It should be illegal to inherit anything?

Megan McArdle at the Atlantic is really impressing me these days. Check this out: she argues that people should not be able to inherit anything. If rich grandaddy wants to give me money, he has to do it while he’s alive: he’s got to give me a gift. He cant’ just hold it in abeyance and have it turned over to me after he dies.

This isn’t really that new of a concept, and in fact some libertarians endorse it as a way to make people entitled to only what they “earn.” (scare quotes because what you earn is really hard to determine I think). Many liberals also like it because it seems to go after rich people and takes all their money away before they can give it away to their spoiled grandkids.

But there are a lot of issues. McArdle looks at the economic effects and claims that such a tax might be economically non-optimal because parents will work less hard because they can’t give away the excess that they don’t use when they die. Of course, kids will work harder, because that pepsico heir taking Econ 001, “the economics of being rich as hell” will have to get some real skills and make his own way. McArdle rightly says that parents are more productive than kids so the fire that is lit under the asses of kids would hardly make up for the slacking that would result from adults. But even that is a little deceptive. What if parents, rather than working less, expend more money on their kids while they’re alive. For instance, I could see a no-estate tax world filled with colleges that provide healthcare, career services, guaranteed jobs on campus after school, and a pension. These colleges would cost 400,000 over four years, but parents would pay them as a way of making sure their kids are safe and protected after they die. This transfer from savings to increased investment while alive would almost surely be economically inefficient. Better to save money to be used when needed rather than find ridiculous uses for it all before one dies. Think, if you had to spend all your money tomorrow, how happy could you really make yourself than if you could spend it over a period of a year, for example? Your happiness wouldn’t increase that much after you bought that first new car and the penthouse suite at all the las vegas casinos. There is only so much you can consume at once.

But one really good effect that McArdle doesn’t talk about, is that rich people would all of a sudden become very interested in the wider social world. If you can’t guarantee that your kid will live off your money, you might start to care about medicare and social security and take an interest in these policy problems. At the margins, you might even start to care more about things like the public school system (if you have a young kid and are afraid you might die soon). The public world would likely benefit from elite attention rather than indifference (or would elites make things even worse if they trained their eyes on social problems?)

There are a bunch of deeper philosophical questions too. One is: is the problem with rich people giving their money to their kids that they are giving some people a leg up who didn’t work for that leg up, or is it there something special about the way inheritance goes to people I value and not other people in need. What if, when I died, I put in my will that my fortune was to be given to a random person living below the poverty line. Should the government be able to tax away to its coffers. It really reinvigorates the whole debate about people’s entitlement to their money in any case. A 100% estate tax would basically that any money I don’t spend is de facto tax money. But why? What if I want my fortune to go to HIV research and not the USFG? See, I think the 100% estate tax gets some of its umph from the idea that people who benefit their own kids are blue-blooded selfish bastards who want to perpetuate a family lineage where a lot of people have first names like “Dale” and “Sebastian.”

HOWEVER, as I’ve argued many times on this blog, I think society should be thought of as a competition. Not a cutthroat, war of all against all type of competition, but like a basketball game; a fair but somewhat antagonistic arena where greatness can emerge and each participant can be honored for their good faith attempt to be great. So, I think an estate tax would further that goal, of making sure each person was put into a position where they are pushed to succeed for themselves. For the same reason I cringe when I see a parent spoiling their kid, I cringe when I see someone getting inordinate resources from their parents, and this means I cringe many times at myself, since I’ve been the beneficiary of their generosity. I’m not saying everyone has to fend for themselves. I think welfare, education and medicare, and on and on are similar to salary caps and free agent restrictions: they ensure everyone gets a shot to compete.

Politicians As Prize Fighters

I read this excellent paper by renowned political scientist John Zaller a while back.

The paper is really excellent in that it has a lot of commonsense arguments, a very close look at a lot of different areas of data, and a cool hook. Politicians are like boxers. Yea, really.

Really though, the important part of this paper is its very principled anti-cynicism. People think our country is broken in many ways. For instance there is a common sentiment that politicians are reelected due to the unfair influence they wield and that most large companies trade money for votes with elected officials.

The evidence on both these claims is actually very mixed, but this paper focuses on the prevalence of reelection. Why do most politicians lose so rarely? Is it because of corruption as many people think?

Zaller hypothesizes (and provides mathematical modeling for the proposition) that politicians lose races so rarely for the same reason that many heavyweight champion boxers lose so rarely: they’re really good. The idea is that political races enact a selection effect so that politicians who keep winning do so not because of any unfair advantages but because they had to win in the first place to get into office and so probably know what they’re doing.

This might explain the sophomore surge, which is the empirically irrefutable fact that politicians start winning much more easily starting in the SECOND race of their career. This makes sense. A politician’s first race is against an incumbent who probably knows what he is doing. If the challenger wins, then he must be more skilled  and so when he takes over the office, he will be even harder to beat. The quality of politicians as runners-for-office is thus constantly ratcheted upward as the weaker politicians lose out –natural selection for politicians. Thus, its no surprise that your average politician is going to get trounced by an incumbent; the incumbent is the equivalent of a heavyweight champion, having one at least one tough fight (read: election) and probably many.

There are questions I have though, all of them cynical. It’s also a pretty well confirmed fact that the best challengers to a seat (the smartest, hardest working, etc.) are also the savviest, and so wait until opportune moments to run. So, if the best challengers only challenge when the incumbent is weak (because of scandal, bad voting record, or a position on a controversial issue such as a war), then they might not really be better politicians, but just wisely opportunistic (a guy with a skill of 5 could beat a skill 6 guy if he waits for a damning mistake). In this way, the average skill of politicians would NOT be ratcheted up over time and might, in fact, come down in times of great upheaval or controversy. If the sophomore surge persists in such situations, then it seems likely that something about the powers of office and not the candidate’s skill are what is causing high incumbent reelection rates. Maybe some skepticism is warranted after all, but if it is, it’s got to be backed by an even more nuanced analysis of reelection rates. That is Zaller’s contribution in this paper.