Because wealth is accumulated over decades, it is highly misleading to draw conclusions from a snapshot of who owned what in any particular year.  A 2004 Business Week article about wealth said, “The top 10% of families, as measured by net worth own 65% of [the nation’s] assets, and the top 50% own a stunning 95% of assets.  This means the gains from rising wealth have effectively left out half the population.”  Actually, it means no such thing.  The key fact about wealth is that young people (who have only human capital) do not stay young forever.  The “gains from rising wealth” take place over several decades, and so does the average lifespan.  The top 10-5- percent as measured by net worth will typically spend most of the wealth on retirement, then die and be replaced by an entirely different group of top wealth holders.

The Business Week complaint demonstrates the snapshot fallacy– the erroneous belief that because half the population had not yet accumulated many assets in any particular year, that same half of the population (rather than a newer and younger group) would never accumulate much wealth over an entire lifetime.

From Income and Wealth by Alan Reynolds

This book is an indispensable source of information and clarity about much of the misinformation about the measurements of income and wealth equality.

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