An interesting conversation between two extremely smart economists with very, very different points of view.
Piketty:
We are very far, to say the least, from equality of opportunity. This is the least you can say, which is interesting because equality of opportunity is a theoretical concept that people very often say they are in favor of. But if you try to move in a concrete manner to have more equality of opportunity, for instance, by distributing inheritance, people get completely crazy and say, “Oh, how could you do that?”
I’m making a proposal about this in my recent book, saying, okay, maybe everybody at age 25 should receive a minimum inheritance. Let’s say it could be 60 percent of average wealth. In France today, that would be €120,000 if the average wealth is €200,000 euros per adult, so everybody, say, would receive €120,000 euros at age 25. People who today receive zero would receive €120,000 at age 25. People who today receive €1 million will still receive €600,000 after the progressive taxation of inheritance and wealth that’s paying for that, so we would still be very, very far from equality of opportunity.
If you want my opinion, I think we could and we should go beyond that. But just doing that would increase the share of the bottom 50 percent children in total inheritance, which today is between 2 percent in the US and 4 percent in France. It would be 20 percent to 25 percent, which is still much less than 50 percent because after all, they are the poorest 50 percent children. But I think it will make a big difference in terms of real opportunity to start a business. But also, more generally, wealth has a big impact on your bargaining power in life.
When you don’t own anything, when you just own zero or when you only have debt, you have to accept everything. You have to accept any working condition, any wage, any job because you need to pay your bills. You need to pay your rent. If you have a family, you need to do something, so you have to accept this. For people with millions or billions, maybe 100 is like zero. They don’t make the difference. But for people who are at zero, having 100, 200 puts you in a position in terms of bargaining power vis-à-vis the rest of society. It is very different.
I think it’s very complementary to control capital and human capital because €100,000, €200,000 — okay, that’s not going to make you buy an apartment in Paris. That’s not enough. But there are many other cities which, for many people, are more enjoyable, where you can actually buy an apartment or house. You can start a business. It makes a real difference for the bottom 50 percent people.