So suppose that when anyone died all their net worth would be liquidized and the money would be removed from circulation.

how would this affect the economy? I know this question is a bit broad, but In general, what changes would occur?


1 Answer 1


Oddly enough, this is a topic that economists have covered pretty thoroughly!

Life cycle models (more info) are a model of consumption generally attributed to Franco Modigliani. These models describe how individuals consume over their lifespan.

While more advanced versions of these models, like overlapping generations models or bequeathal models, incorporate people passing resources onto their children, in the simplest versions people only worry about themselves. In effect, this gives them a goal of using up all their resources at the same time they die, in an attempt to smooth their consumption over their lifespan.

Based on extrapolation from those models, and the fact that the no-bequeathal condition in those models isn't the main thing making them unrealistic, probably not a whole lot changes!

The biggest change you'd see if this were the case is that people would work harder to consumption smooth so that they wouldn't have anything left over. Or they'd save just enough to account for the uncertainty of their lifespan.

You'd probably end up with people falling into destitution when they live longer than expected (or more people doing so than already do). But people already undersave for retirement, so this would only matter for the rich. You might get more support for elderly-care programs so people don't have to save as much with the potential for it to be erased.

You'd also see people who amass great fortunes spending way more of it and hoarding less (or just giving it to their kids earlier), basically the same predictions you get from big estate taxes, as this is effectively just a 100% estate tax.

One change is that occasionally you'd get a super rich person dying unexpectedly. This would end up being a negative money supply shock, which could have negative macroeconomic consequences, although what would likely happen is that the relevant central bank would be prepared to print more money to replace it if necessary. This would reduce inequality very slightly.

None of those are particularly exciting predictions, but that's because this is a pretty easy thing to get around by just shifting how you spend your money. There might be some interesting contract-theoretic implications with the fact that wills are no longer a thing. No waiting for the rich person to die to figure out how they're going to divvy up their stuff; it has to be given away ahead of time.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.