I’m unhappy that I have to comment on the video below, but I don’t see that anyone else making the point.
I am not at all “surprised” by the video, but let me lay out how I’m getting tripped up; wealth and income have two very distinct technical definitions that are very often confused to mean the same thing by the layperson. Wealth is net assets owned by a specific economic unit, income represents the ability to save or consume, usually denominated in money. Being rich and being wealthy are not the same thing.
Ceterus paribus, a higher income certainly enables the accumulation of wealth over time. It is also true that being rich and being wealthy are certainly correlated. But that need not be the case. The determinants of income and wealth at the margin are very different. In traditional models, income is determined by marginal productivity. Wealth is a function of income and time preference.
However, it is almost certain that when asked the questions in the survey that introduces the video, the respondents were confusing wealth to be income, and what they were actually desired was not a certain distribution of assets within an economy, but rather a certain distribution of income — these are completely different things that cannot be interchanged in the way that the video refers to them. Either the preceding theory is correct, or the fans of this video have a complex theory of the determinants of wealth that I don’t know about…or maybe they just advocate a eye-popping level of redistribution and paternalism? Also, do the makers of the video understand this (quite obviously not, as they confuse income and wealth in the video itself)?
While there are certainly other conceptual problems with the video (i.e. “middle class” is not a range of income), my confusion is stemming from the popularity of the video among people that I know that should know better. It’s really taking even intellectuals by storm. Can anyone un-confuse me?
Also, Cullen Roche discusses the Pareto principle.
P.S. If my theory above is not correct, then why doesn’t the video include assets owned by various levels of government as wealth “owned by the people”?