Wealth: earned or inherited?

by John Quiggin on May 6, 2014

The efforts of the right to discredit Piketty’s Capital have so far ranged from unconvincing to risible (Chris picked up a particularly amusing one from Max Hastings in the Daily Mail, to which I won’t bother linking). One point raised in this four-para summary by the Economist is that ” today’s super-rich mostly come by their wealth through work, rather than via inheritance.” Piketty does a good job of rebutting this, but for those who haven’t acquired the book or got around to reading it, I thought I’d repost my own response, from 2012.

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Matthew Yglesias, responding to Tyler Cowen and my critique of same.

high levels of income inequality lead to high prices for art. A lot of this reflects higher prices for old paintings by dead artists, but the art market exhibits sufficient efficiency that higher prices also benefit new works by living artists. … The mechanism, basically, is that art-buying is mostly done by very rich people so when very rich people get richer, the price of art gets bid up. When buying power shifts to the middle class they tend to buy more banal things like bigger houses or nicer cars.

Whether these price trends are good for the arts is going to depend on a bunch of other questions that the paper doesn’t address. Do higher prices for art works induce artists to become more productive? Does greater output come at the expense of quality? Do people shift into painting from more mass market artistic pursuits (music, movies) or from careers outside the arts? Do higher prices make art less accessible to non-rich art lovers? One can imagine a whole range of different outcomes here. But the evidence that inequality boosts the financial returns to the fine arts — largely by diverting financial resources away from middle class consumption of normal stuff — seems compelling.

By coincidence, I’ve recently finished reading The People’s Platform, Astra Taylor’s wonderful new book on culture and the Internet (Amazon, Powells), which gives a much more jaundiced account of what is happening to art in the age of inequality (see here for an interview which gives some flavor of her thinking). [click to continue…]