3 ms·

I don't understand the argument. Why is it not a good idea to sum up the net worth of the poor? Because you find the result displeasing?

giancarlostoro 8y ago
Seems more like the results are not as straight forward as one thinks, especially if you don't account for debt. How do you appropriately account for debt anyway? I'm guessing many here would have different approaches. Thus why it's not a good idea. I think defining up front how the numbers came to be would be a better idea.
- Juliate 8y ago
  Exactly. Who's the richest: * person A who owns 2 cows and can make a confortable living for their family; yet, has a debt of 2 cows value to someone else; * person B who lives a frugal life, has no possessions, gets only enough food to live day by day, but owns person A's debt.
dagw 8y ago
Why is it not a good idea to sum up the net worth of the poor Because it gives weird outcomes like a when newly graduated lawyer with a $200K salary and a massive student debt is considered much poorer than someone in sub-Saharan Africa earning $2 a day but is debt free.
- jonathanstrange 8y ago
  It's an indicator, like many other indicators. If you interpret indicators correctly, there is no problem. I suppose the argument is that better indicators should be used? So I'm curious. Which ones would you suggest and how are they calculated? I'm a bit sceptical about the replies to my question so far, because where I live individual debts have to paid and massive debts will make your life miserable. So I definitely think they should be included into a meaningful indicator.
  - bobthepanda 8y ago
    Individually as indicators they make sense in their context. Grouping together similar contexts makes sense. But aggregating all of disparate people globally on non-PPP adjusted wealth tells us what, exactly?
  - dagw 8y ago
    massive debts will make your life miserable. I have both a mortgage and student loans and in a global 'poverty' sense my debt level is massive (but probably quite normal from an upper middle class Westerner perspective). However my household income more than covers all the costs of servicing those loans as well as making sure my entire family is comfortably fed, housed, educated and healthy, and still leaves me with money left over every month to save for a rainy day. That is how wealth should be defined. Basically, having a net worth of negative $400k is not necessarily a problem if your income is $200K. Being in debt is not in it self a problem, not being able to make your debt payments is what will make you miserable. A wealth indicator should try to capture that distinction.
  - tomhoward 8y ago
    > If you interpret indicators correctly, there is no problem. Right, but when the indicators are used for ragebait headlines and editorials, for most people the reaction is outrage, and ends at that. So a more sober, considered discussion about the issue of wealth and inequality - which is an important discussion we need to have - can't happen.
    - tomhoward 8y ago
      Also... > where I live individual debts have to paid and massive debts will make your life miserable. So I definitely think they should be included into a meaningful indicator There have been times over the past few years where my paper net worth was negative (due to running a startup that had no market value and having substantial personal debts), but still lived a materially comfortable western lifestyle - i.e., lived in a nice apartment in a nice area of a modern city, owned a nice-ish car, ate at nice restaurants, travelled frequently both domestically and abroad. Life wasn't exactly joyous, but it wasn't the debts that made life hard, it was the pressure of startup life. Recently my partner and I have become home-owners and so we now live in a nice-ish house in a nice-ish area, but the mortgage combined with my legacy debts mean that my net worth is still not very much above zero. The bank has been willing to lend to us because our combined present and future earning capacity makes us reasonably low-risk borrowers, so we get to live a lifestyle that could well put us in the top few percent in the world, even though we're not "rich" on paper. I could easily take out a couple of personal loans to spend on consumables, push our net worth below zero, but not have a materially less well-off existence. This is the problem with these studies; it equates "richness" with present dollars of assets or debt, completely divorced from the realities of your current and future lifestyle and earning capacity.
- isostatic 8y ago
  Only because assets aren't counted correctly. That education -- a massive asset That western passport -- a massive asset Even a homeless bum sleeping rough on the streets of chicago has more wealth than a typical Indian farmer.
- tomjen3 8y ago
  You could compute the net-present value of the average future life-time income of each of the persons involved, which would give a more correct overview of the real wealth.
maratc 8y ago
The Forbes' rebuttal does a pretty good job at explaining it, there's no need to get my personal opinions involved.

giancarlostoro 8y ago

Seems more like the results are not as straight forward as one thinks, especially if you don't account for debt. How do you appropriately account for debt anyway? I'm guessing many here would have different approaches. Thus why it's not a good idea. I think defining up front how the numbers came to be would be a better idea.

Juliate 8y ago
Exactly. Who's the richest: * person A who owns 2 cows and can make a confortable living for their family; yet, has a debt of 2 cows value to someone else; * person B who lives a frugal life, has no possessions, gets only enough food to live day by day, but owns person A's debt.

dagw 8y ago

Why is it not a good idea to sum up the net worth of the poor Because it gives weird outcomes like a when newly graduated lawyer with a $200K salary and a massive student debt is considered much poorer than someone in sub-Saharan Africa earning $2 a day but is debt free.

jonathanstrange 8y ago
It's an indicator, like many other indicators. If you interpret indicators correctly, there is no problem. I suppose the argument is that better indicators should be used? So I'm curious. Which ones would you suggest and how are they calculated? I'm a bit sceptical about the replies to my question so far, because where I live individual debts have to paid and massive debts will make your life miserable. So I definitely think they should be included into a meaningful indicator.
- bobthepanda 8y ago
  Individually as indicators they make sense in their context. Grouping together similar contexts makes sense. But aggregating all of disparate people globally on non-PPP adjusted wealth tells us what, exactly?
- dagw 8y ago
  massive debts will make your life miserable. I have both a mortgage and student loans and in a global 'poverty' sense my debt level is massive (but probably quite normal from an upper middle class Westerner perspective). However my household income more than covers all the costs of servicing those loans as well as making sure my entire family is comfortably fed, housed, educated and healthy, and still leaves me with money left over every month to save for a rainy day. That is how wealth should be defined. Basically, having a net worth of negative $400k is not necessarily a problem if your income is $200K. Being in debt is not in it self a problem, not being able to make your debt payments is what will make you miserable. A wealth indicator should try to capture that distinction.
- tomhoward 8y ago
  > If you interpret indicators correctly, there is no problem. Right, but when the indicators are used for ragebait headlines and editorials, for most people the reaction is outrage, and ends at that. So a more sober, considered discussion about the issue of wealth and inequality - which is an important discussion we need to have - can't happen.
  - tomhoward 8y ago
    Also... > where I live individual debts have to paid and massive debts will make your life miserable. So I definitely think they should be included into a meaningful indicator There have been times over the past few years where my paper net worth was negative (due to running a startup that had no market value and having substantial personal debts), but still lived a materially comfortable western lifestyle - i.e., lived in a nice apartment in a nice area of a modern city, owned a nice-ish car, ate at nice restaurants, travelled frequently both domestically and abroad. Life wasn't exactly joyous, but it wasn't the debts that made life hard, it was the pressure of startup life. Recently my partner and I have become home-owners and so we now live in a nice-ish house in a nice-ish area, but the mortgage combined with my legacy debts mean that my net worth is still not very much above zero. The bank has been willing to lend to us because our combined present and future earning capacity makes us reasonably low-risk borrowers, so we get to live a lifestyle that could well put us in the top few percent in the world, even though we're not "rich" on paper. I could easily take out a couple of personal loans to spend on consumables, push our net worth below zero, but not have a materially less well-off existence. This is the problem with these studies; it equates "richness" with present dollars of assets or debt, completely divorced from the realities of your current and future lifestyle and earning capacity.
isostatic 8y ago
Only because assets aren't counted correctly. That education -- a massive asset That western passport -- a massive asset Even a homeless bum sleeping rough on the streets of chicago has more wealth than a typical Indian farmer.
tomjen3 8y ago
You could compute the net-present value of the average future life-time income of each of the persons involved, which would give a more correct overview of the real wealth.

maratc 8y ago

The Forbes' rebuttal does a pretty good job at explaining it, there's no need to get my personal opinions involved.