Family fortunes

[From Bill Powers (2001.02.11.0722 MST)]

Paul Stokes (2001.02.10) --

I forgot to comment on one of your observations, the one about unearned
income. The problem with unearned income is that it is an Achilles heel of
the capitalist system. If a poor family resolves to save its money and work
hard and gradually build up a large fortune, even if this takes several
generations, it can eventually reach the point where it can live on
unearned income, provided it doesn't reproduce too fast. A noble goal quite
in the capitalist tradition, you say? (Not you, Paul).

Not at all. Something has to be done to prevent this Horatio Alger story
from being lived out by more than a small fraction of the population. To
see why, all you have to do is imagine what would happen if _everyone_
achieved this capitalist dream. It is not possible for everyone to live on
capital income. I suspect that the current number who do so is near the
maximum feasible number.
Something like 60% of all income is capital income, before taxes (40%
after). I don't know how that translates into a fraction of the U.S.
population, but it's a small fraction, probably around 5%. The rest have to
adopt the Protestant Work Ethic, a virtue which is greatly encouraged by
the 5%.

The feudal system is far from dead.


Bill P.