Some $30 trillion in the US will reportedly be passed from the baby-boom generation to their heirs over the next 30 years, and recent changes in the tax code make passing along inherited wealth all the more easy.
While family wealth tends to regress toward the mean in the long run—meaning that the descendants of the wealthy will eventually resemble the average citizen—Wahl wryly noted that “the evidence presented here suggested that the long run may be long indeed.”
How long?
Wahl offered this hypothetical: Imagine that the wealthiest family at any given point in time has 100% more money than the average family. According to this sample, it would take 13 generations—approximately four centuries—for this hypothetical wealthy family to return to having a mere 10% more than the average household.
Of course, the nation’s wealthiest families have assets thousands of times larger than the average family’s. If these rates remained operative for the super-wealthy, too, it would take immeasurably longer for their descendants to fall back into the common herd of humanity.
While family wealth tends to regress toward the mean in the long run—meaning that the descendants of the wealthy will eventually resemble the average citizen—Wahl wryly noted that “the evidence presented here suggested that the long run may be long indeed.”
How long?
Wahl offered this hypothetical: Imagine that the wealthiest family at any given point in time has 100% more money than the average family. According to this sample, it would take 13 generations—approximately four centuries—for this hypothetical wealthy family to return to having a mere 10% more than the average household.
Of course, the nation’s wealthiest families have assets thousands of times larger than the average family’s. If these rates remained operative for the super-wealthy, too, it would take immeasurably longer for their descendants to fall back into the common herd of humanity.
Gregory Clark and Neil Cummins cleverly examined families with rare surnames, making it much easier to track descendants through the historical record.
Their results largely echoed Wahl’s findings: Families with the most wealth between the years 1858-1887 managed to hang on to most of their money, with a rate of erosion roughly comparable to what Wahl found. Moreover, as in Wahl’s study, this rate held steady over time, even in periods when tax policy—the estate tax, primarily—became much more punitive.
These more recent studies of long-run outcomes also offer evidence that mechanisms like the estate tax may not do much to frustrate the persistence of dynastic wealth, despite claims by the rich that such policies penalize their heirs. For reasons that remain murky, something else the wealthy possess—social connections, cultural capital—gets passed along from generation to generation many times over.
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