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Wealth statistics are tricky. As a thought experiment, I have always wondered what the numbers would be if everyone in the country had identical incomes of $50

Wealth statistics are tricky. As a thought experiment, I have always wondered what the numbers would be if everyone in the country had identical incomes of $50k/year. I have a feeling that 25% would accumulate debts and have zero total wealth. Even with perfectly identical incomes, the "wealthiest" person would have more wealth than the bottom 25% combined.

anovikov 13y ago
That's why i think if we want to debate if the society is 'fair' or not, we should think about income distribution, not wealth distibution. Even for the majority of the people considered 'rich' (top 1% by income), most of the income is not derived from assets/wealth, but from work. So wealth does not play a big role in living standards of vast majority of Americans, even most rich ones.
- ctdonath 13y ago
  Something missing from these discussions is velocity of money. Big income may not mean much if you're burning thru it fast with little to show; reversed, I've known people to amass small fortunes from paltry incomes because they were frugal. I haven't thought thru it much nor come to conclusions, but do think one's "velocity of money" needs far more consideration.
  - saalweachter 13y ago
    What if you considered the income : outflow (non-investment) ratio? How many years of living expenses do you earn each year?
  - anovikov 13y ago
    But this is behavioral difference, it has nothing to do with oligarchy or social order. Also, if there is little you can do to get sizable income form assets, why accumulating assets? Burning through big income is fun.
  - e12e 13y ago
    It's not just that. As there is a (fluent, but still) correlation between money and material goods, it's not the same to be able to save 5% of 20K a year, and 5% of 200K. One way I like to look at it, is how long would you have to save up to have 20xmedian (net) yearly income in your area in the bank? That is, after subtracting whatever reasonable living expenses, how long would you have to save all that's left to have 20 yearly incomes in savings? Because at that point, barring financial crisis -- you should be able to live off the interests -- at roughly median income. It's actually a pretty small number -- the point at which you could reasonably retire just on your own savings pretty much indefinitely. But it's something that is generally impossible to do unless you are "well off" -- and not at the bottom of the pile, so to speak. On the other hand, as soon as you start making "real" money (say 1.2x median income) it becomes almost trivial if you deem it to be a goal worth trying for.
ctdonath 13y ago
A recurring observation about wealth distribution is that if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distribution we see now. Poverty/wealth is, on the whole, a consequence of chosen behavior. I find it odd that those of us who make this observation, and follow it thru to its natural outcomes, are lambasted for the consequential opinions we hold thereon.
- selmnoo 13y ago
  That is a particularly useless observation. What about when wealth distribution is done not through simply handing poor people money, but through providing more social programs, mental healthcare, high-quality education, etc. to people most in need of it? Most people who point out economic inequality would rather like to see long-term social stability programs, not just handing people money until we reach a good wealth curve across the population.
- lutusp 13y ago
  > Poverty/wealth is, on the whole, a consequence of chosen behavior. That's very true, but an equally important factor is compound interest, which tends to amplify what might initially be very small differences in wealth. I once wrote an article (http://arachnoid.com/example/#Compound_Interest_Example http://arachnoid.com/example/#Compound_Interest_Example) in which, as an example, at age 20 a prudent person invests an inheritance of $20,000 for his retirement at age 60, expecting to withdraw $45.00 each week for walking-around money. In the experiment, if the investor withdrew 38 cents more each week, he ended up flat broke at age 60. If he withdrew 38 cents less, he doubled his money. Another factor is that being poor is expensive, there's no other way to put it. When a rich person uses a credit card, he gets a free 30-day loan. That service is being paid for by those at the bottom, who have a constant balance on their cards. A poor person has to buy insurance for his house and car, because they're both on bank loans, and the banks require insurance (and the bank loans sometimes double the cost of the purchases). A rich person can buy things in cash, and then self-insure using his assets to cover accidental losses. Let's face it -- overall, being poor is a very bad business policy. But the point is that an old adage about the rich getting richer and the poor getting poorer is backed up by simple economics.
james1071 13y ago
How many orders of magnitude do you think you are out?

anovikov 13y ago

That's why i think if we want to debate if the society is 'fair' or not, we should think about income distribution, not wealth distibution. Even for the majority of the people considered 'rich' (top 1% by income), most of the income is not derived from assets/wealth, but from work. So wealth does not play a big role in living standards of vast majority of Americans, even most rich ones.

ctdonath 13y ago
Something missing from these discussions is velocity of money. Big income may not mean much if you're burning thru it fast with little to show; reversed, I've known people to amass small fortunes from paltry incomes because they were frugal. I haven't thought thru it much nor come to conclusions, but do think one's "velocity of money" needs far more consideration.
- saalweachter 13y ago
  What if you considered the income : outflow (non-investment) ratio? How many years of living expenses do you earn each year?
- anovikov 13y ago
  But this is behavioral difference, it has nothing to do with oligarchy or social order. Also, if there is little you can do to get sizable income form assets, why accumulating assets? Burning through big income is fun.
- e12e 13y ago
  It's not just that. As there is a (fluent, but still) correlation between money and material goods, it's not the same to be able to save 5% of 20K a year, and 5% of 200K. One way I like to look at it, is how long would you have to save up to have 20xmedian (net) yearly income in your area in the bank? That is, after subtracting whatever reasonable living expenses, how long would you have to save all that's left to have 20 yearly incomes in savings? Because at that point, barring financial crisis -- you should be able to live off the interests -- at roughly median income. It's actually a pretty small number -- the point at which you could reasonably retire just on your own savings pretty much indefinitely. But it's something that is generally impossible to do unless you are "well off" -- and not at the bottom of the pile, so to speak. On the other hand, as soon as you start making "real" money (say 1.2x median income) it becomes almost trivial if you deem it to be a goal worth trying for.

ctdonath 13y ago

A recurring observation about wealth distribution is that if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distribution we see now. Poverty/wealth is, on the whole, a consequence of chosen behavior. I find it odd that those of us who make this observation, and follow it thru to its natural outcomes, are lambasted for the consequential opinions we hold thereon.

selmnoo 13y ago
That is a particularly useless observation. What about when wealth distribution is done not through simply handing poor people money, but through providing more social programs, mental healthcare, high-quality education, etc. to people most in need of it? Most people who point out economic inequality would rather like to see long-term social stability programs, not just handing people money until we reach a good wealth curve across the population.
lutusp 13y ago
> Poverty/wealth is, on the whole, a consequence of chosen behavior. That's very true, but an equally important factor is compound interest, which tends to amplify what might initially be very small differences in wealth. I once wrote an article (http://arachnoid.com/example/#Compound_Interest_Example http://arachnoid.com/example/#Compound_Interest_Example) in which, as an example, at age 20 a prudent person invests an inheritance of $20,000 for his retirement at age 60, expecting to withdraw $45.00 each week for walking-around money. In the experiment, if the investor withdrew 38 cents more each week, he ended up flat broke at age 60. If he withdrew 38 cents less, he doubled his money. Another factor is that being poor is expensive, there's no other way to put it. When a rich person uses a credit card, he gets a free 30-day loan. That service is being paid for by those at the bottom, who have a constant balance on their cards. A poor person has to buy insurance for his house and car, because they're both on bank loans, and the banks require insurance (and the bank loans sometimes double the cost of the purchases). A rich person can buy things in cash, and then self-insure using his assets to cover accidental losses. Let's face it -- overall, being poor is a very bad business policy. But the point is that an old adage about the rich getting richer and the poor getting poorer is backed up by simple economics.

james1071 13y ago

How many orders of magnitude do you think you are out?