5 ms·

If someone can provide a definition of rich and can show the majority of people meeting that definition of rich stay in that class for very long, I'd be interes

If someone can provide a definition of rich and can show the majority of people meeting that definition of rich stay in that class for very long, I'd be interested in seeing the data supporting it. I have looked for years and always found the opposite whenever a dataset allowed answering the question. For any reasonable definition of rich ( * ) (by total wealth or by total income, for example), and for any dataset from which I can check the claim "the rich get richer," I have found that the majority of those in that definition of rich do not stay in that class. So it seems far more accurate to claim the rich get poorer. It's hard to find such datasets, but some that you can find that demonstrate this are (I don't care to chase them down, and my notes on it are not where I am sitting): 1) the majority born into the top quintile don't end up there (although the most likely quintile to end up in is the top). I think St. Louis Fed has studies on this. 2) the richest Americans, as measured by Forbes 400, demonstrate that the majority are first generation in that class. This you can check yourself quite easily. 3) Various tax studies show that people don't stay at the top for income. Sure, a wealthy person rarely falls to zero, but once you fix a definition of rich and see how long people in that class stay at that definition, the majority simply do not last. (*) if you define rich as the top 90% of people by wealth, which is not a very common way to define it, then the majority stay in it over time.

socialist_coder 12y ago
> If someone can provide a definition of rich and can show the majority of people meeting that definition of rich stay in that class for very long, I'd be interested in seeing the data supporting it. Isn't that "Capital in the Twenty-First Century"? It's proved.
- ChrisLomont 12y ago
  The class as a whole may have increasing wealth, but that does not mean the people in the class at one snapshot in time remain there. Care to cite where in that book they make a definition of rich, and then show that exactly those people in the rich group remain there? I have not seen anyone claim the books shows this. The class of rich people is very fluid, as the above datasets show. In academic circles, there is ample criticism of that book, so much that it's considered wrong on many points by economists of all political persuasions. It's right about some things, provides a lot if good material, but is also wrong in many things, so don't just take all it says as truth without reading ample scholarly work after it's publication. Google is your friend here.
  - jellicle 12y ago
    > In academic circles, there is ample criticism of that book, so much that it's considered wrong on many points by economists of all political persuasions. No, there isn't. Only Fox News believes that. You clearly haven't read Piketty's book. Among other things, he has excellent data from several countries showing most of all wealth is inherited. Some 70% in France, over 50% in the U.S. That is, in France, for every 100 euros of wealth of any type whatsoever, 70 of those were inherited from one's parents. In the U.S. for every $100 of any sort of wealth whatsoever, over $50 was inherited from one's parents. Most of all wealth is inherited, not worked for. By definition, dynastic wealth shifts around a bit. A billion into this trust (dedicated for grandchildren and great-grandchildren), a billion into that trust dedicated for maintenance of the family's real estate holdings. A given individual may fall in or out of limited rankings such as the Forbes 400. But so what? The 493rd richest person in America is still very very rich, and will remain so until that person decides to distribute their wealth to their heirs (and for that matter, moving out of the top 400 may have been due to providing for the heirs). There are also lots of studies about income mobility. The U.S. has lower income mobility than most nations. In general, if you are born poor, you're quite unlikely to ever reach the top quintile of income. (The top quintile of household income in the U.S. is just over $100K, which I suspect many Silicon Valleyers wouldn't even call "rich".) So one way to write this would be: if you are born poor, you are very unlikely to ever live in a household where there are two earners that each earn a bit over $50K. About 8% of those born poor will ever reach that level of income. http://www.equality-of-opportunity.org/ http://www.equality-of-opportunity.org/
    - ChrisLomont 12y ago
      >No, there isn't. Only Fox News believes that. Here [1] is the first page google returned when I asked for a summary of criticism. Although many would dislike heritage, the critique contains ample references to well respected academics (including some from MIT, Yale, etc.) Here's [2] a widely circulated report on a paper by a MIT grad student showing a significant alternative explanation to Piketty. Here's the actual paper [3]. Here's Krugman [4], pretty much of the same political persuasion as Piketty, summarizing some serious critique and errors in Piketty. Here's [5] other economists claiming Piketty had conclusion altering errors in his data (but if I recall, Piketty later fixed some, but not all, of these errors. The corrections are not in the book as far as I know) Here [6] famous author, economist, and statistician Nassim Taleb proves that Piketty's math is flawed. Here is an easier intro (andother critiques, repeated in the literature) from his notebooks [7, #156 and #158]. I could go on and on, there is ample research going on, but I've amply demonstrated that your claim that it's only Fox News is completely wrong. >The U.S. has lower income mobility than most nations. Only when measured as quintiles, and a lot of that effect is the US has larger dollar value quintiles than most. If a quintile here takes $40K to move across and only $30K in another country, you can have people here with more dollar mobility and less quintile mobility. Please check your source for your claim and see if they measure by quintile or by PPP adjusted dollars. There is a difference. Here [8] is an overview of some issues and references to papers showing how the results change if talking about quintile mobility or dollar mobility. Related, probably the largest study to day on US mobility [9] based on tracking IRS data found that mobility in the US is relatively unchanged for many decades. >In general, if you are born poor, you're quite unlikely to ever reach the top quintile of income. In terms of absolute mobility, 90% of those born into the bottom end up better off than their parents [10, Fig 1]. From the same dataset, the majority born into the bottom quintile do not stay there [Fig 2, 55% leave], and similarly the majority of those born into the top quintile do not stay there [about 55% leave]. So one way to write this would be: if you are born poor or rich, you are most likely to move towards the median. [1] http://www.heritage.org/research/reports/2014/09/understanding-thomas-piketty-and-his-critics http://www.heritage.org/research/reports/2014/09/understandi... [2] http://www.economist.com/blogs/freeexchange/2015/03/wealth-inequality?fsrc=scn/tw/te/bl/ed/nimbysinthetwentyfirstcentury http://www.economist.com/blogs/freeexchange/2015/03/wealth-i... [3] http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf [4] http://krugman.blogs.nytimes.com/2014/05/24/is-piketty-all-wrong/?_r=0 http://krugman.blogs.nytimes.com/2014/05/24/is-piketty-all-w... [5] http://www.ft.com/intl/cms/s/2/e1f343ca-e281-11e3-89fd-00144feabdc0.html#axzz32YyA0Zcp http://www.ft.com/intl/cms/s/2/e1f343ca-e281-11e3-89fd-00144... [6] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2434363 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2434363 [7] http://www.fooledbyrandomness.com/notebook.htm http://www.fooledbyrandomness.com/notebook.htm [8] http://www.heritage.org/research/reports/2013/07/a-guide-to-understanding-international-comparisons-of-economic-mobility http://www.heritage.org/research/reports/2013/07/a-guide-to-... [9] http://obs.rc.fas.harvard.edu/chetty/mobility_trends.pdf http://obs.rc.fas.harvard.edu/chetty/mobility_trends.pdf [10] http://www.frbsf.org/economic-research/publications/economic-letter/2013/march/us-economic-mobility-dream-data/ http://www.frbsf.org/economic-research/publications/economic...
curun1r 12y ago
I think this is missing the point. It's not really important whether it's the same 1% that's getting richer. The fact that the income distribution between the top 1% of earners and the remaining 99% is as high as it is is still a huge problem. It's just not an efficient way for society to allocate resources.
- ChrisLomont 12y ago
  I agree that is a problem. However, many people assume the rich are some monolithic group, hence the maxim "the rich get richer," which most people take to mean a rich person gets richer, not most rich people fall from that class and different people enter that class with even more wealth. Thus I commented on the fact (it seems) that rich people usually do not stay rich, for any reasonable definition of rich. Other people become rich.
mcguire 12y ago
Out of curiosity, what happens to the bottom quintile in those three cases?
- ChrisLomont 12y ago
  The majority of the bottom quintile do not stay in the bottom quintile. The movement from bottom to each of the higher quntiles is quite similar to the movement from the top down. Here is one look at it [1] [1] http://www.frbsf.org/economic-research/publications/economic-letter/2013/march/us-economic-mobility-dream-data/ http://www.frbsf.org/economic-research/publications/economic...
crimsonalucard 12y ago
Once you become rich not only does it become significantly easier to spend money, but it becomes significantly easier to make money. Essentially your money just grows through investments, dividends and compounding interest. You gain more money by doing less work, so you stay rich for basically the rest of your life. This is a common trend among rich people and among experts who actually study economics it is also the prevailing reason behind the wealth gap. > 2) the richest Americans, as measured by Forbes 400, demonstrate that the majority are first generation in that class. This you can check yourself quite easily. Rich people as individuals tend to stay rich. However wealth is diluted exponentially when passed from generation to generation as inheritance. Think about diluting $100 amongst nodes for each level of a binary tree. The root node gets 100, the next generation each node gets 50, the next gets 25, 12, 6, 3... two generations and already the wealth is divided by four, and this only accounts for people having two kids, rich people tend to have much more!
- ChrisLomont 12y ago
  >Rich people as individuals tend to stay rich Can you provide a dataset with some cutoff for "rich," and demonstrate people in that class stay there? The entire point is I've tried to do this, and for each dataset that allows measuring such a claim I get the opposite conclusion. The majority fall out of that class, even within their own lifetime. If a person has 1B, and later has 100M, they have lost value. If your original definition of rich is 1B, then they fell out. So if you now move your definition of rich to include 100M, then you also need to consider all people that had 100M, not just the guy with 1B. Now you'll find most don't stay at 100M, most fall. Say you then move your definition to 10M. Then 1M. Then 100K. Repeat the process, but you're moving the definition of rich which is not accurate reasoning. I've done all this, and your claim is unsupportable from any dataset I've examined. For each dataset where I could see how many people started at some level of wealth or income, within their lifetime (and often much shorter), the majority fell below that wealth or income level. Can you provide a dataset showing otherwise? I posted how to get a few counter to your claim already.

socialist_coder 12y ago

> If someone can provide a definition of rich and can show the majority of people meeting that definition of rich stay in that class for very long, I'd be interested in seeing the data supporting it. Isn't that "Capital in the Twenty-First Century"? It's proved.

ChrisLomont 12y ago
The class as a whole may have increasing wealth, but that does not mean the people in the class at one snapshot in time remain there. Care to cite where in that book they make a definition of rich, and then show that exactly those people in the rich group remain there? I have not seen anyone claim the books shows this. The class of rich people is very fluid, as the above datasets show. In academic circles, there is ample criticism of that book, so much that it's considered wrong on many points by economists of all political persuasions. It's right about some things, provides a lot if good material, but is also wrong in many things, so don't just take all it says as truth without reading ample scholarly work after it's publication. Google is your friend here.
- jellicle 12y ago
  > In academic circles, there is ample criticism of that book, so much that it's considered wrong on many points by economists of all political persuasions. No, there isn't. Only Fox News believes that. You clearly haven't read Piketty's book. Among other things, he has excellent data from several countries showing most of all wealth is inherited. Some 70% in France, over 50% in the U.S. That is, in France, for every 100 euros of wealth of any type whatsoever, 70 of those were inherited from one's parents. In the U.S. for every $100 of any sort of wealth whatsoever, over $50 was inherited from one's parents. Most of all wealth is inherited, not worked for. By definition, dynastic wealth shifts around a bit. A billion into this trust (dedicated for grandchildren and great-grandchildren), a billion into that trust dedicated for maintenance of the family's real estate holdings. A given individual may fall in or out of limited rankings such as the Forbes 400. But so what? The 493rd richest person in America is still very very rich, and will remain so until that person decides to distribute their wealth to their heirs (and for that matter, moving out of the top 400 may have been due to providing for the heirs). There are also lots of studies about income mobility. The U.S. has lower income mobility than most nations. In general, if you are born poor, you're quite unlikely to ever reach the top quintile of income. (The top quintile of household income in the U.S. is just over $100K, which I suspect many Silicon Valleyers wouldn't even call "rich".) So one way to write this would be: if you are born poor, you are very unlikely to ever live in a household where there are two earners that each earn a bit over $50K. About 8% of those born poor will ever reach that level of income. http://www.equality-of-opportunity.org/ http://www.equality-of-opportunity.org/
  - ChrisLomont 12y ago
    >No, there isn't. Only Fox News believes that. Here [1] is the first page google returned when I asked for a summary of criticism. Although many would dislike heritage, the critique contains ample references to well respected academics (including some from MIT, Yale, etc.) Here's [2] a widely circulated report on a paper by a MIT grad student showing a significant alternative explanation to Piketty. Here's the actual paper [3]. Here's Krugman [4], pretty much of the same political persuasion as Piketty, summarizing some serious critique and errors in Piketty. Here's [5] other economists claiming Piketty had conclusion altering errors in his data (but if I recall, Piketty later fixed some, but not all, of these errors. The corrections are not in the book as far as I know) Here [6] famous author, economist, and statistician Nassim Taleb proves that Piketty's math is flawed. Here is an easier intro (andother critiques, repeated in the literature) from his notebooks [7, #156 and #158]. I could go on and on, there is ample research going on, but I've amply demonstrated that your claim that it's only Fox News is completely wrong. >The U.S. has lower income mobility than most nations. Only when measured as quintiles, and a lot of that effect is the US has larger dollar value quintiles than most. If a quintile here takes $40K to move across and only $30K in another country, you can have people here with more dollar mobility and less quintile mobility. Please check your source for your claim and see if they measure by quintile or by PPP adjusted dollars. There is a difference. Here [8] is an overview of some issues and references to papers showing how the results change if talking about quintile mobility or dollar mobility. Related, probably the largest study to day on US mobility [9] based on tracking IRS data found that mobility in the US is relatively unchanged for many decades. >In general, if you are born poor, you're quite unlikely to ever reach the top quintile of income. In terms of absolute mobility, 90% of those born into the bottom end up better off than their parents [10, Fig 1]. From the same dataset, the majority born into the bottom quintile do not stay there [Fig 2, 55% leave], and similarly the majority of those born into the top quintile do not stay there [about 55% leave]. So one way to write this would be: if you are born poor or rich, you are most likely to move towards the median. [1] http://www.heritage.org/research/reports/2014/09/understanding-thomas-piketty-and-his-critics http://www.heritage.org/research/reports/2014/09/understandi... [2] http://www.economist.com/blogs/freeexchange/2015/03/wealth-inequality?fsrc=scn/tw/te/bl/ed/nimbysinthetwentyfirstcentury http://www.economist.com/blogs/freeexchange/2015/03/wealth-i... [3] http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf [4] http://krugman.blogs.nytimes.com/2014/05/24/is-piketty-all-wrong/?_r=0 http://krugman.blogs.nytimes.com/2014/05/24/is-piketty-all-w... [5] http://www.ft.com/intl/cms/s/2/e1f343ca-e281-11e3-89fd-00144feabdc0.html#axzz32YyA0Zcp http://www.ft.com/intl/cms/s/2/e1f343ca-e281-11e3-89fd-00144... [6] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2434363 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2434363 [7] http://www.fooledbyrandomness.com/notebook.htm http://www.fooledbyrandomness.com/notebook.htm [8] http://www.heritage.org/research/reports/2013/07/a-guide-to-understanding-international-comparisons-of-economic-mobility http://www.heritage.org/research/reports/2013/07/a-guide-to-... [9] http://obs.rc.fas.harvard.edu/chetty/mobility_trends.pdf http://obs.rc.fas.harvard.edu/chetty/mobility_trends.pdf [10] http://www.frbsf.org/economic-research/publications/economic-letter/2013/march/us-economic-mobility-dream-data/ http://www.frbsf.org/economic-research/publications/economic...

curun1r 12y ago

I think this is missing the point. It's not really important whether it's the same 1% that's getting richer. The fact that the income distribution between the top 1% of earners and the remaining 99% is as high as it is is still a huge problem. It's just not an efficient way for society to allocate resources.

ChrisLomont 12y ago
I agree that is a problem. However, many people assume the rich are some monolithic group, hence the maxim "the rich get richer," which most people take to mean a rich person gets richer, not most rich people fall from that class and different people enter that class with even more wealth. Thus I commented on the fact (it seems) that rich people usually do not stay rich, for any reasonable definition of rich. Other people become rich.

mcguire 12y ago

Out of curiosity, what happens to the bottom quintile in those three cases?

ChrisLomont 12y ago
The majority of the bottom quintile do not stay in the bottom quintile. The movement from bottom to each of the higher quntiles is quite similar to the movement from the top down. Here is one look at it [1] [1] http://www.frbsf.org/economic-research/publications/economic-letter/2013/march/us-economic-mobility-dream-data/ http://www.frbsf.org/economic-research/publications/economic...

crimsonalucard 12y ago

Once you become rich not only does it become significantly easier to spend money, but it becomes significantly easier to make money. Essentially your money just grows through investments, dividends and compounding interest. You gain more money by doing less work, so you stay rich for basically the rest of your life. This is a common trend among rich people and among experts who actually study economics it is also the prevailing reason behind the wealth gap. > 2) the richest Americans, as measured by Forbes 400, demonstrate that the majority are first generation in that class. This you can check yourself quite easily. Rich people as individuals tend to stay rich. However wealth is diluted exponentially when passed from generation to generation as inheritance. Think about diluting $100 amongst nodes for each level of a binary tree. The root node gets 100, the next generation each node gets 50, the next gets 25, 12, 6, 3... two generations and already the wealth is divided by four, and this only accounts for people having two kids, rich people tend to have much more!

ChrisLomont 12y ago
>Rich people as individuals tend to stay rich Can you provide a dataset with some cutoff for "rich," and demonstrate people in that class stay there? The entire point is I've tried to do this, and for each dataset that allows measuring such a claim I get the opposite conclusion. The majority fall out of that class, even within their own lifetime. If a person has 1B, and later has 100M, they have lost value. If your original definition of rich is 1B, then they fell out. So if you now move your definition of rich to include 100M, then you also need to consider all people that had 100M, not just the guy with 1B. Now you'll find most don't stay at 100M, most fall. Say you then move your definition to 10M. Then 1M. Then 100K. Repeat the process, but you're moving the definition of rich which is not accurate reasoning. I've done all this, and your claim is unsupportable from any dataset I've examined. For each dataset where I could see how many people started at some level of wealth or income, within their lifetime (and often much shorter), the majority fell below that wealth or income level. Can you provide a dataset showing otherwise? I posted how to get a few counter to your claim already.