Question

Nearly everyone knows that the Japanese save more money than Americans do, and that they are more community minded as well. How do the two nations compare when it comes to bequest motives and bequest divisions?
Charles Yuji Horioka, in a National Bureau of Economic Research working paper entitled “Are the Japanese Selfish, Altruistic, or Dynastic?” explored the attitudes and actions of parents in both nations as to the money and property they left their children. He identified three classes of bequests:
The selfish. Selfish parents either leave money to their children in return for receiving care in their old age, or they attempt to spend all their money before they die.
The altruistic. The altruists leave money to their children no matter what, with the most altruistic leaving the most to their poorest child.
The dynastic. Dynastic parents leave money to preserve a family business or a name. They usually bequest all or most of their fortune to one child.
He found that selfishness is well entrenched in both nations but more so in Japan. Depending on the years involved, 77 to 91 percent of Japanese said they were disinterested with amassing wealth for the purpose of passing it on to their children, while 57 percent of Americans surveyed felt the same way.
When it came to splitting the inheritance among their children, 84 percent of Americans but only 44 percent of Japanese would divide the money equally. Also, 29 percent of the Japanese but only 3 percent of the Americans would give more or all the money to the child or children that took care of them in their old age.

Questions:
1. Who are maximizing their rational choice, the Japanese or the Americans?
2. Which of the three forms would Adam Smith agree is the best choice?
3. In which nation do you think collective choice outweighs individual choice?
4. Does opportunity cost play a role in bequest decisions?
5. Would there be diminishing marginal utility in the selfish strategy?



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  • CreatedJuly 29, 2013
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