The way you put it, it sounds like geometric returns are the primary cause of wealth inequality, with generational transfer being a minor blip. Transfer alone is roughly O(1) over time; geometric returns are O(k^t). And imagine if your k < 1!!
Maybe that's the cause of wealth inequality and we should examine that. It seems like income taxation and social subsidies O(t) are unlikely to outcompete exponential processes as ameliorations for the root problem.
Geometric returns are, in a way, the primary cause of wealth inequality. However, if everyone starts at the far left flat end of the curve, it's a fair playing surface allowing for meritocratic rewards for those who provide outsize value.
On the other hand, if you start at the parabolic upward portion of the geometric return curve, having demonstrated no value of your own, you've destroyed meritocratic rewards.
The founding fathers were historically against generational wealth, after all, they fled such a system in Europe.
> It seems like income taxation and social subsidies O(t) are unlikely to outcompete exponential processes as ameliorations for the root problem.
Taxation can absolutely outcompete potential exponential processes, that's why we have progressive taxation. Progressive taxation is exponential in dollar terms.
Progressive wealth taxation is another way of approaching this, but so is an estate tax. That short-circuits the whole process.
To be clear, I believe in wealth inequality, and I believe in income inequality, so long as it's coupled with social mobility (i.e. everyone has the ability to reach higher tiers), and so long as the minimum standard is a decent existence, not death.
If progressive taxation outcompetes exponentiality, empirically it never has, not even in the most progressive states, as we see that the wealth gap still increases, even in most European nations.
I don't mind that, though, I think outsized reward is fair for outsized value creation. Where I disagree is that it should last more than a generation, and I believe that higher taxes should be levied to raise the standard of living for the bottom rung.
> I think outsized reward is fair for outsized value creation
How do you define "fair" and how do you define "value creation"? And how do I get to be the administrator who gets to make those calls, so that I can make sure that my friends and family's "value creation" classes are put before everyone else's?
Maybe that's the cause of wealth inequality and we should examine that. It seems like income taxation and social subsidies O(t) are unlikely to outcompete exponential processes as ameliorations for the root problem.