The Guardian's Lying - Wealth Inequality Is Not Rising

But then trying to get them to grasp something economic....

We are told that unless we dispossess the rich there will be a revolution coming. Wolfie Smiths everywhere celebrate:

The Guardian view on billionaire Britain: tax wealth fairly or face democratic unravelling

Editorial

Without bold reform which makes the rich pull their weight, rising inequality risks eroding public trust and fracturing social stability

Berets and afghans quiver in anticipation

Joy, eh?

The background is the excessive concentration of wealth and how appalling is wealth inequality and just you think of it from The Equality Trust. That’s the mountainous pile of shite from the The Spirit Level peeps.

How can we explain this apparent contradiction? Looking at sources of billionaire wealth from 1990-2025, we can see an answer: the obscene growth in wealth for the UK’s richest has more to do with frustrating these goals than solving them. The UK’s economy has become incredibly specialised at finding ways to extract wealth from a process – from interfering, adding little or no value, and charging a fee.

This has made a small number of people very, very rich by contributing almost nothing and taking increasing rents from those that do contribute.

Yadda yadda.

And here’s the bit they’re not getting. As elsewhere:

The overall costs of this subsidised housing system are put at about £50 billion a year. We can and should capitalise that - and why not use the method employed by Saez and Zucman? 5% rate, meaning that’s £1 trillion of wealth. Total British housing wealth as generally recorded as in the £5 to £6 trillion range. But if we now add in that £1 trillion in subsidised value and allocate it - as it must be - to those with low incomes we will have radically changed the wealth distribution.

The problem with much of the whining about “excessive” wealth concentration is that it takes no account - none, zip, nada, in fact directly rejects doing so - of what we already do to change that wealth distribution. Access to free medical care for life - the NHS - is wealth. To subsidised housing, the state pension, the welfare state at all levels and of all types, free education for children, they’re all wealth. And absolutely none of them are included, by design, in our calculations of wealth equality or inequality. We seem to spend some £500 billion a year on all these things (very b of envelope, that) which means we’re moving around £10 trillion of wealth. With total household wealth of £16 trillion that really does change the distribution radically. And, as we say, no note of this is taken in anyone’s calculations at all. No, not even in the numbers of those who insist we can solve societal problems by expropriating the rich - they adamantly refuse to note how much of the claimed problem is already solved.

Mr Stephenson is not the only one. The entire sector, the whole way the wealth distribution is measured, is wrong. Wealth inequality is very much lower than currently claimed.

Think, just for moment. Say we took all those in the bottom half of the income distribution, everyone below median, and guaranteed them the median income. Then also said here’s a nice 4 bedder house to live in buckshee and free. We would have changed income inequality by tbe way we measure income (after tax and benefits, after housing costs) substantially. We would have changed, by the way we measure wealth, wealth inequality by not one percentage point, basis point nor pip. That’s insane.

And I’m afraid that this is true. From the core work on wealth inequality, the Saez and Zucman paper:

Let us first define the concept of wealth that we consider in this paper. Wealth is the current market value of all the assets owned by households net of all their debts. Following international standards codified in the System of National Accounts (United Nations 2009), assets include all the non-financial and financial assets over which ownership rights can be enforced and that provide economic benefits to their owners.

Our definition of wealth includes all pension wealth— whether held in individual retirement accounts, or through pension funds and life insurance companies—with the exception of Social Security and unfunded defined benefit pensions. Although Social Security matters for saving decisions, the same is true for all promises of future government transfers. Including Social Security in wealth would thus call for including the present value of future Medicare benefits, future government education spending for one’s children, etc., net of future taxes. It is not clear where to stop, and such computations are inherently fragile because of the lack of observable market prices for these types of assets. Unfunded defined benefit pensions are promises of future payments that are not backed by actual wealth. The vast majority (94% in 2013) of unfunded pension entitlements are for government employees (federal and local), thus are conceptually similar to promises of future government transfers, and just like those are better excluded from wealth. According to the Financial Accounts, unfunded defined benefit pensions represent the equivalent of 5% of total household wealth today, down from 10–15% in the 1960s and 1970s.

Our wealth concept excludes human capital, which, contrary to non-human wealth, cannot be sold on markets.

So, our - modest perhaps - equalisation of pension wealth through social security pensions isn’t counted at all. We are, in fact, counting wealth inequality in the raw, rather than as it exists after the things we do about it.

And it’s really very odd indeed for a couple of credentialled professors - who get paid because of their credentials - to insist human capital cannot be sold in the market.

Everything everyone says about wealth inequality is wrong. On the very simple grounds that we don’t, in fact, measure wealth inequality. We measure wealth before all the other things we do about wealth.

This is Worstall’s Fallacy - to insist upon doing without taking account of what is already being done.

Next time one of these beret-brains whines to you about wealth inequality tell ‘em to fuck off and learn to count. You can drop the last four words for The Guardian of course.