As I suspected, it counts dollars. Moreover, it attributes any subsequent income for somebody that received an inheritance as "inherited" (up to certain exponential boundary). I.e. if you received an inheritance of $1000, spent it, and in 30 years since you became a millionaire, then the amount of wealth you have up to what you could have if you invested $1000 at certain rate would be still counted as "inherited". I am very far from being qualified to understand the dense math in the underlying article (http://www.piketty.pse.ens.fr/files/AlvaredoGarbintiPiketty2...) but with such assumption, I imagine we could arrive at 60%. But it doesn't mean what you think it means.
What do you mean? It counts ownership stakes & stocks as well.
> I imagine we could arrive at 60%. But it doesn't mean what you think it means.
It means exactly what I think it means - if you get bequeathed $1 million dollars and get 8% returns from investing this, it doesn't mean you "self-made" $3.66 million more 20 years later.
It also means that if you get “bequeathed” $1000 and use it to buy tools, start a contracting business, and expand it into a large construction corporation over 30 years, you didn’t “self-make” anything either.
not sure where you are getting this from, maybe you are making it up? but that sort of person would be categorized as self-made minus their inherited $1000 and its expected returns.
It doesn't. But on the other side, if you have 3.66 million 20 years later, it doesn't mean you got it from passively investing that same money at 8% returns. Sure, for some people it could be the case, but it's just one of the possible options.
All this calculation is doing is subtracting expected returns above what they would get from investing their capital. If they also start a business and make more money, that will not be counted as inherited wealth - unless they start a business by spending their inherited wealth and get returns below the growth rate of the economy. At that point, it's up to your interpretation whether they "self made" negative wealth or spent money on a vanity business project. I don't think it is unfair to not categorize those people as self made.
Isn't all that based on the assumption that "growth rate of the economy" is some natural process - like the universe expansion or radioactive decay - that happens regardless of what people do? It appears to me that this growth is rather the result of the effort of "self made" (to the amount of their achievement - some more, some less) people that cause it to happen, one way or another. And excluding it seems kinda wrong to me. Of course, sometimes the effort belongs to one person - e.g. the startup owner - but the benefits are shared with others - e.g. investors - and their function can be treated differently. But it's not what's happening here - here the whole investment capital is excluded altogether. I am not sure it's such a useful lens.
Source? This fails the sniff test, as the amount of wealth has grown at such a rapid rate this seems almost impossible.