Inheritance: A Sin Against an Efficient Market
By William Handke
We Could Be Great
With the exception of theft, inheritance might be the most inefficient economic transaction that humanity has devised. Consider this: with both theft and inheritance, the recipient of wealth does not have to create any amount of economic benefit in order to be rewarded. At best, the heir receives compensation for effectively doing nothing (being born). At worst, the thief receives compensation for doing something harmful (injuring someone during a robbery). Both transactions serve as examples of how the free market naturally creates pockets of inefficiency: rewarding individuals who haven’t economically earned a reward. Both are problems, but only theft is actually addressed as such.
Though certainly not deserving of criminalization, the problem of inheritance does demand action. If unchecked, the inefficiency it creates will continue to generate negative ripple effects throughout our economy and social unrest within our culture.
Before discussing inheritance’s harmful effects, it is useful to understand its development. The problem of inheritance was nurtured by the advent of money. Under a barter-based economy, wealth was passed-on in the form of physical goods, animals, or land – things that are naturally harder to store, transfer, and maintain. On top of that, it was more difficult to pass on the income–generating properties of these goods because the activities that create further wealth (e.g. turning commodities into finished goods, running a farm, developing land, etc.) require a certain amount of ability and business acumen – traits which, unlike wealth, cannot be transferred to an heir.
With money, the impediments to wealth transfer and the skill requirements for additional wealth creation are sharply lessened. The lines of numbers in modern banking computer systems require no maintenance to store, nor effort to transfer. Moreover, a large wealth management industry now exists, the sole purpose of which is to turn big pools of money into bigger ones, without the owners of them having to lift a finger. The result of these innovations is self-sustaining dynastic wealth on a large scale, such that many fortunate families than thrive in grandiloquent fashion from birth, never burdened by the necessity to create any semblance of economic benefit.
We Could Be Great
With the exception of theft, inheritance might be the most inefficient economic transaction that humanity has devised. Consider this: with both theft and inheritance, the recipient of wealth does not have to create any amount of economic benefit in order to be rewarded. At best, the heir receives compensation for effectively doing nothing (being born). At worst, the thief receives compensation for doing something harmful (injuring someone during a robbery). Both transactions serve as examples of how the free market naturally creates pockets of inefficiency: rewarding individuals who haven’t economically earned a reward. Both are problems, but only theft is actually addressed as such.
Though certainly not deserving of criminalization, the problem of inheritance does demand action. If unchecked, the inefficiency it creates will continue to generate negative ripple effects throughout our economy and social unrest within our culture.
Before discussing inheritance’s harmful effects, it is useful to understand its development. The problem of inheritance was nurtured by the advent of money. Under a barter-based economy, wealth was passed-on in the form of physical goods, animals, or land – things that are naturally harder to store, transfer, and maintain. On top of that, it was more difficult to pass on the income–generating properties of these goods because the activities that create further wealth (e.g. turning commodities into finished goods, running a farm, developing land, etc.) require a certain amount of ability and business acumen – traits which, unlike wealth, cannot be transferred to an heir.
With money, the impediments to wealth transfer and the skill requirements for additional wealth creation are sharply lessened. The lines of numbers in modern banking computer systems require no maintenance to store, nor effort to transfer. Moreover, a large wealth management industry now exists, the sole purpose of which is to turn big pools of money into bigger ones, without the owners of them having to lift a finger. The result of these innovations is self-sustaining dynastic wealth on a large scale, such that many fortunate families than thrive in grandiloquent fashion from birth, never burdened by the necessity to create any semblance of economic benefit.
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