Institutions and the dynamics of inequality

In a recent article, Intergenerational Wealth Transmission and the Dynamics of Inequality in Small-Scale Societies, by Monique Borgerhoff Mulder and colleagues (Science 326, 682 (2009) show the role of wealth sharing institutions, such as common property, in shaping the dynamics of inequality in society .  In their article they write:

Investigations of the dynamics of economic inequality across distinct economic systems have been limited by the paucity of data on all but contemporary market-based industrial societies. Here we present empirical estimates of the extent of inheritance of wealth across generations and of the degree of wealth inequality, along with a descriptive model of the relation between the two.

The key thesis to be explored is that for some kinds of wealth and some economic systems (but not others) the parents’ wealth strongly predicts the wealth of the offspring. In particular, the cattle, land and other types of material wealth of pastoral and agricultural economies are directly transmitted by simple transfers, often buttressed by social conventions of inheritance. By contrast the somatic wealth and skills and the social network ties central to foraging and horticultural livelihoods are more subject to the vagaries of learning, genetic recombination, and childhood development. Moreover, in foraging and horticultural economies, such material wealth as exists tends to circulate through broad social networks rather than being vertically transmitted to offspring. A corollary of the thesis is that, if our model is correct, economies in which material wealth is important will show substantial levels of wealth inequality.

Both the thesis and the corollary find strong support in our data. …

Our principal conclusion is that there exist substantial differences among economic systems in the intergenerational transmission of wealth and that these arise because material wealth is more important in agricultural and pastoral societies and because, in these systems, material wealth is substantially more heritable than embodied and relational wealth. By way of comparison, the degree of intergenerational transmission of wealth in hunter-gatherer and horticultural populations is comparable to the intergenerational transmission of earnings in the Nordic social democratic countries (5)—the average β for earnings in Denmark, Sweden, and Norway is 0.18—whereas the agricultural and pastoral societies in our data set are comparable to economies in which inequalities are inherited most strongly across generations, the United States and Italy, where the average β for earnings is 0.43. Concerning wealth inequality, the Gini measure in the hunter-gatherer and horticultural populations is almost exactly the average of the Gini measure of disposable income for Denmark, Norway, and Finland (0.24); the pastoral and agricultural populations are substantially more unequal than the most unequal of the high-income nations, the United States, whose Gini coefficient is 0.37 (21). Our model explains some seeming anomalies, such as substantial wealth differences in those hunter-gatherer populations whose rich fishing sites can be defended by families or other corporate groups and transmitted across generations and which constitute an atypically important form of material wealth for those societies (22). Our findings also provide evidence for the view—widely held among historians, archaeologists, and other social scientists—that some influences on inequality are not captured simply by differences in technology, as measured by our {alpha} values. For example, the marked hierarchies among some Australian foragers may be due to polygyny (23), elite possession of ritual knowledge (24) that may be transmitted intergenerationally, or even to the dynamics of food sharing (25). Similarly, the fact that some agricultural and pastoral societies do not exhibit substantial levels of economic inequality despite their characteristic forms of wealth being in principle heritable (26, 27) suggests the importance of deliberate egalitarianism, as well as other cultural influences and political choices (28). Examples include the lavish funeral feasting that redistributes the wealth of the elite among the Tandroy and other cattle pastoralists in Madagascar (29) and elsewhere (26). Other examples are the Nordic social democratic polities mentioned above.

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