tend to reduce inequality, and this tendency would be greater, the smaller the maximum. Such a limit might be imposed as part either of the non-fiscal or the fiscal law. In the former case, it would need to be provided that a will in which the legal limit was exceeded should be void, either as a whole, or in so far as the limit was exceeded. In the latter case, the limit would be imposed by means of a progressive tax on inherited property, appropriately graduated. §4. In considering the comparative effects of freedom of bequest and of the legitim upon productive power, we need to distinguish between effects on the action of testators and effects on the action of inheritors. Sidgwick has propounded a characteristic dilemma, the substance of which is that any restriction on the right of bequest tends to reduce work and saving by testators, while the absence of restriction tends to reduce work and saving by inheritors.1 As regards testators, the motives of accumulation are complex, but moderate restrictions do not seem likely to restrict work or saving appreciably, though a drastic restriction on the lines proposed by Mill might do so." As regards inheritors, we need to distinguish between the effects of the fact of inheritance, and the effects of the expectation of the fact of inheritance. In general, the effects of the fact of inheritance will obviously be to make work and saving less than they would otherwise have been, and markedly less if the amount inherited is large, or if the inheritance comes at an early age. In the case of large fortunes, the total check to work, and probably also to saving, will generally be greater, if these fortunes are broken up into several parts of considerable size, 1 Principles of Political Economy, pp. 404 ff., and Elements of Politics, pp. 102-3. Compare Rignano (Un Socialisme, p. 37). Professor Graziani argues that the legitim cannot be defended on the ground that it encourages production, (Teorie e Fatti Economici, p. 102). than if they are handed down unbroken, except by taxation. For this reason it may be argued that the legitim, as applied to large fortunes, increases the number of idlers more than freedom of bequest might do.1 But the force of this argument is weakened by the fact already mentioned that rich families, as a rule, have a low birth-rate. Another argument which has been used against the legitim, and might equally be used against Mill's proposal, is that it tends to an excessive subdivision of property, which is harmful to efficient production. This argument is most plausible in regard to agricultural land and private, as distinct from joint stock, businesses. For in other cases, apart from reactions on the amount of new saving, subdivision of individual property rights need not hinder the adoption of the most efficient methods of production. Even as regards land, as Mill pointed out,3 no such harmful effects on production need follow an equal division of property rights, if those concerned in the division are fully alive to their own economic interests. For the land itself need not be divided into uneconomic holdings. One of those concerned may continue to hold and work the land in the most economic units, and the others take a share in the profits. In fact, however, it must be admitted that those concerned often fail to make such agreements, but are led by ignorance, sentimentality or jealousy to excessive subdivisions. Such excessive subdivision undoubtedly exists in parts of Ireland and of Continental Europe, though in France, and to a certain extent elsewhere, it is partially and slowly corrected by a reduction in the birth-rate of the families concerned, which tend to cut their coat according to their cloth, 1 Rignano (op. cit., p. 38) makes the same objection to Mill's proposal. * Compare Marshall, Industry and Trade, p. 114. • Principles of Political Economy, pp. 296 ff. The same argument applies to private businesses. or the size of their families according to the size of their estates. The legitim, in short, will only produce these uneconomic effects, provided three other conditions are also present, namely, an already wide diffusion of landed property, a moderately high birth-rate among the proprietors, and a certain lack of economic understanding. Mill's proposal for a maximum inheritance, unless fixed very low, would have no such effect, nor would the legitim in regard to large fortunes. Turning from the fact of inheritance to the expectation of the fact, it is clear that the latter will cause a check to work and saving additional to that caused by the former. Only inheritances which are windfalls, that is to say, totally unexpected, are likely to be completely free from this checking tendency. We might add, as a counsel of perfection, to the old precept that "established expectations should not be disappointed," the new one, as regards inheritance, that "no expectations should become established." As between different classes of expectations, the check to work and saving will be less for small than for large inheritances, and less when the expectation is remote than when it is near. But though, from the point of view of maximum production, it is better that property should come to inheritors late in life, yet the welfare derivable from a given expenditure will generally diminish, for any particular person, as he grows older. This fact is important in relation to gifts inter vivos, which are considered below. §5. We may now go on to consider the effects on inequality and on production of various rules of intestate succession. Up to a point the argument of the preceding sections is equally applicable. It is obvious that equal division between children, without distinction of age or sex, tends to cause less inequality than primogeniture. But, seeing that women's incomes, both from work and property, are generally smaller than men's, a division between children, in which daughters received more than sons, would tend to diminish inequality further. The same would be true of succession under the law of legitim. Schemes of intestate succession, in which ascendants participate, will generally lead to greater immediate inequality than schemes from which they are excluded, since they are generally older and richer than descendants or collaterals of the same generation. The only practicable alternative to allowing distant relatives to inherit on intestacy is to transfer the property concerned to the State, a proposal which falls under the heading of fiscal law and will be considered in Chapter IX. below. As regards effects on production, Dr. Johnson defended primogeniture, whether by law or custom, on the ground that "it makes but one fool in a family," and it certainly tends to make but one idler, and probably also to encourage saving, since in general the larger any one's income, the larger the proportion which he saves. In considering the effects of intestate succession, we need only consider the effects of the fact, and not of the expectation of the fact, of inheritance, since the expectation will always be that a man, if he has anything to leave, will make a will. Intestacy is rare and unimportant among the rich, and any stiffening of the rules of intestate succession, in a sense disagreeable to property owners, will merely stimulate will-making.1 The problem of encouraging accumulation and, in particular, of checking decumulation, will be considered in Chapter X. below. Its solution will be found to turn, in large measure, upon the introduction in law of differential treatment as between property which a man has acquired out of his savings, and property which he has received by inheritance or gift. 1 Compare Rignano, op. cit., p. 33. CHAPTER VIII THE COMPARATIVE EFFECTS OF CUSTOM WITHIN THE LIMITS OF THE NON-FISCAL LAW. §1. It was pointed out in the last chapter that, for a complete knowledge of the comparative effects of different laws of inheritance, we need to know how custom operates within the limits of such laws. The comparative inequality produced by substantial freedom of bequest on the one hand, and of the law of legitim on the other, depends upon such custom. In this matter our knowledge is at present very imperfect. An analysis of substantial wills in different countries, designed to show the extent to which testators concentrate their property on one inheritor, or spread it among many, the extent to which they leave property to those who are not related to them, and the proportion of their property which they leave for "benevolent" purposes and to institutions, would be very valuable and instructive. But no such analysis seems hitherto to have been attempted. It is an important piece of research, which still awaits a researcher.1 Very much less important in its effects It could be very useful without pretending to be exhaustive. A good sample could probably be obtained, e.g., by taking the wills during the last ten years of all persons whose names began with B and who left property worth more than £10,000. The data in this country are all at Somerset House, and any will may be inspected on payment of a small fee. A complication of course arises, in so far as property is settled on trustees during life, and not left by will at all. But this would not greatly disturb the general results. Another largely unworked field of research, of interest both for economists and economic historians, is offered by the life history of millionaires. The comparative numbers of millionaires in different occupations, including the occupation of passive inheritance, has been partially investigated. See Watkins, Growth of Large Fortunes, pp. 141-147 |