Definition of wealth
Wealth is a person's net worth, expressed as:
wealth = assets − liabilities
The word "wealth" is often confused with "income". These two terms describe different but related things. Wealth consists of those items of economic value that an individual owns, while income is an inflow of items of economic value. (See Stock and flow.) The relation between wealth, income, and expenses is:
change of wealth = income − expense
A common mistake made by people embarking on a research project to determine the distribution of wealth is to use statistical data of income to describe the distribution of wealth. The distribution of income is substantially different from the distribution of wealth. According to the International Association for Research in Income and Wealth, "the world distribution of wealth is much more unequal than that of income."
If an individual has a large income but also large expenses, his wealth could be small or even negative.
Statistical distributions
There are many ways in which the distribution of wealth can be analysed. One example is to compare the wealth of the richest ten percent with the wealth of the poorest ten percent. In many societies, the richest ten percent control more than half of the total wealth. Mathematically, a Pareto distribution has often been used to quantify the distribution of wealth, since it models an unequal distribution. More sophisticated models have also been proposed. Generally, income inequality metrics can be used as wealth inequality metrics.
Redistribution of wealth and public policy
All about: Redistribution of wealth
In many societies, attempts have been made, through property redistribution, taxation, or regulation, to redistribute wealth, sometimes in support of the upper class, and sometimes to diminish extreme inequality.
Examples of this practice go back at least to the Roman republic in the third century B.C., when laws were passed limiting the amount of wealth or land that could be owned by any one family. Motivations for such limitations on wealth include the desire for equality of opportunity, a fear that great wealth leads to political corruption, to the belief that limiting wealth will gain the political favor of a voting bloc, or fear that extreme concentration of wealth results in rebellion. Various forms of socialism attempt to diminish the unequal distribution of wealth and thus the conflicts arising from it.
During the Age of Reason, Francis Bacon wrote "Above all things good policy is to be used so that the treasures and monies in a state be not gathered into a few hands... Money is like muck, not good except it be spread."
Communism arose as a reaction to a distribution of wealth in which a few lived in luxury while the masses lived in extreme poverty. In The Communist Manifesto Marx and Engels wrote "From each according to his ability, to each according to his need."[6] While the ideas of Marx have been embraced by various states (Russia and China in the 20th century), Marxism has seldom if ever worked in practice.
On the other hand, the combination of labor movements, technology, and social liberalism has diminished extreme poverty in the developed world today, though extremes of wealth and poverty continue in the Third World.
Charity
In addition to government efforts to redistribute wealth, the tradition of individual charity is a voluntary means of wealth transference. There are also many voluntary charitable organizations making concerted efforts to aid those in need.
21st century
At the end of the 20th century, wealth was concentrated among the G8 and Western industrialized nations, along with several Asian and OPEC nations. An Energy Information Administration report stated that OPEC member nations were projected to earn $1.251 trillion in 2008, from their oil exports, due to the record crude prices.[9]
A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned 1% of global wealth.[10] Moreover, another study found that the richest 2% own more than half of global household assets.
Real estate
While sizeable numbers of households own no land, few have no income. For example, 10% of land owners (all corporations) in Baltimore, Maryland own 58% of the taxable land value. The bottom 10% of those who own any land own less than 1% of the total land value.This form of Gini coefficient analysis has been used to support Land value taxation.
In the United States
In the United States at the end of 2001, 10% of the population owned 71% of the wealth and the top 1% owned 38%. On the other hand, the bottom 40% owned less than 1% of the nation's wealth. According to this 2006 study by the Federal Reserve System, from 1989 to 2004, the distribution in the United States had been changing with indications there was a greater concentration of wealth held by the top 10% and top 1% of the population.A PBS report by Solman on Aug. 16, 2011 now found that financial gains over the last decade in the United States have been mostly made at the "tippy-top" of the economic food chain as more people fall out of the middle class. The top 20 percent of Americans now holds 84 percent of U.S. wealth., the 2nd 20 % holds 11%, the third 20 % 4 %. The following figure shows the actual distribution of wealth in the US. The 4th 20% (0.2%) and the Bottom 20% (0.1%) are not visible:
Dan Ariely and Michael Norton show in a study (2011) that US citizens across the political spectrum significantly underestimate the current US wealth inequality and would prefer a more egalitarian distribution of wealth, raising questions about ideological disputes over issues like taxation and welfare.
All about the Money:
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