Members of older cohorts were wealthier at younger ages in the past than is the case for current cohorts.

Hmm. From a couple of days ago.

Fraction of all US wealth owned by Boomers & Gen-Xers when the average member of each was age 35:

Boomers, 1989 21%
GenX, 2008 8%

The average Millennial turns 35 in 2023. Right now they own 3%.

There will surely be political implications.https://t.co/j1pNrt8mll

— Kurt Andersen (@KBAndersen) November 24, 2019

Click for the responses.

I don't know if the data is correct, but for debate purposes happy to stipulate that it is.

Theoretically, if each generation is demographically identical (particularly in marriage and fertility choices) and each generation is facing virtually identical economic forces, one would expect each generation cohort at the same age should be owning a comparable amount of societal wealth. Clearly there has been a falling off from each generational cohort since the Boomers.

Alex Tabbarok at Marginal Revolution linked to the tweet in Wealth by Generation and Age.

The responders to Andersen's original tweet are a smorgasbord of Rorschach tests. Everyone is seeing what their priors dictate they should see.

The Marginal Revolution commenters are a shrewder and more intelligent bunch and their responses are less dogmatic and more puzzled, more open to suggestions.

Some ideas which leap to immediate mind for me:

The Boomer generation is about 20% longer in years than the next two, 18 years versus 15 tears. That will skew things anyway.

Cohort life expectancies have been rising. If you are a Boomer born in 1950, you could expect to live to be 68. You would expect you parents born circa 1925 to live till they were 58. If you are a Generation X born in 1970, you expect to live to be 71. If you are Millennial born in 1990, you expect to live to be 75. The longer lived each generational cohort's parent cohort, presumably there is less wealth to be inherited (the next generation waits longer for them to die and more of the parent's accumulated capital is expended in that longer life) and therefore less subsequent cohort wealth accumulation.

Shift in income/wealth balance. For the entirety of the post-WWII period, there has been a shift in balance of household income from labor to capital. The implication is that earlier cohorts might have had greater opportunity to accumulate wealth via labor than later cohorts. This is an intergenerational inequality issue.

It is possible that for the asset owning members in the older cohorts, that their assets accumulated value (interest/inflation) at a higher rate than is true for current cohorts. In a world of negative interest rates, the structure of capital and interest might be disadvantageous today in a fashion deleterious to the current generations.

We know that post-WWII there has been a mass migration out of the traditional middle-class into the top two quintiles of income and wealth. Heritable wealth is perhaps segregating in a skewed fashion such that later cohorts are demonstrating a statistical skew.

It is possible that some of the apparent impact is due to changed attitudes towards household debt. My impression is that all quintiles are carrying much higher burdens of household debt than earlier generations. If that is the case, then it would retard net wealth accumulation of later cohorts. Basically the younger generations are bringing forward consumption in a fashion different from the past.

I suspect work diligence expectations might have been much higher in the past, yielding more rapid wealth accumulation earlier in life. We know that labor force participation rate is down materially over the past two or three cohorts. We have less good data on work intensity. However, I would wager that there was a higher percentage of Boomers at any given age who were working intensely (say greater than 50 hours a week) than today. If so, that would translate into more rapid wealth accumulation earlier in life among earlier cohorts.

Almost certainly the biggest driver would be in demographic changes in terms of career start and family formation starts between earlier and later cohorts. Among boomers, perhaps only 15% expected to achieve a college degree whereas today it is perhaps 35%. Pursuit of a college degree takes you out of the labor force longer, retarding your wealth accumulation. So age by age in the different cohorts, your wealth accumulation is going to push back later. Similarly, wealth accumulation begins to kick in with marriage and then children. Become more financially responsible as they accumulate familial responsibilities. Percentage ever married is lower in later cohorts and average age of first marriage is higher. Same with birth of children.

A higher percentage of more recent cohorts are pursuing more education and more degrees than in the past which should translate into higher future incomes, enabling greater savings. However, the degree premium has been eroding, more people attempt higher education but do not complete (incurring the costs but not gaining the benefits), and more are funding the cost of higher education through debt - all of which likely sharply erode the capacity to accumulate wealth.

Finally, I assume that the average propensity to save was higher in older cohorts and that later cohorts have a corresponding higher propensity to consume.

If Andersen's data is accurate, then the reasons for the variance in wealth accumulation between age cohorts has multiple root causes, some of them self-correcting. For example, we are probably topping out the long run we have had in age improvement.

Unstated in Andersen's tweet are the policy implications of these root causes. If cohort wealth accumulations vary because of random luck events at the cohort level, it possibly bolsters the case for estate and or wealth taxes.

If, instead, and what I suspect is more likely the case, cohort wealth accumulation varies owing to personal choices (when to marry, when to have children, propensity to save, propensity to consume, how much to invest in education, tolerance of debt, etc.) then the wealth variances between cohorts is a simple function of superior behavioral practices among the older cohorts, then the case for estate and wealth taxes evaporates. Younger cohorts need to adjust their behaviors and then they too will have high wealth accumulation rates.

Regardless of what the answers turn out to be, it is an interesting observation and implied question.