Hi ElMat
You guys doing "experiments" ought to read the article by Charles and Hurst in Journal of Political Economy 2003 on correlation between wealth across generations. They find that there is a fairly strong correlation but that the "pre-bequest" correlation - i.e. while the parents are still alive is mainly determined by the children inheriting their parents risk tolerance and imitating their savings behavior. Education is less important. Lots of other good stuff in there. I can send any of you a copy (copyrighted - I got online from my university library) if you e-mail me at moominoid@yahoo.com. That is just the first one I read. BTW Hurst is the nephew of my barber here on campus. The nephew is a professor at Chicago Business School. Uncle is very proud about how he went up in the world, starting in a state college upstate here. Apparently a low correlation in income and wealth in this case :)
In my personal example there is a lot true in the article.
Moon, I have clothes bought in 98 when the Indonesian Rupiah collapsed. I bought them to throw money in the Indonesian economy and it was a good deal too.
My car is five year old, has low kilometrage. Could use use 3 years more if driven by me and not by my wife. Will change it 2006. It is simple sedan 1.8l engine Fiat Marea.
I'm only constructing the house now, because I needed to extract all the investment put in the old flat. Good for small kid with 5.000m2 of non-constrcuted area. Kids up to 7 to 8 years can bike, swim play, sports within that area.
I fight back the need for experiment buy stuff. I offer alternatives and I negotiate. My wife just buys!
When I go there, or they holiday with me, I buy good clothes -Curitiba is cold place for Brazil 1.000m above sea level- I keep an eye on the shoes. Not to buy higher helled shoes that cause foot problems. Feet grows fast and I want to throw away the shoes so that the feet is not deformed. All those things that are practical.
But becaue we have a scorn of the planet called Xuxa, who dress sexy on TV and has TV program for kids, the girls want to emulate her. So those good quality clothes I buy: "Is for boys!!"
I needed to give her the URL of some clothes stores to show what girls' clothes look like.
When I talk about "nouveau riche" it comes from the stereotype that old money people look down on the newly rich and their supposedly "unsophisticated" behavior with their new wealth etc. In the 90s people talked about "Sudden Wealth Syndrome" which is related I think. A lot of the self made people coming into much increased wealth over when they grew up, manage everything very well, but some don't. Dealing with the next generation does seem to be a challenge though.
My father would often say what his stepfather (who was relatively wealthy) would do. So he was modeling his raising of children to some degree on the last generation. Usually though it would be along the lines of "I'm such a nice guy, my stepfather would never have done this!" That guy though seemed to spoil his own children over the two he inherited from the first marriage (my grandfather died very young). My father grew up with servants etc. (though they lived in an apartment in the city) and came down in status, this is what I jokingly refer to as nouveau pauvre. My mother has just gone the other way all her life. But she still won't spend anything :) She definitely didn't get the SWS! So I end up inheriting a massive savings rate and a high risk tolerance. My brother though has much lower risk tolerance than my father in investing. So it isn't always inherited. |
