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Just to add: Income to wealth correlation though is a matter of one being used to create another. The level of one's income has an impact on how easy it is to c

Just to add: Income to wealth correlation though is a matter of one being used to create another. The level of one's income has an impact on how easy it is to create wealth. Aside from that though, the two should never be conflated. Many people are able to create wealth with small to moderate incomes, while higher income doesn't mean higher wealth if you also have high expenses.

mikeash 13y ago
I think it's also important to note that the causal relationship goes in both directions. Higher income increases the ability to create wealth, but also higher wealth increases the ability to have a higher income. Certainly, they are very different things, and individual variance can be high, but they are definitely strongly correlated in the population at large.
- run4yourlives 13y ago
  but also higher wealth increases the ability to have a higher income. This I don't quite agree with. Overall it makes sense but it is not as direct a correlation. Wealth gives you leverage, but only by the weakest of factors can it give you higher income directly. There would always be some sort of intermediate step. There are few ways you can transform wealth directly into income without significant work. (At that point it becomes less a factor of the wealth directly and more you earning an income.) Eg. You are born wealthy and because of that your father knows a lot of people willing to give you an opportunity that a person not born wealthy wouldn't have. This only works if you aren't an idiot, or an alcoholic, etc. If you are, the chances of you turning your own wealth into income which you can then convert back into more wealth is significantly hampered compared to someone without these issues but less starting wealth. If you aren't putting work and effort into exploiting the leverage that wealth provides, you will not create income.

mikeash 13y ago

I think it's also important to note that the causal relationship goes in both directions. Higher income increases the ability to create wealth, but also higher wealth increases the ability to have a higher income. Certainly, they are very different things, and individual variance can be high, but they are definitely strongly correlated in the population at large.

run4yourlives 13y ago
but also higher wealth increases the ability to have a higher income. This I don't quite agree with. Overall it makes sense but it is not as direct a correlation. Wealth gives you leverage, but only by the weakest of factors can it give you higher income directly. There would always be some sort of intermediate step. There are few ways you can transform wealth directly into income without significant work. (At that point it becomes less a factor of the wealth directly and more you earning an income.) Eg. You are born wealthy and because of that your father knows a lot of people willing to give you an opportunity that a person not born wealthy wouldn't have. This only works if you aren't an idiot, or an alcoholic, etc. If you are, the chances of you turning your own wealth into income which you can then convert back into more wealth is significantly hampered compared to someone without these issues but less starting wealth. If you aren't putting work and effort into exploiting the leverage that wealth provides, you will not create income.