Putting on Heirs
Metaphors, like magic
tricks, may dazzle through deceit. Take, for example, the recurring metaphor of
society as an extended family (a particular favorite among those who aspire to
be the head of the household). The accompanying patter goes like this: Families
do not allow one member to prosper while another struggles; ergo , we
need something like a bigger welfare system or a more progressive tax code.
Note the
rhetorical sleight of hand. While you were still pondering whether society is
really like a family, I slipped in the wholly invented "fact" that families
take from the rich and give to the poor. The truth, at least as it is revealed
by last wills and testaments, is otherwise. Apparently, among the children,
even when some children are much wealthier than others. A bequest is a final
opportunity to redistribute income among those you love the most; if most
parents reject that opportunity, then it's pretty hard to see anything
"familial" in using the tax system to redistribute income among strangers.
But bequests aren't the only economic transactions within
families. Does the family function as a welfare state in other ways? What about
schooling? Let's think about that. Who would you rather send to college: your
smart kid, who can make the most of an education, or your dumb kid, who needs
all the help he can get? The answer--even if you have an egalitarian impulse to
pour resources into the dumb kid--is to send the smart kid to college and make
it up to the dumb kid through bequests (or other cash gifts). That strategy
maximizes total family income, which allows you to do more good for both
your children. So, even if parents really wanted to equalize their children's
incomes, they .
If not
schooling, then what about time and attention? At least in large families, the
big winners in the time-and-attention sweepstakes are the firstborns and the
lastborns--those who get to spend a few years as an only child. The middle
siblings perform significantly worse on sixth-grade . This suggests that time
and attention are valuable in much the same way that schooling is, and that
they are, therefore, equally unsuitable as a medium for redistribution. So, the
general rule is that if people wanted to redistribute among offspring, they'd
do it through bequests.
An exception might be poor families, where
bequests are insubstantial. In those circumstances, lavishing the less-skilled
children with schooling, time, and attention might be the only way to transfer
income in their direction. This exception, incidentally, could explain why
programs like Head Start are disappointingly ineffective: When little Johnny is
accepted into the Head Start program, his parents compensate Johnny's brothers
and sisters by spending more time with them and less with Johnny. There's a
nice irony here. By and large, the folks who want to argue that most people are
instinctively redistributionist are the same folks who want to argue for the
efficacy of programs like Head Start. But the stronger the redistributionist
instincts of Johnny's parents, the less he'll gain from the Head Start
program.
Returning to the general
rule, the best way to redistribute income is through bequests. But parents
don't use bequests to redistribute income. We are entitled to conclude that
parents don't consider redistributing income to be terribly important. That
leads to a natural follow-up question: What do parents consider terribly
important? How do they decide what to leave to whom?
I like
the theory that parents believe there is something intrinsically fair
about giving equal amounts to everyone. But to test that theory, we'd need to
know more about the distribution of parental gifts--like schooling, time, and
attention--during the parents' lifetime. I don't know whether my pet theory
would survive that test.
An alternative theory is that a bequest is a mistake.
According to this theory, parents would prefer to spend everything they've got
before they go. The only reason there's anything left over is that death
arrives unexpectedly. But if this alternative were correct, we'd see old people
using all their savings to purchase annuities that pay them a guaranteed income
for life. The limited market for such annuities suggests that people prefer to
leave something behind.
Yet
another theory is that parents are governed by a "strategic bequest motive,"
using their estates to purchase attention from their grown children. The threat
of disinheritance keeps those children in line; when the threat is effective,
nobody is actually disinherited. If this theory were true, you'd expect parents
with a lot of bequeathable wealth (stocks, bonds, etc.) to get far more visits
from their children than parents with an equal amount of nonbequeathable wealth
(such as pensions). That prediction and found accurate, which is one good
reason to believe the theory.
Parallel to the strategic bequest motive, we
can hypothesize a "strategic gift motive" that operates while the parents are
still alive. Those children who are struggling, and hence more likely to burden
their parents (say, by returning to live with them), get extra help in the hope
that they (the children) will become self-sufficient. (As a variation on this
theme, one can imagine a "strategic schooling motive," whereby the
least-accomplished children get extra schooling, in the hope that they will
become more interesting to converse with.) At bequest time, the strategic gift
motive would evaporate, and the favored child would be favored no longer.
Bequest motives interact
with economic policy in surprising ways. The effects of a deficit-financed tax
cut can depend on whether most parents are altruistic or strategic. Altruistic
parents would save the money from their tax cuts and leave it to the children,
who must pay off all that government debt someday; that saving would hold
interest rates down. Strategic parents might spend a large portion of their tax
cuts, causing interest rates to rise.
It's that
interaction with fiscal policy that has drawn economists' attention to bequest
motives in recent years. But a deeper reason for investigating bequests is that
they reveal something about people's instinctive sense of justice. That
instinctive sense is the best guide we have to economic policy in every
sphere.
