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> Wealth is increasing for everyone, generally speaking That depends a lot on how you count. See: https://fred.stlouisfed.org/series/WFRBLB50107 https://fred

by lisper 6y ago

> Wealth is increasing for everyone, generally speaking That depends a lot on how you count. See: https://fred.stlouisfed.org/series/WFRBLB50107 https://fred.stlouisfed.org/series/WFRBLB50107 The average net worth of the bottom 50% over the last 30 years is about the same as it was 30 years ago. Compare to: https://fred.stlouisfed.org/series/WFRBLT01026 https://fred.stlouisfed.org/series/WFRBLT01026 and note that the net worth of the top 1% has been increasing more or less monotonically for the last 30 years, with only a very small dip in 2008-2012. The bottom 50% take a much bigger share of the losses and a much smaller share of the gains. Over the last 30 years the bottom 50% has barely broken even.

pdonis 6y ago
These charts aren't showing wealth, they're showing money. Money is not wealth. For example, suppose you have a car that you paid $20K in cash for this year. That works out to about $10K 30 years ago (I think the Fed charts you showed are in inflation-adjusted dollars, though they don't say so). So as far as monetary vaue is concerned, you have the same net worth in your $20K car today as a person 30 years ago would have in a car that cost $10K then. (Or even a car that cost $20K then, if we aren't adjusting cost for inflation.) Having owned cars over this entire time period, however, I can tell you that the wealth contained in that $20K car today is quite a bit greater than the wealth contained in a car that cost $10K 30 years ago. A $20K car today will be more reliable, get better gas mileage and give better average performance, have numerous safety features that didn't even exist 30 years ago, and have more bells and whistles in general. So in terms of wealth, I'm quite a bit more wealthy with $20K worth of car today than a person 30 years ago would be with the same inflation-adjusted monetary value of car. And cars are actually a pretty poor example as compared with, say, computers or phones.
- smallnamespace 6y ago
  You may be surprised to hear that economists are well aware that consumer goods have improved over time, and even explicitly adjust for it when calculating inflation [1]. [1] https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm#Question_1 https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
  - pdonis 6y ago
    They do this in the Consumer Price Index, yes. But that's not the same as doing it in all the analyses that are claimed to show wealth inequality. Not all sources define "inflation" the way the CPI does. Also, even in the CPI, they don't do "hedonic adjustments", which is what you are describing, for all goods. For example, I mentioned cars and computers; the only adjustments made for those items are "cost based adjustments". And many items don't even get those. Then there's the question of whether the methodology they are using for making "hedonic adjustments" where they are making them actually captures what it claims to capture, which is, to say the least, not something everyone agrees on.
- lisper 6y ago
  Yes, cars and computers have gotten cheaper relative to their quality. So what? Health care and education have gotten more expensive. Inflation-adjusted money is a pretty good proxy for wealth. What else is there?
  - pdonis 6y ago
    > Health care and education have gotten more expensive. I think this depends on where you get your health care and education, but I agree that in many cases quality vs. price is certainly not where it should be. > Inflation-adjusted money is a pretty good proxy for wealth. What else is there? Not trying to centrally plan an entire country's economy based on faulty proxies for something that cannot be reliably measured [1]. Central planning just makes it easier for the rich to siphon more wealth from everyone else while disguising it as "helping". For example, if we take your observation about quality vs. price for health care and education as true, and compare it to my observation about cars and computers, the general pattern is that the areas where quality vs. price is worst are the areas that are the most centrally planned, and the areas where quality vs. price is best are the areas that are least centrally planned. ([1] - The reason wealth cannot be reliably measured is that it's subjective; the value of a good or service depends on who has it and what use they can make of it. This is the only reason wealth can be increased by specialization and trade in the firt place.)
  - throwaway09223 6y ago
    "Health care and education have gotten more expensive. " I apologize because I don't mean to only present disagreements but I don't think this is true, either. I think that like-for-like health care has largely fallen in cost. The catch with health care is that we've developed better (and much more expensive) methods. Spending has increased dramatically. My grandparents grew up on a farm and when they broke a bone they set it at home. They saw a doctor on very rare occasions and when they did, treatment was limited. Their health care spending was very small, but so was the scope of their treatment. When my grandparents got cancer, they died. There were not nearly so many expensive options available for end of life ailments. It's possible to live with the same kind of spartan health care today, but almost no one would because we are fantastically more wealthy than past generations. Willingness to buy more is exactly what we would expect to see if wealth has risen over time, as I am arguing. The status quo rises dramatically as overall wealth increases. Education is tricky as it's largely a fashion product at this point. Knowledge itself is often freely available in ways impossible to imagine decades ago. It's the prestige and pedigree that cost money. Fashionable limited-quantity things get wildly expensive as wealth increases.
throwaway09223 6y ago
"That depends a lot on how you count." No, I don't think that it does. The bottom 50% generally do not have savings and investments - they invest their wealth in tangibles: Housing, food, belongings. It is not meaningful to look at investments or savings as a measure of wealth when most people near the bottom do not and have never had those things. It's necessary to look at what does signify wealth in this class: Consumption and physical belongings. For example, when we look at the average square footage of a home for the bottom 50% we see dramatic increases over the last century -- because wealth in the bottom 50% has had a dramatic increase.
- URSpider94 6y ago
  I think we're seeing two conflicting trends at work. People have better and better consumables in their lives: always-connected pocket computers, cars with amazing safety systems that last much longer than before, and bigger rental apartments with amenities like air conditioning, cable TV and WiFi. At the same time, they are more and more likely to be living paycheck to paycheck with no savings, and no hope of owning their residence. The working class is simultaneously wealthier than ever before (pocket computers !) and poorer than ever before (can't afford to see a doctor !). What's undoubtedly true is that income inequality has grown dramatically in the US.
  - throwaway09223 6y ago
    But they are not more likely to be living paycheck to paycheck. That likelihood has not increased. That is simply how most people live, and how they have AFAICT always lived. Income is not the dominant factor in whether or not someone lives paycheck to paycheck. People live this way with startlingly high incomes.

by lisper 6y ago

pdonis 6y ago

These charts aren't showing wealth, they're showing money. Money is not wealth. For example, suppose you have a car that you paid $20K in cash for this year. That works out to about $10K 30 years ago (I think the Fed charts you showed are in inflation-adjusted dollars, though they don't say so). So as far as monetary vaue is concerned, you have the same net worth in your $20K car today as a person 30 years ago would have in a car that cost $10K then. (Or even a car that cost $20K then, if we aren't adjusting cost for inflation.) Having owned cars over this entire time period, however, I can tell you that the wealth contained in that $20K car today is quite a bit greater than the wealth contained in a car that cost $10K 30 years ago. A $20K car today will be more reliable, get better gas mileage and give better average performance, have numerous safety features that didn't even exist 30 years ago, and have more bells and whistles in general. So in terms of wealth, I'm quite a bit more wealthy with $20K worth of car today than a person 30 years ago would be with the same inflation-adjusted monetary value of car. And cars are actually a pretty poor example as compared with, say, computers or phones.

smallnamespace 6y ago
You may be surprised to hear that economists are well aware that consumer goods have improved over time, and even explicitly adjust for it when calculating inflation [1]. [1] https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm#Question_1 https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
- pdonis 6y ago
  They do this in the Consumer Price Index, yes. But that's not the same as doing it in all the analyses that are claimed to show wealth inequality. Not all sources define "inflation" the way the CPI does. Also, even in the CPI, they don't do "hedonic adjustments", which is what you are describing, for all goods. For example, I mentioned cars and computers; the only adjustments made for those items are "cost based adjustments". And many items don't even get those. Then there's the question of whether the methodology they are using for making "hedonic adjustments" where they are making them actually captures what it claims to capture, which is, to say the least, not something everyone agrees on.
lisper 6y ago
Yes, cars and computers have gotten cheaper relative to their quality. So what? Health care and education have gotten more expensive. Inflation-adjusted money is a pretty good proxy for wealth. What else is there?
- pdonis 6y ago
  > Health care and education have gotten more expensive. I think this depends on where you get your health care and education, but I agree that in many cases quality vs. price is certainly not where it should be. > Inflation-adjusted money is a pretty good proxy for wealth. What else is there? Not trying to centrally plan an entire country's economy based on faulty proxies for something that cannot be reliably measured [1]. Central planning just makes it easier for the rich to siphon more wealth from everyone else while disguising it as "helping". For example, if we take your observation about quality vs. price for health care and education as true, and compare it to my observation about cars and computers, the general pattern is that the areas where quality vs. price is worst are the areas that are the most centrally planned, and the areas where quality vs. price is best are the areas that are least centrally planned. ([1] - The reason wealth cannot be reliably measured is that it's subjective; the value of a good or service depends on who has it and what use they can make of it. This is the only reason wealth can be increased by specialization and trade in the firt place.)
- throwaway09223 6y ago
  "Health care and education have gotten more expensive. " I apologize because I don't mean to only present disagreements but I don't think this is true, either. I think that like-for-like health care has largely fallen in cost. The catch with health care is that we've developed better (and much more expensive) methods. Spending has increased dramatically. My grandparents grew up on a farm and when they broke a bone they set it at home. They saw a doctor on very rare occasions and when they did, treatment was limited. Their health care spending was very small, but so was the scope of their treatment. When my grandparents got cancer, they died. There were not nearly so many expensive options available for end of life ailments. It's possible to live with the same kind of spartan health care today, but almost no one would because we are fantastically more wealthy than past generations. Willingness to buy more is exactly what we would expect to see if wealth has risen over time, as I am arguing. The status quo rises dramatically as overall wealth increases. Education is tricky as it's largely a fashion product at this point. Knowledge itself is often freely available in ways impossible to imagine decades ago. It's the prestige and pedigree that cost money. Fashionable limited-quantity things get wildly expensive as wealth increases.

throwaway09223 6y ago

"That depends a lot on how you count." No, I don't think that it does. The bottom 50% generally do not have savings and investments - they invest their wealth in tangibles: Housing, food, belongings. It is not meaningful to look at investments or savings as a measure of wealth when most people near the bottom do not and have never had those things. It's necessary to look at what does signify wealth in this class: Consumption and physical belongings. For example, when we look at the average square footage of a home for the bottom 50% we see dramatic increases over the last century -- because wealth in the bottom 50% has had a dramatic increase.

URSpider94 6y ago
I think we're seeing two conflicting trends at work. People have better and better consumables in their lives: always-connected pocket computers, cars with amazing safety systems that last much longer than before, and bigger rental apartments with amenities like air conditioning, cable TV and WiFi. At the same time, they are more and more likely to be living paycheck to paycheck with no savings, and no hope of owning their residence. The working class is simultaneously wealthier than ever before (pocket computers !) and poorer than ever before (can't afford to see a doctor !). What's undoubtedly true is that income inequality has grown dramatically in the US.
- throwaway09223 6y ago
  But they are not more likely to be living paycheck to paycheck. That likelihood has not increased. That is simply how most people live, and how they have AFAICT always lived. Income is not the dominant factor in whether or not someone lives paycheck to paycheck. People live this way with startlingly high incomes.