Centerfield

A Farewell to Alms? Fat Chance

I'm pretty skeptical of the primary notion in yet another book I haven't read, that Anglo cultural virtues were mostly spread by inheritance. This post is an inspired by Tyler Cowen's enthusiasm for the book.

All the evidence I've seen suggests descendants that rich families are likely to largely demonstrate worse saving and discipline skills than their contemporaries, simply because they have a choice. Especially by the third generation. The first generation, of course, has good skills because that's how they got there. But the rest? No.

George Bush demonstrated his lack of saving skills to the entire nation for the first six years of his term. Right up until he lost a major election. He has only just now issued his first veto threat to try and contain spending. And it was the same thing with Kings - the founder of a dynasty would usually be financially parsimonious and good at raising money, but later generations would put their realms in hock.

And there's evidence this situation was worse still in Georgian England, the period when the Industrial Revolution was started, than today. If you've ever read any Jane Austen or other period novels, you will have run across the social expectation that the upper-class mustn't work. The objective was to live off a set sum/year. If you didn't already have a fortune, you could get it by marrying well or brown-nosing elder relatives. Creating more yourself was strictly off. Hardly an, er, model major entrepreneur.

Yes, it's true in today's society that there's no shortage of entrepreneurs who inherited their wealth - the minority that DO have the right skills have capital to more easily start a bigger business, have better connections via their family, and can afford a failure or two. But most businesses start without wealthy founders.