The Rich Are Even Richer

The rich are not only different than you and me, they also have even more money than we previously thought. 
The Haves and Have yachts.

With apologies to both F. Scott Fitzgerald and Ernest Hemingway, it seems the richare not only different than you and me; they also have even more money than we previously thought.

Philip Vermeulen, a senior economist at the European Central Bank, has produced a paper suggesting the top 1 percent in the U.S. and Europe own a much bigger share of national wealth than current surveys would suggest. In Germany, for example, he suggests 33 percent of the country's riches are held by that thin top slice of society, compared with the 24 percent that survey data previously indicated.

For Italy, the figures are 20 percent compared with 14 percent, while the most fortunate in the Netherlands have a 17 percent share, almost double prior estimates. Vermeulen reckons U.S. surveys also underestimate the wealth accumulation at the top, which he puts as high as 37 percent rather than the 34 percent typically assumed.

Here's the relevant table, with previous survey data at the far left and Vermeulen's top estimates at the far right:


Vermeulen combined data from the Forbes Billionaire rankings with both the Federal Reserve-sponsored Survey of Consumer Finances in the U.S., and Europe's Household Finance and Consumption Survey, to create what he believes is a better method of compensating for the low propensity of wealthy households to respond to surveys compared with their less well-off neighbors. The billionaires list does more than add some very rich people to the picture; it allows him to more accurately estimate the tail of wealth distribution at the top.

Does the discrepancy matter? Yes, and no.

It isn't important for the increased financial disparity it reveals, because wealth isn't a zero-sum game. The riches accumulated at the top of the pyramid don't prevent those lower down from amassing their own wealth. As Robert Nozick argued in "Anarchy, State, Utopia," your child's swimming pool has no "impedance effects" on my child's lack of a swimming pool.

But it does matter for equality of opportunity, because wealth begets wealth; however ineffective governments have been at nudging educational structures to improve access to self-economic improvement, those efforts at social engineering should at least be based on correct data.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.