There are two problems with this line of thinking. The first is that net worth totals are dollar values of two different kinds of things—capital goods and consumption goods, of which capital goods make up the larger part. Capital goods can not be alchemically transformed into consumption goods. The second problem is that efforts to turn the savings of some into consumption goods for others will in the end reduce the amount of consumption goods for everyone.
Whining and complaining about inequality is a growth industry. Thomas Piketty’s book (or perhaps a large virtue-signaling paperweight), about how the rich are getting richer, achieved bestseller status and is now a movie.
Understanding the flaws in the wealth inequality argument is increasingly important, because the communist wing of the Democratic Party is now openly advocating a wealth tax. In this article I will explain why measures of wealth inequality overstate actual inequality in terms of the standard of living of wealthy people relative to the rest.
Some of the complaining about inequality focuses on income and some on wealth. I will first focus on why both matter and why looking at only one or the other gives an incomplete picture. Depending on where someone sits on the net worth spectrum, their consumption opportunities will depend to a lesser or greater extent on the balance between their wages, their savings, and their time preference.
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