Timmy elsewhere

At the ASI.

On Greg Clark’s new paper on the inheritance of wealth.

People are going to have to be very careful on this. Is it actually the wealth itself that is being inherited? One example given is the Bazalgettes. Is Sir Peter stinking rich because he inherited money or is he stinkling rich because he inherited intelligence? The social attitudes to be an entrepreneur?

What has been inherited?

And do note: the paper does not show that wealth hsa been inheirted at all. It shows that those whose fathers die rich are likely to die rich themselves. That’s a different statement.

31 thoughts on “Timmy elsewhere”

  1. So Much for Subtlety

    People are going to have to be very careful on this. Is it actually the wealth itself that is being inherited?

    I think we could agree that before 1950, it probably wasn’t genetic. As the introduction of the Grammar schools saw a massive rise in new talent.

    However the question is whether that was a one-off, as the former President of Singapore, Lee Kwang-yew, claims about his country, or whether intelligence has little genetic basis at all.

    And just to annoy Ironman, I will point out that if you accept that intelligence is partly genetic, there is no reason to think it is equally distributed across all races. Jews are far more likely to suffer from genetic diseases related to brain and spinal tissue. Perhaps because of the tendency for smarter Jewish boys to have more children.

  2. Of course, Joseph Bazalgette made his money pumping the shit out of London, whereas Peter Bazalgette has made his money pumping it back in.

    (I think roughly attributable to Stephen Fry)

  3. Surely Peter Bazalgette is stinking rich because he is a very successful TV entrepreneur.

    His dad was a stockbroker, he went to Dulwich, got a 3rd at Cambridge, joined the BBC and could have remained a typical BBC guy on low salary (compared to lawyers & bankers he had been educated alongside) & decent pension for rest of his life. Making a couple of million out of the London property boom.

    As it is he took the risk of founding his own production company and was hugely successful.

    Apart from the upper middle class background I’m not sure how much of his success is down to the success of his Victorian engineering ancestor.

  4. So Much for Subtlety

    Shinsei1967 – “Apart from the upper middle class background I’m not sure how much of his success is down to the success of his Victorian engineering ancestor.”

    Presumably a lot of his success is due to knowing the right people to get a job at the BBC and then knowing the same right people to sell them TV shows later on. Which in turn would depend on going to school and university with them or their younger siblings/children.

    I doubt many people from Comprehensives with crap degrees from Sussex could do that. As they did not have the right sort of parents and grandparents who ensured they went to the right sort of schools.

  5. bloke (not) in spain

    Come off it Tim. Those first few slippery rungs on the ladder are the hardest to climb. Further up you start, easier it is to climb. It’s necessary to be willfully incompetent to slip far, if income exceeds expenditure. You don’t get to make all those poor decisions lack of funds pushes you towards.

    Not saying that’s against inherited wealth. With the wealth usually comes the advice & mentoring surrounded its previous owner. The stuff the rookie has to work out for themselves. But wealth creating wealth & is better than it being dissipated away through IHT & creating nothing.

  6. Interesting to compare with sports. Relatively few play and/or have access to good cricket facilities/coaching – and there are loads of brothers/sons playing first class or international cricket. And IIRC, A large no of Indian players are Brahmins.

    Everyone gets to play football, and there aren’t many relatives at top level.

    (I ignore rugby, as size is clearly inherited, so related players is not surprising.)

  7. Interesting to compare with sports.

    Formula 1, certainly.

    But yes, it’s easier to be an entrepreneur and take a few risks if you have family money behind you plus a load of contacts.

  8. Have i got this right? Tim’s response to Piketty was that you make pots of money but your subsequent generations are going to revert to the mean,, because they aren’t you. This paper comes along and says they revert back to the mean at a slower rate. Tim says yes that’s because they have some of what you had.

  9. HB,

    > Tim says yes that’s because they have some of what you had.

    I don’t think Tim’s said that at all. He’s saying that, since that’s a possibility, it’s not possible to conclude from this research that people are rich because they inherited their money.

  10. It’s easier to apply your intelligence if you start off with capital. Also, if your education put you into a network of well connected people. And so on.

    You have a business idea. It needs fifty grand to get off the ground. You’re skint, it’s very hard to get the money from the banks (no collateral) and you’ve got no friends with that kind of dosh, and if it fails you’re screwed. If on the other hand you’re already worth £100 Squillion, you’ve got the money, it doesn’t really matter if it fails, and you’ve got loads of mates who can help make it all happen.

    So yes, intelligence (though entrepreneuralism isn’t really intelligence, it is a talent) but where you’re starting from makes a lot of difference too.

  11. People inherit money–so what?

    Because you inherit a lot its ok for political vermin to steal it?
    Because…poor people?–who aren’t that poor.

    Fuck ’em. If they can steal rich peoples inheritance it won’t be long before they are after everybody’s. That’s how it is with thieves–they only stop when there is nothing left to steal. Unless they are stopped first.

  12. I was about to comment that doubtless evolutionary biology has something to say about this, when bugger me I find that it has already spoken, and with a voice of considerable authoritah.

  13. ‘though entrepreneuralism isn’t really intelligence, it is a talent’

    Though skill might be a better description – you can teach the skill of entrepreneurship.

    Look at Richard Branson – a very skilled entrepreneur but not overly intelligent (that’s not a way of saying he’s stupid – he’s not).

  14. Though skill might be a better description – you can teach the skill of entrepreneurship.

    Well true. A bit of both really. It’s like tennis. Everyone can learn to play, and everyone can improve with coaching, but some people are still better than others by nature. I think a lot of it is down to temperament (entrepreneuralism I mean, not tennis). Some people may be too cautious, some too incautious. Some will not like making the tough decisions like laying off workforces and ditching suppliers and things. And so on.

  15. Ian B,

    “If on the other hand you’re already worth £100 Squillion, you’ve got the money, it doesn’t really matter if it fails, and you’ve got loads of mates who can help make it all happen.”

    It does matter if it fails, because you’ve blown a chunk of the family fortune. If you had a billion and you blow £20m, you’ve now got £980m. Do that 49 more times and you’ve got £0. And your mates can’t help you, not in the private sector. You come up with a daft dotcom idea, and no-one buys it, you’re screwed. And sometimes this takes a few generations, but it nearly always happens.

    About the only places it does happen is with parts of the state, and land.

  16. SMFS

    I’m sure much of Bazalgette’s success is down to good connections formed at school & university, but this would be the same for any Dulwich & Cambridge graduate, the fact his grandfather built the Embankment isn’t really a factor to his success.

  17. Sq2.
    Ok yes… but does this paper at least point to evidence of the reversion to the mean rather than the Piketty conjecture that you get richer and richer and ….. total….world…..domination.

  18. Doug, Ian B

    “Though skill might be a better description – you can teach the skill of entrepreneurship.”

    I can’t remember the source (via Chris Dillow maybe?), but I believe there’s some research that there’s no real similarity in character or temperament amongst entrepreneurs. They tend to have a bit of capital and be older then the 20 something tech wizard we think about.

    More typical is a 40 year old who understands the business they’re in, and have built up some connections. . Eg Tim Waterstone founded Waterstones when he was about 40 after several years at WH Smith.

  19. Per SMFS, someone did a study of English Wills, AFAIR covering the last 5 centuries. Showed a very strong correlation between the size of the estate and the number of kids. Also people leaving minimal assets had less-than-replacement number of kids.
    Over those 20 generations, that’ll lead to a population-wide increase in the mixture of skills that foster wealth creation (intelligence, judgement, social skills etc). Plus, of course, in the propagation of inherited wealth.
    I wouldn’t rate nepotism and social networks that highly. In some circumstances they can help, but often they create the trustafarian mentality.

  20. (way back when, in order to become a politician in Athens, you had to have been born an Athenian)

    There’s a story that Pericles (5th century BC Athenian politician, general and all round succesful guy) was once accosted by a grumbling non-Athenian born contemporary who complained;

    “You could not have been as succesful if you had not been born an Athenian”

    To which Pericles replied; “that may be so, but could you have been as succesful if you had been?”

  21. If we identified exactly the money effect on the next generation’s prospects would we want to counter-act it?
    If you can’t better the chances of your kids you’ve got to be less incentivised to maximise earnings.
    So you would presumably see an effect on current generation inequality (more equal) as well as subsequent generation mobility (more mobility). And the question is would we all be better off?

  22. @bnis

    “those first few slippery rungs on the ladder are the hardest to climb.” – no, they’re the easiest, require only dedication and application. Gets harder as you move up and need uncommon talent and/or burning ambition.

    “Further up you start, easier it is to climb. ” – no again, higher you start, higher the minimum talent / ambition required.

    Trivially however, the higher you start, the easier it is to get to any given point.

    What I’m saying is that if you start in the middle its harder to get to the top than it is to get to the middle if you start at the bottom.

    These are only generalisations, its surely true that the first million is most difficult. But nonetheless, its easier to get to head of personnel than CEO for anyone.

    And then there’s the matter of one’s natural born talent – its easiest for those who’ve got it, and they’ve probably inherited it.

  23. Farewell to Alms. despite its silly title. is a great book. However, and despite Jane Austen, its central allegation is bullshit. Losers in the race to be genteel have no inherent reason to stay genteel. It’s the poor getting a bit richer that makes them tip their hat to the beadle.

  24. On another tack. I wonder whether aristocratic marriage and grammar schools are related.

    Toffs marry models (gentlemen prefer blondes).
    After a couple of generations this makes them inferior.

    Grammar schools shook up the social mix but the results (good) last only a couple of generations, again marrying for beauty not brains. So maybe it wasn’t worth reforming education in the 90’s but it is now to reshake up the social mix.

  25. @Tim
    So it is, thanks! He’s an interesting fellow – Irish descent, grew up in Scotland, went to Kings Cambridge and then Harvard & Stanford and currently at UC-Davis. Somehow he’s created himself a nice little niche, classic entrepreneur…

Leave a Reply

Your email address will not be published. Required fields are marked *