Inheritance and Inequality

by Reihan Salam

Mike Konczal’s latest Wonkblog column sketches an “anti-rentier” agenda that has the potential to unite right and left, drawing on recent work by Michael Lind. There is much to admire in Konczal’s column, which does an excellent job of weaving together a number of themes that will be familiar to National Review readers, e.g., the importance of reforming copyright and patent laws, local land use regulations, and monetary policy to better reflect the interests of young firms, workers, and consumers rather than entrenched incumbent firms.

And Konczal also identifies tensions between what we might describe as the anti-rentier agenda of the right, which tends to focus on how state interventions serve the interests of incumbents and wealthy, influential individuals, and the anti-rentier agenda of the left, which is more concerned about the dangers of wealth concentration as such and the market power of firms that flourish in an open, lightly-regulated economy, due to first-mover advantages, network effects, and much else. Konczal, as a left-liberal, is fairly clear in expressing his preference for the anti-rentier agenda of the left, emphasizing the importance of “public regulation, public ownership, and public competition,” the latter of which refers to the idea of creating “public options” in various domains dominated by private provision.

Yet perhaps the most important point of tension Konczal addresses is over capital and inheritance taxation. Drawing on Thomas Piketty’s findings annual inheritance flow as a share of French national income, Konczal suggests that a robust anti-rentier agenda must make an effort to somehow reduce the intergenerational transmission of wealth. He also observes that conservatives are disinclined to embrace inheritance taxation, as they’ve traditionally understood inheritance “as an issue related to the right of the recipient to give something, or for people to do whatever they want with their property.”

I actually think that Konczal’s characterization is not quite right, but in a fairly subtle way. As the sociologist Dalton Conley has observed, building on an insight from the feminist political theorist Jacqueline Stevens, the transfer of wealth to children can be understood as a reflection of “pregnancy envy.” That is, because men cannot actually give birth to children, the issue of paternity uncertainty has played a deep role in our history. It has meant that men have tenuous roles within kinship structures and child-rearing when compared to women and mothers, and that they have tended to strengthen this role by controlling wealth and the intergenerational transmission of wealth. So: I may not have given birth to you, but I have it in my power to bequeath all of my worldly possessions. One possible explanation for changing norms around fatherhood in the U.S. and other affluent market democracies could be that paternity uncertainty is increasingly a thing of the past, and so, perhaps, is the insecurity that comes with it — an insecurity that has (arguably) tended to discipline and restrain men who seek recognition as fathers and providers. 

Conley explains that while in developing societies wealth transfers tend to flow from children to parents, as children work as subsistence farmers, etc., to keep the family afloat, wealth transfers flow in the other direction in more affluent societies, as individuals accumulate assets over a lifetime. Dangling the promise of an inheritance can allow adults parents to press adult children to provide for their emotional and physical needs. While this doesn’t necessarily sound very edifying, it is easy to see why people might have a gut reaction against inheritance taxes: according to Conley, allowing the intergenerational transmission of wealth within families is a way of affirming the private kinship sphere outside of the market. Moreover, it is a way of demonstrating that we as a society believe that the kinship sphere has existed long before the state and that intra-family allegiances and commitments should in at least some respects take precedence over the interests of the state. 

Note that this framework doesn’t necessarily preclude inheritance taxes of some kind. But it does help explain why opposition to inheritance taxes is often framed in terms of threats to family-owned farms and businesses.

One of the reasons I find a fixation on income and wealth inequality, as opposed to a focus on low absolute incomes and low absolute upward mobility at the bottom of the economic ladder, discomfiting is that income and wealth inequality have a powerful intergenerational dimension. This is true not just because of the intergenerational transmission of tangible assets, but also due to the intergenerational transmission of skills and sensibilities and, more concretely, relationships. Given the importance of social and cultural capital in allowing individuals to build wealth or, more broadly, to lead satisfying, full lives, a serious effort to mitigate relative inequality would have to, like the early Israeli kibbutzim, ultimately need to restructure family life, as the family remains, and will likely remain for the foreseeable future, the incubator of human capital. In contrast, there is much that we can do to improve absolute incomes and absolute upward mobility for very poor incomes that doesn’t redefine as a problem the fact that parents (particularly bourgeois parents) are inclined to do whatever they can to make their children robust against negative shocks.

This is not to suggest that efforts to mitigate inequality necessarily fall into this trap. Most modest efforts do not. Many left-liberals believe that early childhood interventions, for example, are a good way to facilitate the cultivation of noncognitive and cognitive skills in children raised in chaotic households, and that this will tend to improve labor market and educational outcomes for these children. Whether or not one believes such interventions are likely to be effective at scale, or rather that they are likely to prove more effective than other, lower-cost interventions, this concept will obviously not detract from the ability of affluent families to invest in their own children. Rather, what I have in mind are egalitarian campaigns against private and selective education and other “leveling” efforts that may well have perverse consequences. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.