Wealth — Inherited or Self-Made?

The claim is often made that inherited money is a social evil which needs to be curtailed such as by an estate or inheritance tax.  People point to celebrities such as Paris Hilton to support this claim.

However, Robert Frank reports in The New Rich: Self-Made or Family-Made?, Wealth Report, May 29, 2007 that “only 2% to 4% of the fortune of today’s millionaires was inherited.”  In addition, “70% of the nation’s big family fortunes are less than 13 years old.”

Frank also discusses studies which show that economic mobility in the United States is declining.  He concludes as follows:

So we seem to have two contradictory narratives. One says they rich have made their own fate. The other says that today’s rich are mainly people who were born rich.

I don’t have an answer to this puzzle. But there are some possible explanations. Perhaps mobility for a tiny population at the very top (among multi-millionaires) is greater than mobility for the rest of society. Perhaps today’s rich say they grew up middle-class, but actually grew up in relatively affluent families.

Special thanks to Prof. Joel C. Dobris of the University of California-Davis for bringing this article to my attention.