3 ms·

They are actually quite correlated. Your links argue that there are cases where wealthy people don't have high income and vice-versa, but that doesn't disprove

by mjn 14y ago

They are actually quite correlated. Your links argue that there are cases where wealthy people don't have high income and vice-versa, but that doesn't disprove the quite strong general trend. See table 5 (pg. 36) here, which shows both net worth by income percentile, and income by net worth percentile, to see the strong relationship between being high-net-worth and high-income: http://www.federalreserve.gov/pubs/feds/2009/200913/200913pap.pdf http://www.federalreserve.gov/pubs/feds/2009/200913/200913pa... Example numbers: the top 1% of 2007 income-earners held 26% of U.S. wealth, and the top 1% of households by net worth in 2006 earned 16% of the year's income. Meanwhile, the bottom 50% of income-earners held only 14% of U.S. wealth, and the bottom 50% by net worth earned only 22% of U.S. income. The general trend holds in the in-between categories as well: the 95-99th percentile of incomes hold about twice as much wealth as the 90-95th percentile, etc. So the relationship is not perfect, but taking the groups in aggregate, higher-income-earners control considerably more wealth than lower-income-earners. Some of the later figures in the document explicitly plot some ratios.

Afforess 14y ago
The correlation exists, but is not extremely strong, as the GP stated, which is what my point was. I never said there was no correlation.
- mjn 14y ago
  How is it "not extremely strong"? If there were no correlation, you would expect the top 1% of income earners to hold 1% of net worth, because there's no expected relationship between being high in income and high in net worth. If there were a correlation but a weak one, you might expect them to own a few times the uncorrelated amount. Maybe they'd own 2% of U.S. assets (twice the otherwise expected amount), maybe even 5% (five times the expected amount). Either of those would be enough to establish a clear relationship, but a weak one. But they actually own 26% of American assets, twenty-six times the amount you'd expect in the uncorrelated case! The top 1% of Americans by income own a full quarter of all the country's assets— stocks, bonds, real-estate, etc. That seems like a pretty strong relationship.
  - enoch_r 14y ago
    This just isn't good statistics. The fact that the vast majority of hysterectomies are performed on women doesn't tell us anything about the probability that a randomly selected woman has had a hysterectomy; the fact that the vast majority of wealth is held by the rich doesn't tell us anything about the probability that a randomly selected rich person has a lot of wealth.
    - mjn 14y ago
      Err, the fact that the vast majority of hysterectomies are performed on women does tell us that hysterectomies are strongly correlated with sex. That was the initial dispute: whether wealth and income are strongly correlated or not. The distribution is a separate argument, although I'll note that the PDF I linked has some data on the distributions as well, and it does not support the "weak link between them" argument. The proportion of very-wealthy people with low incomes, and very-high-income people with low wealth, is actually quite small.
      - icambron 14y ago
        I took a quick crack at the correlation implied by table 5 in that paper you linked. Assuming wealth was constant across the ranges specified, I came up with a correlation of 0.45. So meaningful but not high. I personally suspect that it's actually much more highly correlated and that fact would come out if I didn't have to assume wealth was constant for 0-50 and 50-90, but it would be conclusory for me to incorporate that into my numbers.

by mjn 14y ago

Afforess 14y ago

The correlation exists, but is not extremely strong, as the GP stated, which is what my point was. I never said there was no correlation.

mjn 14y ago
How is it "not extremely strong"? If there were no correlation, you would expect the top 1% of income earners to hold 1% of net worth, because there's no expected relationship between being high in income and high in net worth. If there were a correlation but a weak one, you might expect them to own a few times the uncorrelated amount. Maybe they'd own 2% of U.S. assets (twice the otherwise expected amount), maybe even 5% (five times the expected amount). Either of those would be enough to establish a clear relationship, but a weak one. But they actually own 26% of American assets, twenty-six times the amount you'd expect in the uncorrelated case! The top 1% of Americans by income own a full quarter of all the country's assets— stocks, bonds, real-estate, etc. That seems like a pretty strong relationship.
- enoch_r 14y ago
  This just isn't good statistics. The fact that the vast majority of hysterectomies are performed on women doesn't tell us anything about the probability that a randomly selected woman has had a hysterectomy; the fact that the vast majority of wealth is held by the rich doesn't tell us anything about the probability that a randomly selected rich person has a lot of wealth.
  - mjn 14y ago
    Err, the fact that the vast majority of hysterectomies are performed on women does tell us that hysterectomies are strongly correlated with sex. That was the initial dispute: whether wealth and income are strongly correlated or not. The distribution is a separate argument, although I'll note that the PDF I linked has some data on the distributions as well, and it does not support the "weak link between them" argument. The proportion of very-wealthy people with low incomes, and very-high-income people with low wealth, is actually quite small.
    - icambron 14y ago
      I took a quick crack at the correlation implied by table 5 in that paper you linked. Assuming wealth was constant across the ranges specified, I came up with a correlation of 0.45. So meaningful but not high. I personally suspect that it's actually much more highly correlated and that fact would come out if I didn't have to assume wealth was constant for 0-50 and 50-90, but it would be conclusory for me to incorporate that into my numbers.