares of 1.5 percent of output. At a society-wide reproducible
capital-to-annual-output ratio of 3:1, such rates of growth imply net investment shares of
2.2 percent of output. The conclusion is inescapable: except in those few pre-Industrial
Revolution economies experiencing extraordinary mercantile booms in trade and
population (like fifteenth-century Venice, seventeenth-century Amsterdam, or eighteenth-
DeLong, “Inheritance: An Historical Perspective”
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century London), the accumulation of capital through net saving was simply not large
enough to be an important component of any cohort’s wealth.1
Where did the wealth of a rising cohort come from? It came from inheritance: inheritance
made a contribution more than an order of magnitude larger to the wealth of each cohort.
Inherited wealth included not just the reproducible capital of society, but its land
endowment as well. Inherited wealth included not just reproducible capital and land, but
also rights of control and labor extraction—slavery, serfdom, indenture, metayage,
encomienda—as well.
1
Why were rates of investment so low? That they were low cannot be doubted. The
population history of humanity is well-known (see Livi-Bacci (1992)), and the nearstagnation of material standards of living and productivity for the bulk of the population
is recognized by an analytical tradition dating back to Malthus (1798), recently reinforced
by Pritchett (). Economic historians speculate that substantial rates of capital
depreciation, perhaps half again or more higher than today’s benchmark rate of four
percent per year, is half of the answer (see Clark ()). An absence of opportunities for
investments that paid high rates of return must be the other half, but why remains
obscure.
DeLong, “Inheritance: An Historical Perspective”
Conference Draft, October 2001
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Any estimates of the ratio of wealth to output in the average pre-Industrial Revolution
society are little more than guesses, but it is hard to see how the sum of capital, land, and
labor control rights can have amounted to less than four to six times society’s annual
output.2 Combining this ratio of wealth with short life expectancies and relatively early
ages of childbearing that suggest a generation length of twenty-five years (see reference),
inheritance and inter vivos transfers must have every year turned over to the receiving
2
It is important not to forget that inheritance transmitted not just wealth but poverty—
serfdom and slavery were inherited as well.
DeLong, “Inheritance: An Historical Perspective”
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cohort a net amount of wealth equal to between 16 and 24 percent of annual output. This
amount is more than ten times as large as the net contribution of net investment to wealth.
By contrast, today net investment is a more important component of a cohort’s wealth
accumulation than inheritance. We today have a real GDP per capita growth rate
averaging 2.5% per year, and with a population growth rate of 1.5% per year. Thus net
investment amounts to between 12% and 16% of total output. Today also sees somewhat
longer generations, and the absence of chattel slavery, indentured servitude, and serfdom.
(Partially offsetting this, however, are higher capital-to-annual output ratios: see
Abramovitz and David (1973).) Thus each year a sum of wealth amounting to perhaps
12% of a year’s total output passes to the receiving cohort via inheritance and inter vivos
transfers. This balance between accumulation and inheritance is in sharp contrast to the
more than 1:10 ratio of the pre-Industrial Revolution past.
It is no wonder that inheritance and ways to manipulate this intergenerational wealth
transmission system loom so large in the consciousness of the rich back before the
Industrial Revolution. Consider England, for example. Heroines of Jane Austen novels
seeking romantic happiness and material comfort search for husbands not among rising
merchants and manufacturers but among those who have inherited or will inherit large
fortunes (references). This bias arises not because of the author’ rural isolation, but
because even on the cusp of the Industrial Revolution there were few whose wealth came
from anywhere other than inheritance.3
Among the most important of the grievances that the successive English Parliaments had
with the Stuart Kings in the run-up to the English Revolution of 1640-1660 was the
Stuart dynasty’s use of the Court of Wards as a revenue source. The Court of Wards was
the administrative body the English crown used to supervise the estates of and find
3
The navy captain husband of Persuasion, whose rise in wealth and status is the result of
meritocratic advancement and the extraordinary financial rewards the British Admiralty
offered those of its captains who captured French ships, is the exception.
DeLong, “Inheritance: An Historical Perspective”
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spouses for heirs and heiresses who were underage. The crown had always used its
wardship powers as one of its tools to reward those who had served it well (references).
But the rationalization and bureaucratic exploitation of these supervisory powers in the
interest of raising money in the first half of the seventeenth century was regarded by
Parliament as one of the worst of all of the abuses of the Stuart Kings: it threatened to
strike deeply at the heart of the interests of the nobility and the gentry (references).
Looking further down the ladder of income and wealth does not appear to diminish the
relative importance of inheritance. Save in exceptional times like the immediate
aftermath of the Black Death, the salience of inherited land and buildings in the wealth
stocks of the middle classes and the poor was little less than among the rich. Indeed,
much demographic history relates the relatively high average age of first marriage found
among western European populations to the requirement that land inheritances had to be
received or at least promised before members of elder generations would allow the
marriage to go forward (see Livi-Bacci (1992)).
The Concentration of Wealth
The use that the rich of pre-Industrial Revolution societies made of the intergenerational
transmission of wealth and the inheritance systems they devised seems odd and
counterproductive to us today. In our view, one leaves bequests for one of two reasons:
either one has failed to accurately forecast one’s date of demise (and has for some reason
or another failed to annuitize one’s wealth), or one leaves bequests and makes inter vivos
transfers to make one’s descendants better off.4 The expectation is that one’s bequest will
be equally divided among one’s descendants: diminishing marginal utility of wealth
drives this default expectation.
4
But see Bernheim, Shleifer, and Summers (1986) for a theory of bequests as another
tool to be used in the within-family game of influence and control.
DeLong, “Inheritance: An Historical Perspective”
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Yet back before the Industrial Revolution the rule appears to have been different.
Consider, once again, the case of England. Under a common-law system, it is usually safe
to assume that the default legal rules enforced by judges tend to follow (perhaps with a
lag) standard and typical practices (see Cooter ()). And the default legal rule was not
equal division, but instead primogeniture: the unitary transmission of the bulk of the
property to a single heir, the eldest male in the line of descent. The implicit paternal
utility function appears to have focused not on making all of one’s children happy, but on
maximizing the social position and resources of the eldest male descendant.
The evidence—largely anecdotal, and not collected into statistically sound estimates—
suggests that a variety of considerations of sentiment and utility modified and softened
the application of the principle of primogeniture. Estates inherited from an extinct
collateral branch of the lineage might descend not to the already well provided for eldest
son but to a younger brother (references). Among the rich, marriage bargains would
frequently contain provisions assigning life estate interests to the widow—the mother of
the heir—allowing her substantial material independence (references). Dowries for
daughters were an expected charge (references).
Nevertheless, the force of primogeniture was strong enough to frequently override even
the material interests of the eldest male heir himself. Certainly by the eighteenth century
in England, a large and increasing proportion of landed property was coming to be held
under “strict settlements.” Under such a legal settlement, the head of the lineage was not
the owner of the property, but merely the holder of a life interest in the property that
would pass on his death to his eldest son. The eldest son would then be asked to continue
the “strict settlement”: to assign—before his father died—his ownership interest in the
property to his eldest male descendant, and to accept in his turn a life interest only in the
property after his father’s decease. Historians judge that by the middle of the eighteenth
century it was more likely than not that a piece of English property that passed in direct
line from father to son passed from one life tenant to another (see Clay (1968.
DeLong, “Inheritance: An Historical Perspective”
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Under such a “strict settlement” one’s right to do anything with the property other than to
live off of its rent is extremely limited. The property could not be sold—at most, only
one’s life interest in it could be sold. The property could not be “wasted”: the life tenant
had an obligation to turn it over in at least as valuable a condition as he had received it.
This was, in fact, the purpose of the “strict settlement”: to eliminate, as far as possible,
the right of any eldest male in the chain of lineage descent to do anything to dissipate the
property of the lineage. The aim of the inheritance game was not to boost the utility of
descendants, and not even to boost the utility of the heir, but to gather and maintain as
large and lucrative a property and fortune as possible in the hands of the eldest male line
of descent of the lineage.
The concentration of inheritance in the hands of the eldest son was not limited to the rich.
Among the peasantry, division of the limited amount of good farmland among multiple
descendants was the road to a slow death of one’s descendants by starvation (references).
Save in Kent (reference), the rule for the poor as well as for the rich was that the bulk of
property descended in a single bundle to a single heir. At all levels of society, both the
importance of inheritance in each cohort’s building-up of its wealth and the role of
primogeniture in the inheritance system were powerful factors tending to increase the
concentration of wealth.
DeLong, “Inheritance: An Historical Perspective”
Conference Draft, October 2001
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III. Colonial America
Before the end of the eighteenth century, Colonial America had already broken with these
pre-Industrial Revolution English patterns of inheritance along several important
dimensions. The first of these is the fall of primogeniture, and the end of the belief that
the purpose of inheritance was to maximize the social position of the lineage head down
through the generations. The second was the inescapable fact that a rapidly-expanding
frontier-settler economy would inevitably see inheritance rank far lower as a contribution
to the wealth accumulation of any cohort.
In England primogeniture had contributed to the concentration of wealth and the power
of the lineage head among the rich and to the maintenance of farm sizes sufficient to
support a family among the yeomanry. In the north of British Colonial America,
primogeniture vanished almost immediately upon initial settlement.
Alston and Schapiro (1984) speculate that the rapid disappearance of primogeniture in
northern Colonial America was the result of the need for large amounts of family labor to
clear land and establish farms. Younger sons would be more willing to remain and help
with the family project if they believed that they were likely to receive a share of the
property on their father’s death. By contrast, a presumption that primogeniture would
apply would send younger sons out in search of other economic opportunities at an earlier
age.
Evidence in favor of this speculation is relatively weak. It is true that some observers saw
this motive as a reason to shift from primogeniture to multigeniture. For example, Alston
and Schapiro (1984) quote seventeenth-century Governor Talcott of Connecticut as
saying that: “much of our lands remain yet unsubdued and must continue to do so without
the assistance of the younger sons, which in reason cannot be expected if they have no
DeLong, “Inheritance: An Historical Perspective”
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part of the inheritance…” But primogeniture remained the default legal rule in the
southern half of British Colonial America until the American Revolution.5
It seems more likely that the shift from an economy in which inheritance was the
overwhelming source of wealth acquisition by a cohort to one in which it was roughly
balanced by saving and accumulation played an important role in changing support for
primogeniture. As long as inheritance is the principal and overwhelming source of
wealth, division of the property among more than one (male) heir virtually guarantees
that all of one’s descendants will lose relative wealth and social position. Hence to the
extent that maintaining the dignity of the lineage is an important value, there will be
strong incentives to sacrifice the interests of younger sons to that of the prospective
lineage head. However, once it is possible for descendants to maintain their relative
wealth and status without relying almost completely on inheritance—as it is in a rapidlygrowing settler economy—then the factors that always limited and softened
primogeniture are likely to come into play.
The changed conditions of a rapidly-expanding settler economy also changed the way in
which Americans thought about such ideas as upward mobility. In pre-Industrial
Revolution England, upward mobility had been seen as something exceptional and
unusual. Class positions and relative economic standing was given by birth (or, rather, by
one’s prospective inheritance). But by the early nineteenth century, the view in America
was very different. Politicians like Abraham Lincoln would make the fluidity of class
distinctions a standard part of their speeches and visions. As Lincoln (reference) put it,
everybody started out as a laborer. And everyone could, with sufficient industry and a
small amount of luck, make something of himself: acquire property, learn a profession, or
5
Alston and Schapiro (1984) maintain that the southern attachment to primogeniture
arose from two reasons. First, the large-scale availability of slaves diminished the need to
tie younger sons to the property being developed in order to mobilize labor for land
clearing and improvements. Second, the staple export crops produced by southern slave
plantations were produced under substantial economies of scale. Hence there were extra
DeLong, “Inheritance: An Historical Perspective”
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build a business. In Lincoln’s words, “the man who labored for another last year, this
year labors for himself, and next year will hire others to labor for him.”
The divisions between rich and poor in the northern United States, in Lincoln’s view,
were much more a gap between the established and the young than a permanent gap
between those destined to be rich and those destined to be poor for their entire lives.
“Southern men declare that their slaves are better off than hired laborers amongst us,”
Lincoln wrote. “How little they know whereof they speak! There is no permanent class of
hired laborers amongst us. Twenty-five years ago, I was a hired laborer…
Advancement—improvement in condition—is the order of things in a society of equals.”
Lincoln’s view was surely idealized, and also out of date. In all likelihood, the top 1% of
households already held twice as large a share of total national wealth in 1860 as they had
in 1776 (see Jones ()). But Lincoln was not wrong in seeing that America’s rapidlyexpanding settler economy had fundamentally different dynamics of wealth distribution
and inheritance than England had possessed, or indeed that then existed in the
slaveholding American south, where rates of economic growth were lower and the
inheritance of slave property had its impact.
benefits from wealth concentration—and thus from inheritance rules, like primogeniture,
that favor concentration of wealth.
DeLong, “Inheritance: An Historical Perspective”
Conference Draft, October 2001
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IV. America in the Gilded Age
The coming of the Industrial Revolution to America brought two changes to the system
of inheritance. The first and less important was a substantial rise in the economy’s capital
intensity—its capital-output ratio (see Abramovitz and David (1973)). The second and
more important was a slow but sustained and large increase in the concentration of
wealth.
The increase in capital intensity meant that the economy’s ratio of wealth to income rose,
and so the potential amount of wealth to be transferred to rising cohorts through
inheritance rose. In terms of the sources of cohorts’ wealth acquisitions, however, this
was approximately balanced in late nineteenth-century America by a roughly equivalent
rise in the magnitude of net investment.
DeLong, “Inheritance: An Historical Perspective”
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The increase in wealth concentration had a more profound effect on the economy.
Estimates of the share of wealth held by the richest one percent of Americans on the eve
of the Revolutionary War center around 15 percent or so (see Jones ()). Between 1776
and the end of the Civil War the concentration of wealth increased. America in the
aftermath of the Civil War was, perhaps, a society whose wealth was as concentrated as it
was in the post-World War II era (references). Then came an enormous upward leap in
wealth inequality, carrying the concentration of wealth in the decade or so before World
War I to levels that have probably never been seen since. And in the years around and
after World War I, as the founding entrepreneurs, plutocrats, and malefactors of great
wealth of the Gilded Age died off, inheritance became an important issue not in terms of
its increased quantitative significance in the wealth acquisition of the rising cohort, but in
terms of the concentration of wealth (references).
The great fortunes of the Gilded Age were justified—by the fortune-makers both to
themselves and to others—as their just rewards in a Lockeian sense for the tasks that they
had accomplished. John D. Rockefeller had, it was said, earned his fortune. He had made
his money by the sweat of his brow and by his acts of Schumpeterian entrepreneurial
vision in grasping the extraordinary economies of scale potentially present in the
production and distribution of petroleum and petroleum products (leaving to one side the
distribution of well-placed sums to members of the Pennsylvania legislature). Leland
Stanford had earned his fortune by masterminding the construction of the transcontinental
railroad (never mind that the publicly-traded Central Pacific Railroad had vastly overpaid
for the construction services it bought from a company narrowly held by Leland Stanford,
Mark Hopkins, Colis Huntington, and Charles Crocker).
But the same Lockeian argument did not seem to apply to the fortune of John D.
Rockefeller, Jr., or to the other inheritors of the Mellon, Guggenheim, and other fortunes.
The way that Andrew Carnegie put it was that an extraordinary entrepreneur was
rewarded with an extraordinary fortune because his vision and enterprise had made him
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worthy of deciding on how such a fortune should be spent to better society. It was a
public trust.
This assessment of the value of inheritance was held even by some of those at the very
top of the Gilded Age wealth distribution. Consider the Prince of the Robber Barons,
Andrew Carnegie. As Andrew Carnegie puts it, “he who dies rich”—and leaves a fortune
to his heirs—“dies in disgrace.” Accumulated entrepreneurial wealth was a public trust to
be used for public betterment--hence the Carnegie libraries, endowments, buildings, and
universities scattered over America. Accumulated entrepreneurial wealth was not--or so
Carnegie thought--something that could be morally used to give your descendants a
cushy life. Carnegie applauded the "…growing disposition to tax more and more heavily
large estates left at death.” He saw this as a “…cheering indication of the growth of a
salutary change in public opinion.” In his view, “of all forms of taxation, this seems the
wisest.”
Thus the Gilded Age was characterized by two important considerations. The first was
the extraordinary upward leap in the concentration of wealth. The second was a belief—a
widespread ideological belief—that such concentration of wealth should not affect future
generations through inheritance.
DeLong, “Inheritance: An Historical Perspective”
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V. Social Democracy and the Estate Tax
This it should be no surprise that the coming of social democracy to America was
accompanied by the creation of an estate tax. Such a tax made sense in terms of
America’s underlying value of equality of opportunity: America’s upper class should be
made up of those who have been skillful and lucky in their deeds. Both in its initial
enactment and in its expansion, the federal estate tax drew remarkably little opposition or
ideologically-based dissent: it made sense to tax estates and inheritances (references).
Gradually, as wars and national emergencies came and went, the estate tax acquired
higher and higher notional statutory rates. The permanent6 (so far) estate tax was passed
in 1916 in an attempt to correct for the largely regressive impact of the then-existing
federal tax system.
The 1916 version of the estate tax had a top rate of 10%, which applied to estates over $5
million (in relative income terms, equivalent to roughly $500 million today). During
World War I the top rate was raised to 25%, and the top rate was then raised to 70%
during the New Deal. However, standard legislative dynamics often give concentrated
interest groups strongly affected by particular provisions a good chance of rewriting the
legislative fine print in their favor. In the case of the estate tax, these legislative dynamics
have worked over the decade to make the estate tax relatively ineffective as social
devices for wealth equalization and redistribution. It has been called “essentially
voluntary” for all except the very top wealth holders. Throughout the nearly a century
that it has been in existence, the U.S. estate tax has not been a significant factor either in
federal revenue or in affecting the distribution of wealth.
Instead, if it has had a function, its primary function has been as a statement that
“equality of opportunity” is a good thing to aim for—that wealth and economic power
should spring from one’s own accomplishments, and not from the fact that one has in
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some sense chosen the right parents. Its secondary function has been to put a moderatelysized obstacle in one channel for the intergenerational transfer of wealth and power.
The past year has seen another turn of the wheel, and legislative changes that promise the
end of the estate “death tax” in less than a decade. Just as at its creation, the estate tax
proposals drew remarkably little opposition and remarkably little ideological dissent
(references)—but this time there was little opposition to the estate tax’s repeal, and little
dissent based on the belief that the estate tax is a useful marker emphasizing the core
American value of equality of opportunity.
Does this represent a temporary change? Does this represent a permanent shift in
Americans’ attitude toward the legitimacy of large inheritances?
It may well be that it is the nineteenth-century American belief of Andrew Carnegie and
others that inherited wealth—especially large-scale inherited wealth—is somehow
illegitimate that is the unusual and temporary view. After all, Adam Smith (1759)
observed a tendency in human nature to identify with and applaud the happiness of the
rich and celebrated. In his view, “a stranger to human nature who saw the indifference of
men about the misery of their inferiors, and the regret and indignation which they feel for
the misfortunes and sufferings of those above them would be apt to imagine, that pain
must be more agonizing, and the convulsions of death more terrible to persons of higher
rank, than to those of meaner stations.”
Moreover, inheritance has always been one and only one channel for the
intergenerational transmission of “wealth,” broadly defined. The children of the well-off
benefit from material inheritances. But they also tend to receive more and better quality
schooling, and they are likely to benefit from cultural and (perhaps) genetic inheritances
6
There had been earlier, explicitly temporary, estate taxes passed to raise revenue during
the Civil War and the Spanish-American War.
DeLong, “Inheritance: An Historical Perspective”
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as well. “Choosing the right parents”7 would still have a profound influence on one’s lifechances, permanent income, and peak wealth accumulation even if there were no
inheritance of wealth at all.
As Bowles and Gintis (2002) point out, recent research suggests intergenerational
correlations for wealth and economic status in the range of 0.3 to 0.45—more than twice
what economists believed the degree of intergenerational transmission (through all
channels, of which the inheritance of material wealth is only one) to be at the time of the
writing of Becker and Tomes (1986).8 The sources of the relatively high correlations
between parents’ and children’s wealth and status are somewhat of a mystery.
7
As David Levine (2001) puts it.
Bowles and Gintis (2002) attribute earlier estimates of low degrees of intergenerational
transmission to be due to underestimates of the transitory component of current income,
and underestimates of the amount of measurement error present in survey respondents’
estimates of their parents’ incomes. See Solon (1992, 1999), Zimmerman (1992), and
Mulligan (1997).
8
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References
Andrew Abel (2001), “Will Bequests Attenuate the Predicted Meltdown in Asset Prices
When Baby Boomers Retire?” (Cambridge: NBER Working Paper 8131).
Moses Abramovitz and Paul David (1972), “The Great Traverse,” American Economic
Review.
T.S. Adams (1915), “The Effect of Income and Inheritance Taxes on the Distribution of
Wealth,” American Economic Review 5:1 (March), pp. 234-44.
Lee Alston and Morton Schapiro (1984), “Inheritance Laws Across Colonies: Causes and
Consequences,” Journal of Economic History 44:2 (June), pp. 277-287.
Orley Ashenfelter and Cecilia Rouse (2000), "Schooling, Intelligence, and Income in
America," in Kenneth Arrow, Samuel Bowles, and Steven Durlauf, eds., Meritocracy and
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Jane Austen (), Persuasion
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