tag:blogger.com,1999:blog-6130830332820181818.post7546722596947466486..comments2024-03-27T13:13:25.164-04:00Comments on johnshaplin: University Endowments, Education and Social Mobility by Thomas Pikettyjohnshaplinhttp://www.blogger.com/profile/17618981988062495637noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-6130830332820181818.post-60177163970449414132014-05-05T17:31:50.404-04:002014-05-05T17:31:50.404-04:00In particular, it is often difficult to distinguis...In particular, it is often difficult to distinguish purely private family foundations from true charitable foundations. In fact, families often use foundations for both private and charitable purposes and are generally careful to maintain control of their assets even when housed in a primarily charitable foundation. It is often not easy to know what exact rights children and relatives have in these complex structures, because important details are often hidden in legal documents that are not public. In some cases, a family trust whose purpose is primarily to serve as an inheritance vehicle exists alongside a foundation with a more charitable purpose.<br /><br />It is very interesting to note that the amount of gifts declared to the tax authorities always falls drastically when oversight is tightened (for example, when donors are required to submit accurate receipts, or when foundations are required to submit more detailed financial statements to certify that their official purpose is in fact respected and private use of foundation funds does not exceed certain limits, confirming the idea that there is a certain porosity between public and private uses of these legal entities. Ultimately, it is very difficult to say precisely what proportion of foundations fulfill purposes than can truly be characterized in the public interest.<br />johnshaplinhttps://www.blogger.com/profile/17618981988062495637noreply@blogger.comtag:blogger.com,1999:blog-6130830332820181818.post-80031128690403223932014-05-05T17:31:28.108-04:002014-05-05T17:31:28.108-04:00These arguments are not altogether reassuring, how...These arguments are not altogether reassuring, however. It would in any case be rather imprudent to rely solely on the eternal but arbitrary force of family degeneration to limit the future proliferation of billionaires. At any rate, as noted, the return on capital does not need to rise as high as 10 percent for all large fortunes: the rate of return only has to exceed the rate of growth by a small margin to deliver major in-egalitarian shocks.<br /><br />Another important point is that wealthy people are constantly coming up with new and ever more sophisticated legal structures to house their fortunes. Trust funds, foundations, and the like often serve to avoid taxes, but they also constrain the freedom of future generations to do as they please with the associated assets. In other words, the boundary between fallible individuals and eternal foundations is not as clear-cut as is sometimes thought. Restrictions on the rights of future generations were in theory drastically reduced when entails were abolished more than two centuries ago. In practice, however, the rules can be circumvented when the stakes require.<br />johnshaplinhttps://www.blogger.com/profile/17618981988062495637noreply@blogger.comtag:blogger.com,1999:blog-6130830332820181818.post-46870964098068819232014-05-05T17:30:54.569-04:002014-05-05T17:30:54.569-04:00(*) (*)These findings should be interpreted cautio...(*) (*)These findings should be interpreted cautiously, however. In particular, it would be too much to try to use them to predict how global wealth inequality will evolve over the next few decades. For one thing, the very high returns that we see in the period 1980-2010 in part reflect the long-term rebound of the global asset prices (stocks and real estate), which may not continue. For another, it is possible that the economies of scale affect mainly the largest portfolios and are greatly reduced for more modest fortunes of 10-15 million euros, which, as noted, account for a larger share of total global wealth than do the Forbes billionaires. Finally, leaving management fees aside, these returns will depend on the institution’s ability to choose the right managers. But a family is not an institution: there always comes a time when a prodigal child squanders the family fortune, which the Harvard Corporation is unlikely to do, simply because any number of people would come forward to stand in the way. Because family fortunes are subject to this kind of random “shock”, it is unlikely that the inequality of wealth will grow indefinitely at the individual level; rather, the wealth distribution will converge towards a certain equilibrium.johnshaplinhttps://www.blogger.com/profile/17618981988062495637noreply@blogger.com