I haven’t read the Piketty book. Even after I do read it, I won’t be able to add anything useful to the discussion, because I’m not an economist. That said, I will link to interesting reviews and discussions about the book and the topic.
Robert Kuttner at American Prospect talks about Piketty’s discussion of the superior power of inherited wealth. Piketty says that the super wealthy have better advisors than regular wealthy people and the rate of return on invested capital is higher than any normal salary.
While more fortunes were arguably “earned” in the period after the two wars, the tendency of unearned wealth to cumulate continued. Michael Kinsley, reviewing the original Forbes 400 of the early 1980s in The New Republic, calculated that all but 59 of the 400 fortunes were rooted either in inherited wealth, lucky timing, or government contracts. Piketty calculates that only about one-third of the current Forbes fortunes are primarily entrepreneurial.
Apt. 11d 
History AND money – geeking out over here…
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Many of the scions of inherited wealth apparently dropped off the list by 2001.
Here’s a paper on the changes in the Forbes 400 from 1982 to 2012 : http://www.aeaweb.org/aea/2013conference/program/retrieve.php?pdfid=160
The biggest change is that they are more likely to have started their businesses having grown up with some wealth, what we consider to be the equivalent of upper middle class. The Forbes 400 of today also are those who were able to access education while young and apply their skills to the most scalable industries: technology, finance, and mass retail.
Your neighbors, investing resources in their UMC children, have good reasons to bet on education.
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So, is the book readable? I’ve been reading Krugman on the book (he’s a good explainer) and Solow in the New Republic and I like the level of wonk I’ve gotten there. But, the book itself seemed targeted at an economic audience, not the general reader.
Is the 341/400 “inherited, lucky timing, government contracts” from the 1980’s (Kinsley analysis)? or the current Forbe’s? And, what is “lucky timing, anyway”? Does Bill Gates count as a beneficiary of “lucky timing”?
Forbe’s analyzes their billionaire’s (1645 billionaires) as having 1080 “self-made”, 207 inherited, and 352 inherited/growing. That’s the world list, 492 of them are Americans, and glancing at the top 25, 14 of them are “self-made” (though I don’t know how to account for government contracts and lucky timing). Of the other 11, 2 are Kochs and 4 are Walton’s, 3 are Mars’s and I don’t know who the other 2 are. I think growing inequality is a real problem and fear the development of an oligarchy that controls wealth as well as government. But, I think we have to be accurate in discussing the data. In the US, it’s clear that a number of the billionaires are those who benefited from (and contributed to) the tech revolutions of the late 20th century (Google, Ebay, Amazon, Oracle, Microsfot, Dell, Facebook, . . . .).
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“And, what is “lucky timing, anyway”?”
Yeah.
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A big part of Picketty’s point is what happens going in to the future, based on the real values of return on capita (s)l and productivity growth (g).
Krugman: “Piketty’s big idea is that we are in the early stages of returning to a society dominated by great dynastic fortunes, by inherited wealth. . . . Imagine a wealthy family that has managed, somehow or other, to guarantee that a large fraction of its income is used to accumulate more wealth. Can this family thereby acquire a dominant position in society?
The answer depends on the relationship between r, the rate of return on assets, and g, the overall rate of economic growth. If r is less than g, dynasties are doomed to erode: even if all income from a very large fortune is devoted to accumulation, the family’s wealth will grow more slowly than the economy, and it will slowly slide into obscurity. But if r is greater than g, dynastic wealth can indeed grow to gigantic size.”
http://krugman.blogs.nytimes.com/2014/03/14/notes-on-piketty-wonkish/
When wealth falls off the Forbe’s charts, it could be the result of dissipation of wealth through consumption (including for charitable causes that do produce positive rates of return — Gates and Buffett both say they plan to dissipate their wealth that way). But the key is whether we are now reaching a world where a family that does not chose that plan (Waltons, Mars, . . . .) can maintain its wealth because the return on capital is greater than the economy’s growth.
(and, the same topic explained by Solow: http://www.newrepublic.com/article/117429/capital-twenty-first-century-thomas-piketty-reviewed. Krugman is easier for me to read).
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“When wealth falls off the Forbe’s charts, it could be the result of dissipation of wealth through consumption (including for charitable causes that do produce positive rates of return — Gates and Buffett both say they plan to dissipate their wealth that way).”
There’s also the issue of multiplication of heirs over the course of multiple generations. Unless family sizes are quite small, the multiplication of heirs is going to far outpace the growth of the business.
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It’s a challenge for a family business to last beyond two generations. Succession planning involving lawyers, accountants AND family therapists are key to making it happen well. It’s actually quite a lucrative “gig” to help families manage intergenerational transitions.
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“…a wealthy family that has managed, somehow or other, to guarantee that a large fraction of its income is used to accumulate more wealth..”
Well, the Ochsulzbergers are now dealing with the current generation noticing that Pinch has taken the NYTimes from a worth of $8 billion to possibly $1 billion on his watch, while paying himself a nice salary along the way. I remember the salacious stories of Peter and Roxanne Pulitzer, the trumpet strumpet. I’ve seen enough ‘shirtsleeves to shirtsleeves in three generations’ that the ‘managed, somehow or other’ looks pretty iffy to me.
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