Bill Gates, Co-Chair of Bill & Melinda Gates Foundation, speaks during the World Economic Forum annual meeting in Davos, Switzerland, January 22, 2019. (Arnd Wiegmann/Reuters)

In the course of praising Senator Elizabeth Warren’s new liquidate-the-kulaks-as-a-class economic agenda — the freshest economic thinking from 1929 — Paul Krugman of the New York Times writes:

Today we are once again living in an era of extraordinary wealth concentrated in the hands of a few people, with the net worth of the wealthiest 0.1 percent of Americans almost equal to that of the bottom 90 percent combined. And this concentration of wealth is growing; as Thomas Piketty famously argued in his book “Capital in the 21st Century,” we seem to be heading toward a society dominated by vast, often inherited fortunes.

Are we really headed toward a society that is dominated by vast fortunes? It is the case that the very wealthy tend to get their way politically more often than not when their preferences diverge from those of the rest of the country, but, as I argue in my column today, there is rather less to that than you would imagine (because there is so much consensus about so many political questions across income groups), and it is worth noting that the disproportionate influence of the wealthy often pushes the country in the direction progressives prefer, as on the questions of gay marriage or marijuana liberalization.

And is it the case that more of the fortunes of the super-wealthy are inherited?

If you go over the Forbes 400, you won’t actually find that many inherited fortunes. There are some Waltons and Marses and Lauders, but it’s mostly Bezoses and Gateses and Zuckerbergs and other people who became vastly wealthy by starting companies. The timelines get complicated, of course: Bill Gates and the Koch brothers were born into very well-off families, which no doubt came with opportunities that helped them to follow the courses of life they followed. It is easier to take great risks when you have a financial backstop and you are not worried about being evicted from your home should the enterprise fail. I think we can safely assume that the road to billions is shorter when starting from millions. But very few of those who start with millions end up in Koch or Gates territory, and many of those who do end up there start from modest beginnings. So starting well is neither a necessary nor a sufficient condition.

My colleague Michael Tanner has looked at the question of inheritance in some detail:

Although Piketty and others worry a great deal about the role of inherited wealth, the evidence suggests that inheritance plays a very small role in how people become wealthy. Surveys vary, but it can be said with a fair degree of accuracy that the overwhelming majority of the rich did not inherit their wealth. For example, a study of billionaires around the world finds that fewer than 3 in 10 American billionaires got to that position by inheriting their wealth, and that “the share of self-made billionaires has been expanding most rapidly in the United States.” And while that represents the richest of the rich, the slightly less wealthy may be even less likely to have inherited their wealth. A report from BMO Financial Group found that two-thirds of high-net-worth Americans could be considered self-made, compared to a mere 3 percent who inherited the majority of their wealth. Interestingly, this study also found that nearly a third of these people are either first-generation Americans or were themselves born elsewhere. Among these wealthy “new Americans,” 80 percent reported that they earned, rather than inherited, their wealth. Finally, a survey by US Trust found that 70 percent of wealthy Americans grew up in middle-class or lower-income households. Even among those with assets in excess of $5 million, only a third grew up wealthy. Moreover, the role of inheritance has diminished over the last generation. A recent study by finance professors Steven Neil Kaplan of the University of Chicago and Joshua Rauh of Stanford found that fewer of those who made it on to the Forbes 400 list in recent years grew up wealthy than in previous decades, falling from 60 percent in 1982 to just 32 percent today. Roughly 20 percent of the Forbes 400 actually grew up poor, roughly the same percentage today as it was in 1982.

If you would like to read that Kaplan-Rauh study in the American Economic Review, a PDF is available here.


As usual, it’s complicated. (Williamson’s First Law: “Everything is simple when you don’t know a f***ing thing about it.”) For example, inherited assets make up a greater share of the wealth of middle-class and lower-middle-class people than they do for wealthy people. That may seem counterintuitive at first, until you think how much wealth an inherited house would add to the net worth of a family with only modest savings. Many of the statistics you see about wealth in the United States — the top x percent have more than the bottom y percent combined — are exaggerated by the fact that high debt and low savings give so many American households, including some with healthy incomes, a net worth of $0.00 or less. There are some things that could be done to improve that; the most obvious one, in my view, would be to simply cease pursuing policies at the federal, state, and local levels designed to make housing more expensive. Not a panacea, but a start, I would think.


The poor are not poor because the rich are rich. That isn’t how income works. But the argument one hears most often in the indictment of the wealthy isn’t economic at all but moral. Thus the especial attention directed at those who inherit money. Inheritance in fact strikes me as among the least disruptive ways to grow vastly wealthy; inheriting money does not involve a lot of externalities compared to, e.g., starting Facebook or drilling for oil. Heirs come in different species, of course. It seems to me that the Alice Waltons and Leonard Lauders are doing a lot of good things that non-billionaires just don’t do. Bill Gates and David Koch, too. Beyond philanthropy, billionaires play an important role in the venture-capital ecosystem, which helps to cultivate innovation and high-growth entrepreneurship.

But there’s another argument in favor of a de facto aristocracy — whether the result of inheritance or entrepreneurship or just dumb good luck — that is of increasing interest: intellectual and political independence. In our age of social-media-mob politics and the ruthless enforcement of various social and political orthodoxies — enforcement that now is often carried out by making a disciplinary instrument of employers — financial independence is necessary to political independence. F. A. Hayek in his time worried that the rise of salaried employment as a norm would have undesirable effects on political thinking and culture as the conformist habits of corporate life evolved into more widely applied social norms and habits. The relationship between financial independence and political independence is not lost on Professor Krugman, who as a creature of the Ivy League and the New York Times stands very close to the spiritual center of orthodoxy. Neither is it lost on Senator Warren and her ilk. That’s what all that dishonest talk about “big money corrupting our politics” is about: bringing the financially independent under political discipline. As an added benefit, the more restricted independent political activism is, the more important and influential grow institutions such as the New York Times, and the more power accrues to the class of people who have access to such instruments.



The independently wealthy man is an alternative to the Organization Man, and in these conformist and stultifying times an increasingly important one. To remain relatively free to think, to dissent, and to experiment is in 2019 something of a luxury good.


Which is to say: What progressives actually hate about those with inherited fortunes is not that they are idle, but that they are free.