Countries bymedian wealth (US dollars) per adult; source: Credit Suisse
Wealth is the abundance ofvaluablefinancial assets orphysical possessions which can be converted into a form that can be used fortransactions. This includes the core meaning as held in the originatingOld English wordweal, which is from anIndo-European word stem.[1] The modern concept of wealth is of significance in all areas ofeconomics, and clearly so forgrowth economics anddevelopment economics, yet the meaning of wealth is context-dependent. A person possessing a substantial net worth is known aswealthy.Net worth is defined as the current value of one's assets lessliabilities (excluding the principal in trust accounts).[2]
At the most general level, economists may define wealth as "the total of anything of value" that captures both the subjective nature of the idea and the idea that it is not a fixed or static concept. Various definitions and concepts of wealth have been asserted by various people in different contexts.[3] Defining wealth can be anormative process with variousethical implications, since often wealth maximization is seen as a goal or is thought to be a normative principle of its own.[4][5] Acommunity, region or country that possesses an abundance of such possessions or resources to the benefit of the common good is known as wealthy.
TheUnited Nations definition ofinclusive wealth is a monetary measure which includes the sum of natural, human, and physical assets.[6][7] Natural capital includes land, forests,energy resources, and minerals. Human capital is the population's education and skills. Physical (or "manufactured") capital includes such things as machinery, buildings, and infrastructure.
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Around 35,000 years agoHomo sapiens groups began to adopt a more settled lifestyle, as evidenced by cave drawings, burial sites, and decorative objects.[8]Around this time, humans begantrading burial-site tools and developed trade networks,[9]resulting in ahunter-gatherer lifestyle.[10]Those who had gathered abundant burial-site tools, weapons, baskets, and food, were considered part of the wealthy.[11][need quotation to verify]
Adam Smith, in his seminal workThe Wealth of Nations, described wealth as "the annual produce of the land and labor of the society". This "produce" is, at its simplest, a good or service which satisfies human needs, and wants ofutility.
In popular usage, wealth can be described as an abundance of items of economicvalue, or the state of controlling or possessing such items, usually in the form ofmoney,real estate and personalproperty. A person considered wealthy, affluent, or rich is someone who has accumulated substantial wealth relative to others in their society or reference group.
In economics,net worth refers to the value ofassets owned minus the value ofliabilities owed at a point in time.[12] Wealth can be categorized into three principal categories:personal property, including homes or automobiles; monetary savings, such as the accumulation of pastincome; and thecapital wealth of income producing assets, includingreal estate,stocks,bonds, andbusinesses. All these delineations make wealth an especially important part ofsocial stratification. Wealth provides some people "safety nets" of protection against unforeseen declines in their living standard in the event of emergency and can be transformed into home ownership, business ownership, or college education by its expenditure.
Wealth has been defined as a collection of things limited in supply, transferable, and useful in satisfying human desires.[13] Scarcity is a fundamental factor for wealth. When a desirable or valuable commodity (transferable good or skill) is abundantly available to everyone, the owner of the commodity will possess no potential for wealth. When a valuable or desirable commodity is in scarce supply, the owner of the commodity will possess great potential for wealth.
'Wealth' refers to someaccumulation of resources (net asset value), whether abundant or not. 'Richness' refers to anabundance of such resources (income or flow). A wealthy person, group, or nation thus has more accumulated resources (capital) than a poor one. The opposite of wealth is destitution. The opposite of richness ispoverty.
The term implies asocial contract on establishing and maintainingownership in relation to such items which can be invoked with little or no effort and expense on the part of the owner. The concept of wealth is relative and not only varies between societies, but varies between different sections or regions in the same society. A personalnet worth of US$10,000 in most parts of the United States would certainly not place a person among the wealthiest citizens of that locale. Such an amount would constitute an extraordinary amount of wealth in impoverisheddeveloping countries.
Concepts of wealth also vary across time. Modern labor-saving inventions and the development of thesciences have vastly improved thestandard of living in modern societies for even the poorest of people. This comparative wealth across time is also applicable to the future; given this trend of human advancement, it is possible that the standard of living that the wealthiest enjoy today will be considered impoverished byfuture generations.
Marxian economics (seelabor theory of value) distinguishes in theGrundrisse between material wealth and human wealth, defining human wealth as "wealth in human relations"; land and labour were the source of all material wealth. The German cultural historian Silvio Vietta links wealth/poverty to rationality. Having a leading position in the development of rational sciences, in new technologies and in economic production leads to wealth, while the opposite can be correlated withpoverty.[15][16]
Countries bytotal wealth (trillions USD), Credit Suisse
The wealth of households worldwide amounts to US$280trillion (2017). According to the eighth edition of the Global Wealth Report, in the year to mid-2017, total global wealth rose at a rate of 6.4%, the fastest pace since 2012 and reached US$280 trillion, a gain of US$16.7 trillion. This reflected widespread gains in equity markets matched by similar rises in non-financial assets, which moved above the pre-crisis year 2007's level for the first time this year. Wealth growth also outpaced population growth, so that global mean wealth per adult grew by 4.9% and reached a new record high of US$56,540 per adult.Tim Harford has asserted that a small child has greater wealth than the 2 billion poorest people in the world combined, since a small child has no debt.[17]
According to the 2021 global wealth report byMcKinsey & Company, the worldwide total net worth is currently at US$514 trillion in 2020, with China being the wealthiest nation with net worth of US$120 trillion.[18][19][20] Another report, byCredit Suisse in 2021, suggests the total wealth of the US exceeded that of China, US$126.3 trillion to US$74.9 trillion.[21]
In Western civilization, wealth is connected with a quantitative type of thought, invented in the ancient Greek "revolution of rationality", involving for instance the quantitative analysis of nature, the rationalization of warfare, and measurement in economics.[15][16] The invention of coined money and banking was particularly important. Aristotle describes the basic function of money as a universal instrument of quantitative measurement – "for it measures all things [...]" – making things alike and comparable due to a social "agreement" of acceptance.[22] In that way, money also enables a new type of economic society and the definition of wealth in measurable quantities, such as gold and money. Modern philosophers like Nietzsche criticized the fixation on measurable wealth: "Unsere 'Reichen' – das sind die Ärmsten! Der eigentliche Zweck alles Reichtums ist vergessen!" ("Our 'rich people' – those are the poorest! The real purpose of all wealth has been forgotten!")[23]
"Savings" redirects here. For the concept of non-expenditure of income per unit of time, seeSaving. For savings as a business objective, seeProcurement § Performance.
Ineconomics, wealth (in a commonly appliedaccounting sense, sometimessavings) is thenet worth of a person, household, ornation – that is, the value of allassets owned net of allliabilities owed at a point in time. For national wealth as measured in thenational accounts, the net liabilities are those owed to the rest of the world.[24] The term may also be used more broadly as referring to the productive capacity of a society or as a contrast topoverty.[25] Analytical emphasis may be on its determinants ordistribution.[26]
Economic terminology distinguishes between wealth and income. Wealth or savings is astock variable – that is, it is measurableat a date in time, for example 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 measurableover say a year is aflow variable. What marks the income as a flow is its measurement per unit of time, such as the value of apples yielded from the orchard per year.
Inmacroeconomic theory the 'wealth effect' may refer to the increase in aggregate consumption from an increase innational wealth. One feature of its effect on economic behavior is thewealth elasticity of demand, which is the percentage change in the amount ofconsumption goods demanded for each one-percent change in wealth.
There are several historical developmental economics points of view on the basis of wealth, such as fromPrinciples of Political Economy byJohn Stuart Mill,The Wealth of Nations byAdam Smith,Capital byKarl Marx, etc.[27] Over the history, some of the key underlying factors in wealth creation and the measurement of the wealth include the scalable innovation and application of human knowledge in the form of institutional structure and political/ideological "superstructure", the scarce resources (both natural and man-made), and the saving of monetary assets.
Wealth may be measured innominal 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 andcapital) andfinancial (money, bonds, etc.). Measurable wealth typically excludes intangible or nonmarketable assets such ashuman capital andsocial capital. In economics, 'wealth' corresponds to the accounting term 'net worth', but is measured differently. Accounting measures net worth in terms of the historical cost of assets while economics measures wealth in terms of current values. But analysis may adapt typical accounting conventions for economic purposes in social accounting (such as innational accounts). An example of the latter isgenerational accounting ofsocial security systems to include thepresent value projected future outlays considered to be liabilities.[28] Macroeconomic questions include whether the issuance of government bonds affectsinvestment andconsumption through thewealth effect.[29]
Environmental assets are not usually counted in measuring wealth, in part due to the difficulty of valuation for anon-market good. Environmental orgreen accounting is a method ofsocial accounting for formulating and deriving such measures on the argument that an educated valuation is superior to a value of zero (as the implied valuation of environmental assets).[30]
In both Marxist and Weberian theory, class is divided intoupper andlower, with each further subdivided. Capitalist economic classes also typically include middle classes with subdivisions (e.g.,upper middle class).[31]
The upper class are schooled to maintain their wealth and pass it to future generations.[33]
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 income and consume many things, typically limiting their savings and investments to retirementpensions and home ownership.[33]Below the middle class, theworking class andpoor have the least amount of wealth, with circumstances discouraging accumulation of assets.[33]
Though the 10th percentile of American households have zero net worth, the 90th percentile has $1.8 million of household wealth.[34]
Higher educational attainment in the US corresponds with median household wealth.[35]
Median wealth of married couples exceeds that of single individuals, regardless of gender and across all age categories.[36]
Although precise data are not available, the totalhousehold wealth in the world, excluding the value ofhuman capital, has been estimated at $418.3trillion (US$418.3 trillion) at the end of the year 2020.[37]For 2018, the World Bank estimated the value of the world's produced capital, natural capital, and human capital to be $1,152 trillion.[38] According to theKuznets curve, inequality of wealth and income increases during the early phases of economic development, stabilizes and then becomes more equitable.
In 2013, 1% of adults were estimated to hold 46% of world wealth[42] and around $18.5trillion was estimated to be stored intax havens worldwide.[43] A fraction of adults have negativenet worth, wheredebt is higher than assets.[44]
^Beinhocker, Eric D. (2006).The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Boston, Massachusetts: Harvard Business Press. p. 7.ISBN9781578517770. RetrievedApril 4, 2023.During this period, archeologists also begin to see evidence of tradingbetween groups of early humans; the evidence included burial-site tools made from nonlocal materials, seashell jewelry found with noncoastal tribes, and patterns of movement suggesting trading routes.
^Beinhocker, Eric D. (2006).The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Boston, Massachusetts: Harvard Business Press. p. 7.ISBN9781578517770. RetrievedApril 4, 2023.With permanent settlements, a variety of tools, and the creation of trading networks, our ancestors achieved a level of cultural and economic sophistication that anthropologists refer to as ahunter-gatherer lifestyle.
^Beinhocker, Eric D. (2007).The Origin of Wealth: The Radical Remaking of Economics and What it Means for Business and Society. Harvard Business Review Press; 1st edition.
^Charles Tuttle, The Wealth Concept. A Study in Economic Theory, Source: The Annals of the American Academy of Political and Social Science , Apr., 1891, Vol. 1 (Apr., 1891), pp. 615–634, Published by: Sage Publications, Inc. in association with the American Academy ofPolitical and Social Science,JSTOR1008953
^abGrant, J. Andrew (2001)."class, definition of". In Jones, R.J. Barry (ed.).Routledge Encyclopedia of International Political Economy: Entries A–F. Taylor & Francis. p. 161.ISBN978-0415243506.
^Team, The Investopedia."Wealth Definition".Investopedia. RetrievedJune 13, 2021.
^abcSherraden, Michael.Assets and the Poor: A New American Welfare Policy. Armonk:M. E. Sharpe, Inc., 1991.
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