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How Did Under-40s Get So Much Richer During Covid?

25 days ago

By Steve Roth

Wealth Economics

This picture from the Center for American Progress, and variations, have been making the rounds on the interwebs lately, eg here, here, and here. The headline is that younger households got 49% richer during/since Covid, in inflation-adjusted “real” terms.

But some drill-down is in order here. What actually happened? Start with background.

There are about 38 million households with under-40 heads of household — 30% of all households.

Those households only held 4% of total household net worth in 2019; that jumped to 6.5% in 2023. They definitely captured a bigger piece of the wealth pie, but the piece is still quite small.
Here are the nominal numbers (total, not per-household) from the DFAs1, CAP’s

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Why Unlimited Wealth Is an Unassailable Advantage

April 22, 2024

By Steve Roth

Wealth Economics

Imagine a five-player poker game. Assume all the players have equal skill, so the flows across the table over the course of the game are just a random walk. “It’s just how the cards fall.”

All the players start with the same number of chips. But there’s one difference: four of the players don’t have any more assets/money to buy new chips. If they lose all their chips, they’re out.

The fifth player has unlimited assets. No matter how much or how often they lose, they can always buy more chips and stay in the game.

If the game continues indefinitely, the fifth player will always at some point end up with all of the other players’ chips, just due to the random flows across the table.

I’ll leave the

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Personal Income and Personal Saving Make More than 40% of Households’ Property Income…Invisible. Think Total Return.

April 16, 2024

By Steve Roth

Wealth Economics

Matthew Klein and Joey Politano have been singularly responsible in their discussions of “excess saving” in the covid era — not least by always putting that term in “so-called” quotes. It’s saving in excess of what would have happened if pre-covid linear trends had continued (with the trend based on some chosen range of preceding quarters or years). It’s an estimate. Great.

They sometimes also discuss the accumulated stock of “excess savings,” which can only mean assets (in excess of what would have been accumulated sans covid). There is no national-accounts measure of any stock of “savings.” There’s just assets.1

Here’s a shot at untangling that, starting with the standard measure of household or “personal”

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Where Does Wealth Come From?

March 24, 2024

Wrong answers only: “saving”

Originally Published at Wealth Economics

In my last post, I tried to say precisely what the words “wealth” and “assets” mean as they’re used in this blog. This post tackles the question of wealth accumulation. Where does wealth come from? What are the mechanisms that create assets?

Households and the accounting-ownership pyramid

I realize first, though, that I left out an important issue in the last post: what I call the accounting-ownership pyramid. The household sector sits at the top; households ultimately “own” everything (that’s ownable and measurable), in accounting terms. The market-cap value of all firms, for instance, is an asset on the household-sector balance sheet. We can think of the firms’ sector

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What is Wealth?

March 20, 2024

The wealth of people and the wealth of nations

Originally Published at Wealth Economics

If you read this blog much, you’ll find many careful definitions of terms — something that the economics profession is terrible at. A blog called Wealth Economics really has to start at the top, with wealth. So here it is.

“The only real, true wealth is…”

You hear that sentence a lot — from economists, pundits, and all sorts of everyday people. It has lots of different endings. All of them are in some sense true and valid. The only “true” wealth is…friends, family, and loved ones. The only true wealth is “real,” productive goods. The only true wealth is land, or the whole environment. Or the discounted (“capitalized”) net present value of all future

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Biden Says Billionaires Pay an 8.2% Tax Rate. What Do Other Households Pay?

March 9, 2024

Let’s compare apples to apples here.

Originally Published at Wealth Economics

Uncle Joe has thrown out this 8.2% figure a couple of times, including in last night’s SOTU. Multiple folks have unpacked it; it’s not the standard “tax rate” measure. The usual “tax rate” is taxes divided by personal income, which doesn’t include accrued holding gains.

The alternative that Joe’s using is based on Total “Haig-Simons” income, which does include holding gains. Economists for many decades have been referring to H-S income as the “preferred” income measure, because it actually explains changes in households’ balance-sheet assets. Personal income, and thus Personal saving, don’t even come close to explaining households’ asset accumulation, and

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Earned Labor Income Is a Small and Weak Lever. Unearned Property Income, and Wealth, Rule

March 7, 2024

Reversing extreme wealth concentration means going after property income.

Originally Published at Wealth Economics

Economists and pundits have been cheered of late by the labor-share increase during the first couple of years of the Covid era. And even, for a moment, lower-income workers were making progress vs higher-income folks. This is good news. In the long view, though, these happy developments are just a minor blip in the half-century decline post-Reagan, which drove off a cliff from the Dot-Bomb through the Global Financial Crisis.

These measures are meaningful, but they don’t put across the sheer volume and magnitude of the disparity, and the shift. And they don’t impart the end result: extreme and increasingly concentrated

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Is More Work Better? Think Again?

February 26, 2024

Is More Work Better? Think Again?

The freedom of free time, branded as unproductive “leisure,” gets no respect.

Originally published at Wealth Economics

This post is prompted by a recent tweet from the excellent Joey Politano, but it’s not singling out Joey in particular.

“We could be working so much more.” It’s hard to come away with any other message. This tweet’s just one example of a lurking, largely unspoken, and quite likely unconscious value assumption that seems nearly universal among economists, pundits, politicians, and…people: more work is better.

Sure: if people need to work for wages to make a living, and they can’t get a job, that’s a bad thing. Hence the “jobs” focus of politicians and people in general. But do

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John Maynard Keynes Doesn’t Seem to Know What He Means by the Word “Spending”

February 16, 2024

Is investment spending “spending,” or isn’t it?

Steve Roth (@ Wealth Economics)

J.M. Keynes’ brief Preface to the French edition of General Theory is sometimes held up as the most concise, cogent, and coherent expression of his economic understandings. It achieves that, but in doing so it also reveals a core incoherence in that thinking.

An obligatory nod here to the importance of many pieces of Keynes’ thinking, notably the rather magisterial dismantling of a fundamental error in the thinking of the “English Political Economy” or “classical” “orthodoxy.” In the third paragraph of the Preface he explains that his orthodox predecessors have been engaged in a massive error of composition.

.…important mistakes have been made through

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The Bottom 80% of U.S. Households Persistently Dissaves, Spending more than Income.

February 5, 2024

Only the top 20% saves.

Originally published at Wealth Economics

Newly released data series from the Bureau Economic Analysis have revealed a pretty eye-popping economic reality that’s been invisible in the national accounts…forever. Subtract households’ Personal Taxes and Personal Outlays from Personal Income to yield Personal Saving, and it turns out that the bulk of U.S. households don’t save. Quite the contrary: the bottom 80% spends more than its income, year in and year out. Only the top 20% consistently saves.1

This reality was invisible before publication of the Distribution of Personal Income Accounts (here, the “DPIAs”), first released in December 2020 and now in its fourth (greatly improved) prototype version, released December

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(Not) Thinking About Money

January 31, 2024

(Not) Thinking About Money, Wealth Economics, Steve Roth (

It’s tempting to abolish the word entirely.

Reprint from Wealth Economics.

J.W. Mason offers a bang-up post on economists’ thinking about “money,” how economists have thought and talked about it over decades and centuries. There’s even a class syllabus and reading list from his class for his John Jay MA econ students. It’s a very deep dive. (“Thirteen Ways of Looking at Money,” eek.) Highly recommended.

But as one who’s spent nigh-on two decades struggling and studying to understand all these writers using that key term in different, overlapping, and conflicting ways, I’d recommend starting with simple, clear definitions (plural) for that vexed word. It’s multivalent

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MMT and the Wealth of Nations, Revisited

January 29, 2024

Steve Roth  (at Asymptosis)

I just had occasion, in replying to a correspondent, to reiterate much of the thinking in my recent MMT Conference presentation. I thought it might be a useful and comprehensible form for some readers, so I’m reproducing it here.

I’ve also explained this at somewhat painful length here.

Correct me if I am wrong but what you are saying extends MMT into the private sector. The govt boosts balance sheets with stimulative fiscal policy. The private sector boosts balance sheets through asset price appreciation. Each creates “money” out of nowhere.

That’s one way of saying it. It adds a mechanism for asset (money) creation beyond “outside” (gov) and “inside” (bank) money issuance.

I’d say: MMT largely and

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How Redistribution Makes Us All Richer

January 25, 2024

Modeling the numbers on bottom-up and middle-out economics.

How Redistribution Makes Us All Richer, Wealth Economics, Steve Roth

You hear a lot about bottom-up and middle-out economics these days, as antidotes to a half-century of “trickle-down” theorizing and rhetoric. You’re even hearing it, prominently, from Joe Biden.

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They’re compelling ideas: put more wealth and income in the hands of millions, or hundreds of millions, and you’ll see more economic activity, more prosperity, and more widespread prosperity. To its proponents, it seems downright intuitive or even obvious, a formula for The American Dream.

But curiously, you don’t find much nuts and bolts economic theory supporting that view of how economies work.

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Total Income, and the Collapse of the Household Labor Share

January 17, 2024

The decline in workers’ share of the total pie is far more extreme than standard measures suggest.

Total Income, and the Collapse of the Household Labor Share, Wealth Economics, Steve Roth

The best way to start this post is with a graph that many will find surprising, even eye-popping. The graph kind of speaks for itself — pretty dismayingly, especially post-covid. The rest of this post just explains it.

This graph answers a question that standard measures of labor share don’t and can’t answer. As households accumulate new assets, wealth, how of much of that newly-created wealth goes to workers, for working? As the wealth pie got bigger, what happened to labor’s slice of that pie? Did all the wealth boats rise together?

To answer that

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Economic Origin Stories and the State of the World

January 11, 2024

Asymptosis » Economic Origin Stories and the State of the World, Steve Roth.

Origin stories and creation myths pack a pretty hefty weight of import in human understandings of the world. Examples are too numerous to mention. What I’ve noticed in the field of economics is such origin stories are often taken (mistakenly) to fully explain the current state of affairs. I’m going to discuss two examples here.

1. Why Money Has Value. The “double coincidence of wants” money-origin story, retailed by Adam Smith among many others, has been quite thoroughly debunked over the past century. But the better stories that have emerged continue to be seen by many economists — problematically in my opinion — as significant explanations of how things work right

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Personal Saving Makes More than 40% of Property Income . . . Invisible. Think Total Return

January 9, 2024

Personal income, so Personal saving, ignore a huge part of Total Return — the income-from-assets measure used by every modern portfolio investor. Guess what’s missing?

Personal Saving Makes More than 40% of Property Income . . . Invisible. Think Total Return, Wealth Economics, Steve Roth

Matthew Klein and Joey Politano have been singularly responsible in their discussions of “excess saving” in the covid era — not least by always putting that term in “so-called” quotes. It’s saving in excess of what would have happened if pre-covid linear trends had continued (with the trend based on some chosen range of preceding quarters or years). It’s an estimate. Great.

They sometimes also discuss the accumulated stock of “excess savings,” which can only

Read More »

Actually, Only Banks Print Money

January 6, 2024

Asymptosis » Actually, Only Banks Print Money, Steve Roth

I’m thinking this headline will raise some eyebrows in the MMT community. But it’s not really so radical. It’s just using the word money very carefully, as defined here.

Starting with the big picture: 

You can compare the magnitude of these asset-creation mechanisms here. (Hint: cap gains rule.)

The key concept: “money” here just means a particular type of financial instrument, balance-sheet asset: one whose price is institutionally pegged to the unit of account (The Dollar, eg). The price of a dollar bill or a checking/money-market one-dollar balance is always…one dollar. This class of instruments is what’s tallied up in monetary aggregates.

A key tenet of MMT, loosely

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Government is Not the Problem. Bad Government is the Problem

January 4, 2024

Having gone from trump to Biden. a person who I thought would never make a good president makes Steve’s argument on Bad Government being the problem when trump was the president.

Asymptosis » Government is Not the Problem. Bad Government is the Problem, Steve Roth.

And the solution to bad government is … good government.

A lot of people — maybe even most Americans — think that making government smaller will make it better.

But that reminds of the time when I was little kid that I got in trouble for pouring water out of a glass down a heat register in our house.

Why down a heat register? I can only say that it seemed like a good idea at the time.

Why was I pouring water out of a glass? Because the water was warm, and I wanted cold

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Do We Wildly Underestimate GDP?

December 29, 2023

Been looking around for a few, new, and good writers to add to Angry Bear. I know we have Robert, New Deal democrat, and Joel amongst us now. I ran into Steve Roth since he posted to Tom Walker’s post. He is allowing me to poach from his new substack Wealth Economics and an older blog site Asymptosis. Happy about this as it allows me to write more freely too. Anyway, this commentary of Steves’ I like.

Do We Wildly Underestimate GDP? Wealth Economics, Steve Roth.

Our production minus our consumption doesn’t come close to explaining our wealth accumulation. Do the asset markets know better?

In national accounting, there are two ways of estimating what all our real-world stuff is worth. They’re both market measures, based on what people pay for

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The Evolution of Ownership….get off my lawn.

December 28, 2017

By Steve Roth (originally published at Evonomics)
You Don’t Own That! The Evolution of OwnershipGet off my lawn.  (repost)
In a recent post on the “evolution of money,” which concentrated heavily on the idea of (balance-sheet) assets, I promised to come back to the fundamental idea behind “assets”: ownership. Herewith, fulfilling that promise.
There are a large handful of things that make humans uniquely different from animals. In many other areas — language, abstract reasoning, music-making, conceptions of self and fairness, large-scale cooperation, etc. — humans and animals vary (hugely) in degree and kind. But they still share those phenotypic behavioral traits.
I’d like to explore one of those unique differences: ownership of property. Animals don’t

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Liberals Getting it Wrong on the Job Guarantee

February 25, 2017

I’ve been quite troubled lately by voices I’ve been hearing from my compatriots on the Left discussing the Job Guarantee — especially in relation to an alternative, Universal Basic Income. A new Jacobin article by Mark Paul, William Darity Jr., and Darrick Hamilton displays several of the aspects that make me uncomfortable.
Get the Math Right. Right off the bat, I’m troubled by the article’s flawed arithmetic — not what I would like to be seeing from left economists who need to be scrupulous in their role as authoritative voices for the left.
…we argue for a FJG that would pay a minimum annual wage of at least $23,000 (the poverty line for a family of four), rising to a mean of $32,500. … In comparison, many of the UBI proposals promise around $10,000 annually to every citizen…half the rate that would be available under the FJG.
$10K per citizen versus $23K per worker is not “half the rate.”
How do the two policies actually compare? I have no idea. This is exactly the kind of difficult calculation that we need economists to do for us (it’s way beyond our abilities), so we can evaluate different policies. Absent analysis with clearly stated parameters (Who counts as a citizen? Children? Etc.) this kind of statement carries no import or information value.
These analyses have been done by economists. I’ve seen them around.

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