The "Burdens" of Inheritance

After today, I'll see if I can dismiss the unexpected "burden" theme for a while, so these thoughts serve as a "wrap"! In the post "Are Healthcare Services Even Considered Product?" I highlighted the burdens imposed by limitations on healthcare which - as a result - has been gradually defined in incomprehensible fiscal terms. A second post looked at burdens imposed by asset structures. Among other problems, today's asset structures impose uncertainties in valuation and risk for investors of all income levels. They also generate problems for flow dynamics from the micro level of family, to the broader macro level of the economy.

Inheritance in this post refers to the "windfalls" of personal inheritance, as well as a broader interpretation of taxation windfalls for governments which don't always correlate well with their spending patterns. Both are similar in that they are incidental to economic activity, yet treated as otherwise. While the first instance is not readily observed (or discussed) at a societal level, the second instance gets constant attention, in part because resultant services formation has little rhyme or reason. Whereas the personal windfall tends to be important for many on the right, the social (or total) windfall holds more importance on the left. Just the same, both left and right often place undue emphasis on personal windfalls as drivers of economic activity.

Even though these two ideas of inheritance windfall can appear different, their illiquid nature stems in part from a societal reliance on assets to services flows. In both instances, the random availability of inheritance windfalls makes it difficult for either individuals or governments to plan for their use in optimal terms. As a result, governments attempt to make such windfalls more reliable through hard definitions of asset formation (zoning and regulation). In the process, property use, business formation and hiring potential become less viable than would otherwise be possible or desirable - which generates "win or lose" scenarios for everyone involved. This affects one's ability to negotiate during the inevitability of changing business conditions and/or personal circumstance.

While states have long relied on asset structures for services formation, the process can slow economic dynamism by conceptualizing asset formation and its associated "inheritance" as primary economic activity, instead of work and ongoing commerce. As a result, property and land use requirements can sometimes overwhelm the activities they are intended to support, in terms of time and resource commitments. What's more, the services which asset formations are expected to generate, are not always adequate in terms of local marketplace needs. This has bearing as to why - in some circumstance - services need to be approached on more direct terms.

At the level of individual and family, the combined nature of property holdings can be a mixed blessing at best and a curse at worst. Not only are these holdings monetarily illiquid, they are difficult - if not impossible - to represent in individual terms of usage potential. This is particularly true for lower income levels, if there is not sufficient income capacity for legal negotiations to go smoothly if changes are needed - if indeed one has sufficient leverage to initiate legal processes. Even though the ability to incorporate or utilize bankruptcy are tools for higher incomes, more efficient legal tools are still needed for lower income levels.

Prisons are full of individuals who take matters into their own hands, when they have no adequate means to maintain resource use. Some who survey this reality refuse to marry, when they see that legal systems are not necessarily equipped to provide solutions for property issues. All too often, governments become the recipients of (consequently) neglected properties, when family members are not able to work out legal issues among themselves. Internal incentives are not strong enough for governments to seek reform. But too many negative externalities build up over time, as local economies bear the consequences with partially abandoned properties and broken societal trust.

It helps to remember in all this that one reason why populations acquiesce to government involvement in the first place, is that governments "promised" to streamline property access and negotiation for their citizens. In part because many vital property issues are conveniently shoehorned under the "untouchables" of domestic family law, governments prevent open discussion as to the fact they have not actually been able to do so. Admittedly, I am speaking of the U.S. in this context, and other nations may not have property burdens of the same nature.

Burdens of inheritance also find their way into monetary policies which consequently place greater emphasis on debt formations and asset structures, instead of the ongoing dynamics of economic activity. Indeed this language has lead to more societal challenging of the nature of GDP. That is particularly unsettling in that GDP expresses economic dynamism more than any other measure available. Even as market monetarists point to the importance of nominal stability as a way to honor debt contracts, policy makers all too often see asset formation as a more important component of the economy, than time commitments on the part of individuals and business formation.

How to overcome these burdens? More flexible and incremental forms of ownership would not only generate more family formation, but greatly improve the condition of already existing local properties. Individuals who provide the most substantial financial commitments tend to be the ones who are actually able to tend to the care and maintenance of their property. All too often: when ownership is uncertain, incentive to provide what may be one's only available resources for property needs, can understandably be lost.

The arguments of this post are not to "do away" with the windfall nature of inheritance and taxation. Just the same: going forward, this form of monetary flow needs some budging from its primary position, so that economies can be envisioned in more dynamic terms. Current government calls for more taxation is ineffective, because the "grow the pile first and ask questions later" mentality only raises the stakes of economic access for all involved. The goal is to make asset formation more liquid, understandable, accessible and flexible.

In summary, the undue emphasis on asset structures for services needs, makes populations reluctant to allow innovation that would lead to greater freedom of choice in time use. In turn, this makes business formation, job formation and family structure more difficult to maintain. The stakes are already quite high: both at the point of economic entry, and what one is expected to provide on an ongoing basis to make both business and personal relationships work. Better forms of incremental growth are needed to spur future growth, and legal assistance will certainly be needed for the process to begin.