Wealth is the abundance of valuable The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods which can be exchanged. From this analysis came the concepts value in use and value in exchange resources A resource is any physical or virtual entity of limited availability that needs to be consumed to obtain a benefit from it. In most cases, commercial or even ethic factors require resource allocation through resource management or material possessions Property is any physical or intangible entity that is owned by a person or jointly by a group of persons. Depending on the nature of the property, an owner of property has the right to consume, sell, rent, mortgage, transfer, exchange or destroy their property, and/or to exclude others from doing these things. Important widely recognized types of or the control of such assets. The word wealth is derived from the old English wela, which is from an Indo-European The Indo-European languages are a family of several hundred related languages and dialects, including most major languages of Europe, the Iranian plateau, and South Asia, and historically also predominant in Anatolia and Central Asia. With written attestations appearing since the Bronze Age, in the form of the Anatolian languages and Mycenaean word stem.^[1] An individual, community, region or country that possesses an abundance of such possessions or resources is known as wealthy.

The concept of wealth is of significance in all areas of economics Economics is the social science that is concerned with the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)". Current, especially development economics Development economics is a branch of economics which deals with economic aspects of the development process in low-income countries. Its focus is not only on methods of promoting economic growth and structural change but also on improving the potential for the mass of the population, for example, through health and education and workplace, yet the meaning of wealth is context-dependent and there is no universally agreed upon definition. Various definitions and concepts of wealth have been asserted by various individuals and in different contexts.^[2] Defining wealth can be a normative Normative has specialized meanings in several academic disciplines. Generically, it means relating to an ideal standard or model. In practice, it has strong connotations of relating to a typical standard or model process with various ethical Ethics is a branch of philosophy that addresses questions about morality—that is, concepts such as good vs. bad, noble vs. ignoble, right vs. wrong, and matters of justice, love, peace, and virtue implications, since often wealth maximization is seen as a goal or is thought to be a normative principle of its own.^[3]

Although precise data is not available, the total household wealth Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save, and spend monetary resources over time, taking into account various financial risks and future life events. Components of personal finance might in the world has been estimated at $125 trillion in year 2000. 90% of this wealth is held by people in North America, Europe, and high-income Asian countries, and 1% of adults are estimated to hold 40% of world wealth, a number which falls to 32% when adjusted for purchasing power parity Purchasing power parity is a theory of long-term equilibrium exchange rates based on relative price levels of two countries. The idea originated with the School of Salamanca in the 16th century and was developed in its modern form by Gustav Cassel in 1918. The concept is founded on the law of one price; the idea that in absence of transaction.^[4]

Definition

For definitions of "wealth," see also Adam Smith Adam Smith was a Scottish moral philosopher and a pioneer of political economics. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations. The latter, usually abbreviated as The Wealth of Nations, is considered his magnum opus and, The Wealth of Nations An Inquiry into the Nature and Causes of the Wealth of Nations is the masterpiece of the Scottish economist and moral philosopher Adam Smith. It was first published in 1776. It is an account of economics at the dawn of the Industrial Revolution, as well as a rhetorical piece written for the generally educated individual of the 18th century - and Max Weber Maximilian Carl Emil "Max" Weber (21 April 1864 – 14 June 1920) was a German sociologist and political economist, who profoundly influenced social theory, social research, and the remit of sociology itself. Weber's major works dealt with the rationalization and so-called "disenchantment" which he associated with the rise of, The Protestant Ethic and the Spirit of Capitalism The Protestant Ethic and the Spirit of Capitalism is a book written by Max Weber, a German sociologist, economist, and politician, in 1904 and 1905 that began as a series of essays. The original edition was in German and has been released. Considered a founding text in economic sociology and sociology in general, the book was translated into.

Adam Smith Adam Smith was a Scottish moral philosopher and a pioneer of political economics. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations. The latter, usually abbreviated as The Wealth of Nations, is considered his magnum opus and, in his seminal work The Wealth of Nations An Inquiry into the Nature and Causes of the Wealth of Nations is the masterpiece of the Scottish economist and moral philosopher Adam Smith. It was first published in 1776. It is an account of economics at the dawn of the Industrial Revolution, as well as a rhetorical piece written for the generally educated individual of the 18th century -, described wealth as "the annual produce of the land and labour of the society". This "produce" is, at its simplest, that which satisfies human needs and wants of utility In economics, utility is a measure of relative satisfaction. Given this measure, one may speak meaningfully of increasing or decreasing utility, and thereby explain economic behavior in terms of attempts to increase one's utility. Utility is often modeled to be affected by consumption of various goods and services, possession of wealth and. In popular usage, wealth can be described as an abundance of items of economic value The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods which can be exchanged. From this analysis came the concepts value in use and value in exchange, or the state of controlling or possessing such items, usually in the form of money Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment, real estate Real estate is a legal term that encompasses land along with improvements to the land, such as buildings, fences, wells and other site improvements that are fixed in location—immovable. Real estate law is the body of regulations and legal codes which pertain to such matters under a particular jurisdiction and include things such as commercial and personal property Property is any physical or intangible entity that is owned by a person or jointly by a group of persons. Depending on the nature of the property, an owner of property has the right to consume, sell, rent, mortgage, transfer, exchange or destroy their property, and/or to exclude others from doing these things. Important widely-recognized types of. An individual who is considered wealthy, affluent, or rich is someone who has accumulated substantial wealth relative to others in their society or reference group. In economics, net wealth In economics, wealth of a person, household, or nation is the value of all assets owned net of all liabilities owed (to foreigners in the national accounts) at a point in time. The term may also be used more broadly as referring to the productive capacity of a society or as a contrast to poverty. Analytical emphasis may be on its determinants or refers to the value of assets In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simplistically stated, assets represent ownership of value that can be converted into cash . The balance sheet of a firm owned minus the value of liabilities In financial accounting, a liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future owed at a point in time.^{[citation needed]} Wealth can be categorized into three principal categories: personal property Personal property, roughly speaking, is private property that is moveable, as opposed to real property or real estate. In the common law systems personal property may also be called chattels or personalty. In the civil law systems personal property is often called movable property or movables - any property that can be moved from one location to, including homes or automobiles; monetary savings, such as the accumulation of past income Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received... in a given period of time."; and the capital In economics, capital, capital goods, or real capital are factors of production used to create goods or services that are not themselves significantly consumed in the production process. Capital goods may be acquired with money or financial capital wealth of income producing assets, including real estate Real estate is a legal term that encompasses land along with improvements to the land, such as buildings, fences, wells and other site improvements that are fixed in location—immovable. Real estate law is the body of regulations and legal codes which pertain to such matters under a particular jurisdiction and include things such as commercial, stocks Stocks are devices used in the medieval times for torture, public humiliation, and corporal punishment. The stocks partially immobilized its victims and they were often exposed in a public place such as the site of a market to the scorn of those who passed by. Since the purpose was to punish offenders against the standards of conduct of the time, and bonds In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals.^{[citation needed]} All these delineations make wealth an especially important part of social stratification In sociology and other social sciences, social stratification refers to the hierarchical arrangement of individuals into divisions of power and wealth within a society. The term most commonly relates to the socio-economic concept of class, involving the "classification of persons into groups based on shared socio-economic conditions ... a. Wealth provides a type of safety net of protection against an unforeseen decline in one’s living standard in the event of job loss or other emergency and can be transformed into home ownership, business ownership, or even a college education.^{[5][not in citation given]}

'Wealth' refers to some accumulation of resources, whether abundant or not. 'Richness' refers to an abundance of such resources. A wealthy (or rich) individual, community, or nation thus has more resources than a poor one. Richness can also refer to at least basic needs being met with abundance widely shared. The opposite of wealth is destitution. The opposite of richness is poverty Poverty is the lack of basic human needs, such as clean water, nutrition, health care, education, clothing and shelter, because of the inability to afford them. This is also referred to as absolute poverty or destitution. Relative poverty is the condition of having fewer resources or less income than others within a society or country, or compared.

The term implies a social contract Social contract describes a broad class of theories that try to explain the ways in which people form states to maintain social order. The notion of the social contract implies that the people give up sovereignty to a government or other authority in order to receive or maintain social order through the rule of law. It can also be thought of as an on establishing and maintaining ownership Ownership is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties. The concept of ownership has existed for thousands of years and in all cultures in relation to such items which can be invoked with little or no effort and expense on the part of the owner (see means of protection A means of protection is some contract or guarantee of security for body or property. It is usually achieved, in a modern state society, by agreeing to some social contract including a monopoly on violence, e.g. placing police and military powers under the control of an authority obeying some predictable theory of civics that guarantees such). The concept of wealth is relative and not only varies between societies, but varies between different sections or regions in the same society. A personal net worth In business, net worth is the total assets minus total outside liabilities of an individual or a company. For a company, this is called shareholders' preference and may be referred to as book value. Net worth is stated as at a particular year in time. In the case of an individual, the term estate is used in relation to deceased individuals in of US $10,000 in most parts of the United States would certainly not place a person among the wealthiest citizens of that locale. However, such an amount would constitute an extraordinary amount of wealth in impoverished developing countries Developing country is a term generally used to describe a nation with a low level of material well being. There is no single internationally-recognized definition of developed country, and the levels of development may vary widely within so-called developing countries, with some developing countries having high average standards of living.

Concepts of wealth also vary across time. Modern labor-saving inventions and the development of the sciences have enabled the poorest sectors of today's society to enjoy a standard of living equivalent if not superior to the wealthy of the not-too-distant past. This comparative wealth across time is also applicable to the future; given this trend of human advancement, it is likely that the standard of living that the wealthiest enjoy today will be considered impoverished by future generations.

Industrialization Industrialisation is the process of social and economic change that transforms a human group from a pre-industrial society into an industrial one. It is a part of a wider modernisation process, where social change and economic development are closely related with technological innovation, particularly with the development of large-scale energy and emphasized the role of technology. Many jobs were automated. Machines replaced some workers while other workers became more specialized. Labour specialization became critical to economic success. However, physical capital In general physical capital refers to any non-human asset made by humans and then used in production. Often, it refers to economic capital in some ambiguous combination of infrastructural capital and natural capital. As these are combined in process-specific and firm-specific ways that neoclassical macroeconomics does not differentiate at its, as it came to be known, consisting of both the natural capital Natural capital is the extension of the economic notion of capital to goods and services relating to the natural environment. Natural capital is thus the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future. For example, a stock of trees or fish provides a flow of new trees or fish, a flow which (raw materials from nature) and the infrastructural capital Infrastructural capital refers to any physical means of production or means of protection beyond that which can be gathered or found directly in nature, i.e. beyond natural capital and that which is not considered as "fluid capital". It may include tools, clothing, shelter, irrigation systems, dams, roads, boats, ports, factories or any (facilitating technology), became the focus of the analysis of wealth.

Adam Smith Adam Smith was a Scottish moral philosopher and a pioneer of political economics. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations. The latter, usually abbreviated as The Wealth of Nations, is considered his magnum opus and saw wealth creation as the combination of materials, labour, land, and technology in such a way as to capture a profit (excess above the cost of production).^[6] The theories of David Ricardo David Ricardo was an English political economist, often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator, who amassed a considerable personal fortune. Perhaps, John Locke John Locke , widely known as the Father of Liberalism, was an English philosopher and physician regarded as one of the most influential of Enlightenment thinkers. Considered the first of the British empiricists, he is equally important to social contract theory. His work had a great impact upon the development of epistemology and political, John Stuart Mill John Stuart Mill was a British philosopher and civil servant. An influential contributor to social theory, political theory, and political economy, his conception of liberty justified the freedom of the individual in opposition to unlimited state control. He was a proponent of utilitarianism, an ethical theory developed by Jeremy Bentham, although, in the 18th century and 19th century built on these views of wealth that we now call classical economics Classical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill.

Marxian Marxian economics are economic theories on the functioning of capitalism based on the works of Karl Marx. Adherents of Marxian economics, particularly in academia, distinguish it from Marxism as a political ideology and sociological theory, arguing that Marx's approach to understanding the economy is intellectually independent of his advocacy of economics (see labor theory of value The labor theories of value are economic theories of value according to which the values of commodities are related to the labor needed to produce them) distinguishes in the Grundrisse The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1941. The work is very wide-ranging in subject matter and covers all six sections of Marx's economics (of which between material wealth and human wealth, defining human wealth as "wealth in human relations"; land and labour were the source of all material wealth.

Some of the wealthiest people in the world are Bill Gates William Henry "Bill" Gates III, KBE is an American business magnate, philanthropist, author and chairman of Microsoft, the software company he founded with Paul Allen. He is consistently ranked among the world's wealthiest people and was the wealthiest overall from 1995 to 2009, excluding 2008, when he was ranked third. During his career, Warren Buffett, and Lawrence Ellison.

Economic analysis

In economics, wealth is the net worth of a person, household, or nation, that is, the value of all assets owned net of all liabilities owed at a point in time. For national wealth as measured in the national accounts, the net liabilities are those owed to the rest of the world.^[7] The term may also be used more broadly as referring to the productive capacity of a society or as a contrast to poverty.^[8] Analytical emphasis may be on its determinants or distribution.^[9]

Economic terminology distinguishes between two types of variables: a stock and a flow. Wealth, as measurable at a date in time, is a stock, like the value of an orchard on December 31 minus debt owed on the orchard. For a given amount of wealth, say at the beginning of the year, income from that wealth, as measurable over say a year is a flow. What marks the income as a flow is its measurement per unit of time, like the value of apples yielded from the orchard per year.

In macroeconomic theory the 'wealth effect' may refer to the increase in aggregate consumption from an increase in national wealth. One measure of it is the wealth elasticity of demand. It is the percentage change in the amount demanded of consumption for each one-percent change in wealth.

Wealth may be measured in nominal or real values, that is in money value as of a given date or adjusted to net out price changes. The assets include those that are tangible (land and capital) and financial (money, bonds, etc.). Measurable wealth typically excludes intangible or nonmarketable assets such as human capital and social capital. In economics, 'wealth' corresponds to the accounting term 'net worth'. But analysis may adapt typical accounting conventions for economic purposes in social accounting (such as in national accounts). An example of the latter is generational accounting of social security systems to include the present value projected future outlays considered as liabilities.^[10] Macroeconomic questions include whether the issuance of government bonds affects investment and consumption through the wealth effect.^[11]

Environmental assets are not usually counted in measuring wealth, in part due to the difficulty of valuing environmental assets. However, it has been argued that although imperfect, an educated valuation is superior to a value of zero (as the implied valuation of environmental assets).^[12]

Sociological treatments

“Wealth provides an important mechanism in the intergenerational transmission of inequality.”^[5] Approximately one half of the wealthiest people in America inherited family fortunes. But the effect of inherited wealth can also be seen on a more modest level. For example, a couple that buys a house with the financial help from their parents or a student that has his or her college education paid for; in both scenarios the participants are benefiting directly from the accumulated wealth of previous generations.^[5]

As a result of different economic conditions of life, members of different social classes have different value systems and view the world in different ways. As such, there exist different “conceptions of social reality, different aspirations and hopes and fears, different conceptions of the desirable.” ^[13] The way the various social classes in society view wealth vary and these diverse characteristics are a fundamental dividing line among the classes. According to Richard H Ropers, the concentration of wealth in the United States is inequitably distributed.^[14] In 1996, the United States federal government reported that the net worth of the top 1 percent of people in the United States was approximately equal to that of the bottom 90 percent.^[5]

The upper class

Upper class values include higher education, the accumulation and maintenance of wealth, the maintenance of social networks and the power that accompanies such networks. Children of the upper class are typically schooled on how to manage this power and channel this privilege in different forms. It is in large part by accessing various edifices of information, associates, procedures and auspices that the upper class are able to maintain their wealth and pass it to future generations.^[15]

The middle class

The middle class places a greater emphasis on income. The middle class views wealth as something for emergencies and it is seen as more of a cushion. This class comprises people that were raised with families that typically owned their own home, planned ahead and stressed the importance of education and achievement. They earn a significant amount of income and also have significant amounts of consumption. However there is very limited savings (deferred consumption) or investments, besides retirement pensions and homeownership. They have been socialized to accumulate wealth through structured, institutionalized arrangements. Without this set structure, asset accumulation would likely not occur.^[15]

The welfare class

Those with the least amount of wealth are the welfare poor. Wealth accumulation for this class is to some extent prohibited. People that receive AFDC transfers cannot own more than a trivial amount of assets, in order to be eligible and remain qualified for income transfers. Most of the institutions that the welfare poor encounter discourage any accumulation of assets.^[15]

Distribution

Wealth in the form of land

In the western tradition, the concepts of owning land and accumulating wealth in the form of land were engendered in the rise of the first states, for a primary service and power of government was, and is to this day, the awarding and adjudication of land use rights.

Land ownership was also justified according to John Locke. He claimed that because we admix our labour with the land, we thereby deserve the right to control the use of the land and benefit from the product of that land (but subject to his Lockean proviso of "at least where there is enough, and as good left in common for others.").

Additionally, in our post-agricultural society this argument has many critics (including those influenced by Georgist and geolibertarian ideas) who argue that since land, by definition, is not a product of human labor, any claim of private property in it is a form of theft; as David Lloyd George observed, "to prove a legal title to land one must trace it back to the man who stole it."

Many older ideas have resurfaced in the modern notions of ecological stewardship, bioregionalism, natural capital, and ecological economics.

See also

• Affluence in the United States
• Capital accumulation
• Capital (economics)
• Distribution of wealth
• Financial independence
• Household income in the United States
• Income in the United Kingdom
• International Ranking of Household Income
• List of Average Wages per Country
• Lists of billionaires
• Personal income in the United States
• Poverty
• Private banking
• Surplus product
• Value added
• Wealth and religion
• Wealth condensation
• Wealth in the United States

Notes

1. ^ [1] "wealth." The American Heritage Dictionary of the English Language, 4th ed., Houghton Mifflin Company. Accessed 21 Feb. 2009.
2. ^ Denis "Authentic Development: Is it Sustainable?", pp. 189-205 in Building Sustainable Societies, Dennis Pirages, ed., M.E. Sharpe, ISBN 1-56324-738-0, 9781563247385. (1996)
3. ^ [2] Anthony T. Kronman, "Wealth Maximization as a Normative Principle", The Journal of Legal Studies, vol. 9 (March 1980)
4. ^ James B. Davies, Susanna Sandström, Anthony Shorrocks, and Edward N. Wolff. (2008). The World Distribution of Household Wealth. UNU-WIDER .
5. ^ ^{a b c d} Gilbert, Dennis. The American Class Structure in an Age of Growing Inequality . N.p.: Wadsworth Publishing;, 2002.
6. ^ Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations
7. ^ • Paul A. Samuelson and William D. Nordhaus (2004, 18th ed.). Economics, "Glossary of Terms." • Nancy D. Ruggles (1987). "social accounting," The New Palgrave: A Dictionary of Economics, v. 4, pp. 377-82, esp. p. 380.
8. ^ • Adam Smith (1776). The Wealth of Nations. • David S. Landes. (1998) The Wealth and Poverty of Nations. Book preview. • Partha Dasgupta (1993). An Inquiry into Well-Being and Destitution. Pub. description.
9. ^ • John Bates Clark (1902). The Distribution of Wealth Analytical Table of Contents. • E.N. Wolff (2002). "Wealth Distribution," International Encyclopedia of the Social & Behavioral Sciences, pp. 16394-16401. Abstract.
10. ^ • Laurence J. Kotlikoff, 1987, “social security," The New Palgrave: A Dictionary of Economics, v. 4, pp. 413-18. Stockton Press. • Laurence J. Kotlikoff, 1992, Generational Accounting. Free Press.
11. ^ Robert J. Barro (1974). "Are Government Bonds Net Wealth?", Journal of Political Economy, 8(6), pp. 1095- 111.
12. ^ http://books.nap.edu/openbook.php?record_id=4844&page=R1
13. ^ Aspects of Poverty. Ed. Ben B Seligman. New York: Thomas Y. Crowell Company, 1968.
14. ^ Ropers, Richard H, Ph.D. Persistent Poverty: The American Dream Turned Nightmare. New York: Insight Books, 1991.
15. ^ ^{a b c} Sherraden, Michael. Assets and the Poor: A New American Welfare Policy. Armonk: M.E. Sharpe, Inc., 1991.

External links

• Article in Dow Jones Insight magazine on wealth
• Blog Article by Ron G. Holland on how is wealth created

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