The problem I have when discussing "wealth" is that it's almost always done in comparison to others at this time. For example, I'm "rich" or "poor" compared to the richest and poorest people around me today.
If we compared it with other people internationally, or even historically, we're filthy rich at almost any level of the ladder.
In some ways we are, but in other ways we aren’t rich at all.
In our ability to procure food and entertainment and travel, even a very poor person is pretty rich compared to the historical average. But if you consider our ability to have leisure time, walk away from an employer, or get other people to do stuff for us, the moderately wealthy of the distant past were still much richer than today’s middle class, let alone today’s poor.
What you say is true, but what fraction of the population was "moderately wealthy" in the distant past? What fraction of the population could walk away in the past, and what fraction can walk away today?
All good things to keep in mind, but the comparison here was with the wealthy of past eras. I often see the statement taken to extremes, saying that a poor person in a first world country today is better off than an ancient king. And in many ways, it’s absolutely true! But in other ways it’s not. My main point is that wealth is as much about power as it is about possessions, and when it comes to power, your relative wealth is all that matters.
That's a good point. I also don't like that these discussions of wealth are always accompanied by a discussion of income and then they end. Especially in an article where debt is featured so prominently. Significantly raising one's income and seeing it as the sole dividing factor between oneself and others becomes part of a false system of hope for many.
A saving habit _and_ reasonable living on one's income, no matter the level, will _often_ quickly result in the kind of savings that will pay for those big restaurant meals, if needed, or those vacations, if needed. My friends who are good savers tend to take vacations to really nice places without needing to spend a lot when they get there. So they have more money for the next vacation, etc.
There are people who are unfairly saddled with debt, to whom this doesn't really apply as readily, but it'd be nice if messages like "wow, sad, income levels make life so hard" could be accompanied by "but here's what many of you who are reading this can do at any level to feel on top of things." We are short-changing our children by not bundling that more realistic discussion with discussions of income.
That's an interesting comment. It made me think about having two different kinds of wealth: wealth enabling things and wealth freeing from problems. If you can do fancy things with careful planning, that's one thing. Doing fancy things without burdening yourself with complicated cost-benefit analysis is the other, and it's probably the latter that gives more freedom and the one the article talks about.
Reading "The Millionaire Next Door," as much a of a cliche or a classic as it is right now, really opened my eyes to some of this nuance for me. The book points out that many high earners are still living paycheck to paycheck, and some lower earners do quite well by saving aggressively. So who is rich, the software engineer who earns $120k/year in a LCoL area and takes expensive vacations and buys photography equipment and has a nice house & great car and has little saved, or the senior school teacher who makes $80k and saves a ton, but doesn't take the expensive vacations, drives a 20-year-old Civic, and enjoys gardening? What's the definition of rich? What's the definition of value? What do you want in life?
The other aspect is (as you and parent posters note) the comparison with others. If you live in an expensive area where everyone drives a nice car, pays for a gardener, and sends the kid to a high-tuition school, you'll stand out if you drive a 2008 Civic, have an adequate but not nice yard, and send the kid to the public kindergarten. "Comparison is the thief of joy," said someone. I personally was much happier with my un-professionally-landscaped yard and small house and used car in my middle-class neighborhood when I realized that those were reasons we have a higher net worth than most of our peers, not signs that we don't.
Wealth is a relative thing, not an absolute. The distribution of wealth is one of the most interesting aspects of it, which is why that is commonly discussed.
This is not true. Wealth is choices: how many different things can you choose to do? The average person today has a multitude of choices that were not available to the richest person in the world a century ago, and for that reason is wealthier than the richest person in the world a century ago.
Relative wealth is very important because it distorts the market. Even if you are well-off compared to a larger population, if many others around you are even better off, it’s going to suck for you. See Bay Area housing prices for a concrete real world example.
> Relative wealth is very important because it distorts the market.
No, that's not correct. What distorts the market are artificial constraints on the market. You mention Bay area housing prices, but you fail to point out that those prices are skyrocketing because of enforced scarcity: the supply of housing in the Bay area is not being allowed to grow in response to growing demand, but instead is held fixed by local laws and regulations. That is what is distorting the market.
Relative wealth does give an advantage in this kind of situation, but that doesn't mean fixing the wealth disparity will fix the market. It won't; it will just mean that the scare Bay area housing gets rationed by some other method than who has the most money. It will still have to be rationed because demand far outstrips supply; and no matter how it is rationed, many people will be left out and will complain that the system is unfair. The only long term fixes for that are to either expand the supply of housing (by letting it respond normally to market forces), or for a lot of people to stop feeding the monster and abandon the Bay area for someplace that offers them better opportunities--which again is a normal response to market forces. And what empowers people to make those choices is absolute wealth, not relative wealth.
There are always going to be limited quantity goods, and inequity will drive up the price of those goods. Land is a fantastic example of this, and the Bay area housing problem is made worse by laws and regulations, it is not created by laws and regulations.
Harvard only produces a limited quantity of lawyers every year, and those lawyers are paid a premium in large part because of the limited supply. A Harvard education isn't a process that can be infinitely scaled.
Income inequality drives up the prices for limited quantity goods.
> There are always going to be limited quantity goods
Some limited quantity goods are unavoidable, yes. The quantity of land in the Bay area is limited.
But the quantity of housing in the Bay area does not have to be limited by the quantity of land. If it is, that's a choice people have made to impose scarcity. And decreasing relative wealth inequality won't fix that problem; you have to fix it by taking away people's power to impose scarcity to further their own ends at the expense of other people's.
> Harvard only produces a limited quantity of lawyers every year
Yes, which is another example of a choice to impose scarcity. See below.
> Harvard only produces a limited quantity of lawyers every year
But you don't need a Harvard education to become a lawyer. A Harvard educated lawyer might be better able to handle certain legal matters, but most people who need lawyers don't need that level of expertise.
In fact, most people these days who need legal documents prepared don't even need lawyers; the free market has created plenty of services that provide such products at a much lower cost. The only reason why many people still need lawyers is artificial scarcity: lawyers write most of our laws, and of course have written laws saying that you have to have a licensed lawyer to prepare various legal documents, even though the lawyer doesn't actually add any value to the process. You can't fix that problem by reducing relative wealth inequality. You have to fix it by taking away people's power to write laws to benefit themselves at the expense of other people.
And that richest person a century ago is totally irrelevant in most conversations about wealth except as a counterexample that economics is not zero-sum.
> that richest person a century ago is totally irrelevant in most conversations about wealth
I agree that this is true as a practical description of how most conversations about wealth go. But to me, that is a bug, not a feature: it means most conversations about wealth are ignoring the huge increase in absolute wealth that has occurred as a result of advancing technology. In other words, people are being encouraged to ignore this huge positive impact on their lives, which, if they only realized it, empowers them to do all kinds of things, and are being told to focus instead on relative wealth disparities that, in a sane world, would have negligible impact on their lives.
> You're still talking about wealth like it is relative and not an absolute. You're just comparing modern wealth to early 20th century wealth.
Nobody in this discussion is using "relative wealth" to mean comparisons over long periods of time. Everyone is using it to mean comparisons between different people's wealth at the same time. If what you're concerned about is the advantages that relative wealth gives you in competing for scarce resources, that makes sense; but nobody today is competing with people a century ago for scarce resources, so using the term "relative wealth" for that kind of comparison makes no sense.
no, not even for a moment. if you have a million dollars, you have "a lot" of money. great. but what about your ability to turn your mass of money into societal influence? you can't buy congress if someone out there has a billion dollars. your chump change doesn't move the needle even if you are "rich" because they have so much more money that the sums they can offer are much greater. as the level of wealth rises, the costs of bribing politicians rises too. absolute wealth doesn't help you gain influence.
it's all about relative wealth. if you are more wealthy, you have relatively more say in the way society goes, at least in the way that things are configured currently.
> it's all about relative wealth. if you are more wealthy, you have relatively more say in the way society goes, at least in the way that things are configured currently.
This is a problem with the way things are configured currently. It doesn't mean absolute wealth doesn't matter.
If we compared it with other people internationally, or even historically, we're filthy rich at almost any level of the ladder.