Bryan Caplan  

The Improvident Rich

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From Larry Summers' review of Piketty:
When Forbes compared its list of the wealthiest Americans in 1982 and 2012, it found that less than one tenth of the 1982 list was still on the list in 2012, despite the fact that a significant majority of members of the 1982 list would have qualified for the 2012 list if they had accumulated wealth at a real rate of even 4 percent a year. They did not, given pressures to spend, donate, or misinvest their wealth. In a similar vein, the data also indicate, contra Piketty, that the share of the Forbes 400 who inherited their wealth is in sharp decline.
HT: David Levey


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COMMENTS (9 to date)
Chase writes:

This could just as easily mean others close to their wealth made a higher return during that time and bumped those down the list. One would have to look at their actual wealth not their wealth compared to other billionaires.

Ben Kuhn writes:

Chase, no, the quote specifically counters that point:

...despite the fact that a significant majority of members of the 1982 list would have qualified for the 2012 list if they had accumulated wealth at a real rate of even 4 percent a year.

So they must have been earning a low rate of less than 4 percent.

Steve Sailer writes:

Here's a study of the % of inherited wealth on the Forbes 400 from 1982-2011:

https://www.vdare.com/posts/forbes-400-analyzed

Keep in mind, though, that few great fortunes were made in America in the middle of the 20th Century, so it's only natural that the 1982 list was heavily made up of scions of pre-1929 wealth.

Dan S writes:

[Comment removed for irrelevance and pending possible edit.--Econlib Ed.]

Hugh writes:

The thing I find surprising in the Piketty debate is that there is relatively little attention being paid to people at the bottom of the scale - it's all about the very few uber-wealthy.

Surely it would be more productive to think of ways of making the poor richer. I would like to propose two areas for study:

1) Policies that would help the poor take the first step towards wealth accumulation - staying out of debt (sorry Wall Street!). ;

2) Policies (enforceable and enforced) that would limit the number of immigrants so as to allow the indigenous poor a better chance of gaining meaningful employment and thereby wealth (sorry Bryan!).

Arthur_500 writes:

I have to ask the question, "Who cares?"

We can't make the poor not be poor because someone always is at the bottom of the scale so it is impossible to eliminate the bottom.

We can't eliminate those who make poor life choices so there will always be those who shoot themselves in the proverbial foot.

We rely on gubment to solve the world's problems when, in fact, it remains the biggest impediment to any forward progress.

Let's eliminate Social Security and replace it with a gubment mandated retirement savings program that works along the lines of the current system. All that cash would remain in the economy and individuals would have a safety net in their later years. In addition, excess accumulated retirement wealth could be passed on to their children.

Hugh, I regret I think your ideas are short-sighted and eliminating the poor is like only drinking out of the top of a drinking glass.

Peter H writes:

It doesn't look like the Forbes comparison accounts for the most widely expected reason to stop being on the list 30 years later - death. This seems like a pretty glaring oversight. In fact, it's surprisingly high that 10% of the world's richest people from 1982 are still alive*, let alone that they're still among the 400 richest people on Earth.

*Average age is 66 for the most recent list, and only 38/400 are under age 50.

http://blog.aarp.org/2013/09/17/the-forbes-400-americas-richest-by-generation/

LD Bottorff writes:

Piketty worries that r > g.

Personally, I'm more interested in living in a country in which r is high. I prefer living in Europe or the United States as compared to countries where r is low; for example Haiti, Cuba, North Korea, Bangladesh.

lemmy caution writes:

"2) Policies (enforceable and enforced) that would limit the number of immigrants so as to allow the indigenous poor a better chance of gaining meaningful employment and thereby wealth (sorry Bryan!)."

Halfway through the book but it seems, increasing immigration will decrease pickitty style wealth inequality according to his model.

The g factor is a combination of population growth and per capita productivity growth. The per capita productivity growth is fixed at about 1-2 percent for countries at the cutting edge which leave increasing population growth as one of the few ways to increase g.

Not sold on that idea.

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