Edward Elgar, 2004, 168 pp, hardback, 1 84064 814 7, £45Order this book
Only a small proportion [of economists] have devoted their time to the study of distribution. Of these, most have been concerned with analysing the distribution of income, between either classes or persons. Only a few have examined the personal distribution of wealth (p.xi)
– both because there is little data available and because the issue is far from value-free. (Amongst the few economists who have studied the distribution of wealth whom Schneider mentions is Tony Atkinson, whose Public Economics in Action: The basic income / flat tax proposal and other publications have been such important contributions to the Citizen’s Income debate).
Chapter 1 contains definitions of wealth and of distribution of wealth, and the justification for the book: ‘The distribution of wealth is important because the wellbeing of individuals/households is affected by their wealth independently of their income’ (p.5).
Chapter 2 is on measuring inequality in the distribution of wealth, and chapter 3 on empirical studies, with a conclusion that globally ‘inequality fell fairly continuously during the first three quarters of the twentieth century, but thereafter either remained relatively constant or increased’ (p.53).
Chapter 4 discusses a number of determinants of the distribution of wealth, and finds that inequality in the distribution of incomes accounts for only half of the inequality in the distribution of wealth. Chapter 5 asks how unequal the distribution of wealth should be on the basis of a variety of views of what society should be like; and chapter 6 discusses ways of changing the distribution of wealth. The author recommends a progressive inheritance tax (p.100), and chapter 7 discusses the question as to whether this would cause capital flight and thus reduce the nation’s affluence. Chapter 8 recommends a step by step approach to reform.
Whilst it is true that inequality in the distribution of income accounts for less than half of the inequality of wealth, it is only just less than half (p.59), so a greater incentive to earn income amongst the low paid could over time increase equality of wealth. Thus measures to reduce the marginal benefit deduction rates for people on low incomes could well stand alongside a progressive inheritance tax as a policy designed to reduce the inequality of wealth. Similarly, different savings habits affect inequality of wealth (pp.63f), so to reduce disincentives to save amongst people on low incomes would also reduce inequality of wealth (as would reducing incentives to save for the better-off). Thus whilst policies directly related to wealth (such as inheritance tax) might be useful, co-ordinated income- and savings-related policies could also have a significant effect.
This well-researched and accessible book is a good introduction to an important subject.