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My criticism has always been around the use of wealth as the indicator. I believe it is chosen instead of income primarily because: 1. It's perhaps easier to d

by Gunax 6y ago

My criticism has always been around the use of wealth as the indicator. I believe it is chosen instead of income primarily because: 1. It's perhaps easier to determine than income (especially for the ultra-wealthy, who often have negative-income in certain years). 2. The wealth-gap is much greater than the income gap, so leads to more dramatic-sounding statements. But really what we care about is income--especially when one considers that wealth is just unspent income. And income is actually what determines lifestyle.

refurb 6y ago
These are good points and to add on, what do they mean when they say “wealth”? Cash? Equities? Real estate? Precious metals? Artwork? Super cars? Some of those are easy to measure and others aren’t. So going by your statement “wealth is just unspent income”, depending on what they consider as “wealth”, you could have person A invest all their disposable income and person B spend all their disposable income. Then in the end analysis person A is wealthy and person B is not despite having the same income.
Proven 6y ago
My criticism has always been around why should incomes or wealth be equal. People aren't equal in their abilities, luck and effort. In a just society some ought to be better off than others. I'm disinterested in "global" anything, and also any redistributionist nonsense. I don't care how much wealth Bill Gates has and I don't want any of it; I care how to live given my own circumstances. Maybe I don't even want to be "wealthy" or "average wealthy". In any case, I reject any attempt by some self-appointed redistributionist busybodies to act on my behalf and steal from others.
twblalock 6y ago
> But really what we care about is income--especially when one considers that wealth is just unspent income. And income is actually what determines lifestyle. Wealth can borrowed against, in many cases to pursue opportunities to build more wealth such as investing or purchasing rental properties. Wealth enables people to make choices that would be too risky to make for people who depend on an income, such as starting a business. Wealth ensures financial security even if one does not have an income. Wealth buys access and influence. Wealth can be inherited. In other words, wealth is not just money, like income is. Wealth is a form of power.
- imtringued 6y ago
  Yeah sure but the way the Fed decided to economic stimulus is basically money straight into your stocks. You don't have to do any productive work to earn money. That's one of the defining features of deflation.
djrobstep 6y ago
Wealth is the correct metric to look at, because wealth generates the most unequal amounts of income, from unequal amounts of work, and even if not spent, is responsible for inequality perpetuating itself over multiple generations.
- WalterBright 6y ago
  85% of American millionaires are self-made (didn't inherit it). See the book "The Millionaire Next Door".
  - joppy 6y ago
    “Self-made”: if you come from a well-off (not necessarily “wealthy” family), you’re more likely to attend university, get a well-paying job, etc. If you come from a worse-off family you’re less likely to do those things. Upbringing and socioeconomic class are still a huge factor in how wealthy one ends up (even excluding inheritance entirely), showing that in the vast majority of cases people tend not to be self-made, but products of their environment.
    - WalterBright 6y ago
      Before you judge the book, why not pick it up? You can get it for $5.48 from Amazon. You can get it for $0.00 at the local public library around here. The book basically lays out common strategies ordinary people employ to become millionaires. It's well worth your time.
      - joppy 6y ago
        I apologise for not having read the book, but that wasn’t the gist of my comment: my point was that wealth or income levels tend to run in families anyway just because of socioeconomic class and similar environmental factors. The book you mention would not help many people in the lower-class neighbourhoods around mine because people there don’t tend to read books on personal finance (perhaps because that is not valued in their social circles, which in turn are products of their environment). The distinction between wealth and income in the book is not so helpful for comparing inequality I think. You can be well-off by having access to enough money: whether this is by having a lot in the bank and a small income, or a little in the bank and a large income, you are still far better of than having neither. I contest the term “self-made” since in particular, socioeconomic status is transmitted from parents to children (there are many studies of this). Sure, there are exceptional self-made individuals. But in a world where the income bracket of a child can be fairly reliably predicted from their parents, is calling a large group of people “self-made” meaningful?
neolog 6y ago
> But really what we care about is income > And income is actually what determines lifestyle. I don't see why for either of those.
jstummbillig 6y ago
Wealth aligns more strongly with inequality because it is inherited. Income is to some part a product of your personal effort which acts as an equalizer. Inheritance very rarely is.
simonebrunozzi 6y ago
I fully disagree. If I had $10M, I could retire today, never work again in my life, and my income would be $0. However, I could easily spend $200k/year and have a great lifestyle, without reducing my wealth, inflation-wise. Some people say I could even spend as high as 4% of my wealth annually [0] - which I personally don't agree with. Vice versa, if I had negative $200k wealth (student debt, etc), and an income of, say, $100k/year while living in the Bay area, I would probably remain "poor" and be constrained to a thrifty lifestyle for a long, long time. [0]: https://www.schwab.com/resource-center/insights/content/beyond-4-rule-how-much-can-you-safely-spend-retirement https://www.schwab.com/resource-center/insights/content/beyo...
- BerislavLopac 6y ago
  It sounds like the best measure would be neither wealth nor income, but expenditure...
  - deleted 6y ago
    [deleted]
  - notahacker 6y ago
    As a measure of lifestyle, to a degree. Although the anomalies are obvious: the upkeep costs of a lavishly appointed London mansion a multimillionaire owns are certainly lower than the rental on a much smaller flat (and probably a fair bit less than the property appreciates in value). And wealth is a source of power and claim on future spending. The average person spending $100k per annum does not have the capacity to decide nobody in his family need ever work again like Warren Buffett could, never mind his power to move markets.
  - yyy888sss 6y ago
    I'd say what matters is whether you can afford something and all, and then to a lesser extent the quality of that good/service. For example, most people in the US can at least afford a cheap used car, and can therefore go pretty much anywhere. Of course, it's nicer to have a Bentley, but a luxury car still sits in the same traffic and has to obey the same speed limits as everyone else. In the developing world however, the rich always have cars, but many normal people can not afford one at all.
Aunche 6y ago
Arguably it's consumption that is the most important metric. Not everyone earns income, but everyone consumes, from a trust-fund baby to a subsidence farmer.
- refurb 6y ago
  So I'm a student in medical school that cost $50k per year, so I take out $80k in student loans to pay tuition and living expenses. Is my $80k in consumption really a good measure of my wealth?

by Gunax 6y ago

refurb 6y ago

These are good points and to add on, what do they mean when they say “wealth”? Cash? Equities? Real estate? Precious metals? Artwork? Super cars? Some of those are easy to measure and others aren’t. So going by your statement “wealth is just unspent income”, depending on what they consider as “wealth”, you could have person A invest all their disposable income and person B spend all their disposable income. Then in the end analysis person A is wealthy and person B is not despite having the same income.

Proven 6y ago

My criticism has always been around why should incomes or wealth be equal. People aren't equal in their abilities, luck and effort. In a just society some ought to be better off than others. I'm disinterested in "global" anything, and also any redistributionist nonsense. I don't care how much wealth Bill Gates has and I don't want any of it; I care how to live given my own circumstances. Maybe I don't even want to be "wealthy" or "average wealthy". In any case, I reject any attempt by some self-appointed redistributionist busybodies to act on my behalf and steal from others.

twblalock 6y ago

> But really what we care about is income--especially when one considers that wealth is just unspent income. And income is actually what determines lifestyle. Wealth can borrowed against, in many cases to pursue opportunities to build more wealth such as investing or purchasing rental properties. Wealth enables people to make choices that would be too risky to make for people who depend on an income, such as starting a business. Wealth ensures financial security even if one does not have an income. Wealth buys access and influence. Wealth can be inherited. In other words, wealth is not just money, like income is. Wealth is a form of power.

imtringued 6y ago
Yeah sure but the way the Fed decided to economic stimulus is basically money straight into your stocks. You don't have to do any productive work to earn money. That's one of the defining features of deflation.

djrobstep 6y ago

Wealth is the correct metric to look at, because wealth generates the most unequal amounts of income, from unequal amounts of work, and even if not spent, is responsible for inequality perpetuating itself over multiple generations.

WalterBright 6y ago
85% of American millionaires are self-made (didn't inherit it). See the book "The Millionaire Next Door".
- joppy 6y ago
  “Self-made”: if you come from a well-off (not necessarily “wealthy” family), you’re more likely to attend university, get a well-paying job, etc. If you come from a worse-off family you’re less likely to do those things. Upbringing and socioeconomic class are still a huge factor in how wealthy one ends up (even excluding inheritance entirely), showing that in the vast majority of cases people tend not to be self-made, but products of their environment.
  - WalterBright 6y ago
    Before you judge the book, why not pick it up? You can get it for $5.48 from Amazon. You can get it for $0.00 at the local public library around here. The book basically lays out common strategies ordinary people employ to become millionaires. It's well worth your time.
    - joppy 6y ago
      I apologise for not having read the book, but that wasn’t the gist of my comment: my point was that wealth or income levels tend to run in families anyway just because of socioeconomic class and similar environmental factors. The book you mention would not help many people in the lower-class neighbourhoods around mine because people there don’t tend to read books on personal finance (perhaps because that is not valued in their social circles, which in turn are products of their environment). The distinction between wealth and income in the book is not so helpful for comparing inequality I think. You can be well-off by having access to enough money: whether this is by having a lot in the bank and a small income, or a little in the bank and a large income, you are still far better of than having neither. I contest the term “self-made” since in particular, socioeconomic status is transmitted from parents to children (there are many studies of this). Sure, there are exceptional self-made individuals. But in a world where the income bracket of a child can be fairly reliably predicted from their parents, is calling a large group of people “self-made” meaningful?

neolog 6y ago

> But really what we care about is income > And income is actually what determines lifestyle. I don't see why for either of those.

jstummbillig 6y ago

Wealth aligns more strongly with inequality because it is inherited. Income is to some part a product of your personal effort which acts as an equalizer. Inheritance very rarely is.

simonebrunozzi 6y ago

I fully disagree. If I had $10M, I could retire today, never work again in my life, and my income would be $0. However, I could easily spend $200k/year and have a great lifestyle, without reducing my wealth, inflation-wise. Some people say I could even spend as high as 4% of my wealth annually [0] - which I personally don't agree with. Vice versa, if I had negative $200k wealth (student debt, etc), and an income of, say, $100k/year while living in the Bay area, I would probably remain "poor" and be constrained to a thrifty lifestyle for a long, long time. [0]: https://www.schwab.com/resource-center/insights/content/beyond-4-rule-how-much-can-you-safely-spend-retirement https://www.schwab.com/resource-center/insights/content/beyo...

BerislavLopac 6y ago
It sounds like the best measure would be neither wealth nor income, but expenditure...
- deleted 6y ago
  [deleted]
- notahacker 6y ago
  As a measure of lifestyle, to a degree. Although the anomalies are obvious: the upkeep costs of a lavishly appointed London mansion a multimillionaire owns are certainly lower than the rental on a much smaller flat (and probably a fair bit less than the property appreciates in value). And wealth is a source of power and claim on future spending. The average person spending $100k per annum does not have the capacity to decide nobody in his family need ever work again like Warren Buffett could, never mind his power to move markets.
- yyy888sss 6y ago
  I'd say what matters is whether you can afford something and all, and then to a lesser extent the quality of that good/service. For example, most people in the US can at least afford a cheap used car, and can therefore go pretty much anywhere. Of course, it's nicer to have a Bentley, but a luxury car still sits in the same traffic and has to obey the same speed limits as everyone else. In the developing world however, the rich always have cars, but many normal people can not afford one at all.

Aunche 6y ago

Arguably it's consumption that is the most important metric. Not everyone earns income, but everyone consumes, from a trust-fund baby to a subsidence farmer.

refurb 6y ago
So I'm a student in medical school that cost $50k per year, so I take out $80k in student loans to pay tuition and living expenses. Is my $80k in consumption really a good measure of my wealth?