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Defining the poor is common (The World Bank's one dollar per day level, for example)

But who are the rich?

If you can read this posting, you are likely rich.

Anyone with a university education and an income at or above the lower-middle class level for an OECD country is rich, I would argue. Being rich is more about having time and freedom to make choices about your life than bagfulls of money.

Joi's latest posting may suggest a way to measure wealth through a Technorati rating!

What is the best metric to define someone as rich?

41 Comments

Of course this is a retorical trick. There's no such thing as a shared, absolute concept of "richness", hence you can't define anything to measure it against, and verify what is best.

I'll have to look for the link, but there was an amazing graphical illustration of the homes people lived in along the spectrum of income. I find that these sorts of visualizations are the easiest to understand. Does anyone know which visualization I'm talking about? I had a feeling that at the time it didn't work properly on the Mac so I didn't blog it...

It depends what you are trying to achieve with your definition of poverty and wealth. If you are trying to decide whether a person is among the most in need of aid, it might be of some benefit. If you want to figure out whether a society is good at distributing its wealth amongst its citizens in a reasonably fair way, then you'd need some sort of relative definition of poverty.

By way of example, compare the US with Singapore. Both are wealthy capitalist countries, but the proportion of people living in very poor conditions is quite different.

There is also a group called 'the working poor', who have jobs, food, TV and access to a computer and so on, but have few choices in life. They work so hard that they don't really have time to improve themselves or find a better way of living.

Measurement of socioeconomic status is the subject of a long and often (of necessity) fairly technically dense literature in economics and related fields. For instance, that "dollar a day" measure is not an unassailable standard for absolute poverty: it is one among many, many competing approaches that have been offered. In fact, these days perhaps the most increasingly popular method of ranking people by socioeconomic status in lower and middle income societies for the purpose of, for example, comparing health outcomes across socioeconomic strata is to do so with country- and survey-specific indices based on the first principal component of a series of asset ownership and household characteristic measures. I'm not a big fan of this approach, but it highlights what I am saying. There are so many competing methods with their own relative merits, approaching each seriously inevitably involves confronting sometimes arcane and technical issues (eg principal components is a methodological can of worms), and there are issues related to the norm (eg will this allow comparison across nations?). And Giacomo is right: the purpose in measuring will help to dictate the appropriate course. If you really want to do this well, it is way beyond the scope of what can be dealt with in the standard blog exchange.

Joi:

The site you are talking about is

http://www.gapminder.org/

It is run by Hans Rosling and he has set up some great interactive graphics about the state of the world.

Peter:

Just to clarify: I am not so interested in defining the world's poor. (Many people do that.)

I am interested in how to define the rich. A necessarily subjective definition, but one that tells a lot about people's perspectives.

A good test for the definition is to complete the sentence: "I will consider myself rich when..."

I remember that when I gave my talk at the Trilateral Commission, some consulting company was distributing a report explaining that in fact, the rich weren't getting richer. ;-) I was curious of the motivation behind the producers and consumers of the report. I wish I had kept it.

No, no, no...rich is comparative. When I lived in a ritzy part of New Jersey making well over 6 figures I felt poor because I was at the bottom of the socio-economic ladder in that area. Now I feel relatively well off because I'm in a better situation than my neighbors, even though I make less money now.

Today I had to go into my bank to take care of some business. Standing outside the bank trying to get money out if its ATM was a young woman. She cursed the machine and marched in ahead of me through the door and up to the teller window. This is a small rural bank and while I waited in line, I could not help overhearing the woman’s problem. She had had £20 in her account but the bank had charged her a £20 fee for being overdrawn so she had nothing in her account. She said she now had no money to feed her child. The bank was understanding and sorted the problem out. I saw the woman around town later with her little boy, shopping for groceries.

I have known what it is like to live below the poverty line, with children to support, and think that if you are above that line, i.e. you can pay your bills, maybe even afford some luxuries, you can consider yourself rich, not only rich, but very lucky.

Thomas,
I realize that the issue here is the rich, but the same substantive issues often creep up along the entire socioeconomic spectrum.

I understand the desire for some indicator that can be driven by whatever completes the statement "I will consider myself rich when..." The problem with that is that there is no such easy answer, at either end of the socioeconomic spectrum. If there was, someone would have come up with it in the mountain of serious work done thus far. If one is serious about this, the challenge is to come up with some sort of method or rule(s) for ranking people that satisfies some basic axioms and notions of what is meant by socioeconomic status in all cases without leading to perverse rankings. Morever, the information about individuals that goes into that process has to be of a nature that 1. can be realtively unequivically agreed on, 2. is not subject to substantial measurement error and 3. is in some intellectually satisfying way linked behaviorally to the ultimate notion of what socioeconomic status is. This is the challenge not only in measuring the poor, but also the rich. And doing that is really hard.

Peter, it's so nice to hear from someone like you who has attained such a level of luxury in life that he can manage to speak about being rich or being poor at such an unemotional level that his primary fixation is on the procedures for defining these terms.

There are 44 million Americans that have no access to affordable health care. That is obscene. We have thousands of people die each year because they can't afford medical care.

I think a countries wealth should be measured at how well they take care of those with less in their country.

Thomas Stanley, in his various books, has a definition of "affluence" derived from this formula:
Annual income times your age in years times one-tenth.
If the resulting number is lower than your current net worth, you are affluent. If not, not.
He says that in the US affluence by this definition is rarely achieved before age 50, and, for that matter, rarely achieved, period.
He means for this definition to be applied in the industrialized western economies, altho obviously the formula could be applied even to those in dollar-a-day circumstances.

Noel,
Nice to hear from you too. I am an economist. I have spent a great deal of time struggling with these issues. I have devoted so much energy to these issues in part becuase, as part of my work, I spend so much of my life in some of the poorest places on earth. I'm sorry if an analytical approach to these things offends you, but I would like to assure you that in most things your evidently more emotional approach to things is the proverbial path to hell paved with good intentions.

Have a nice day.

There are a lot of people who have a university degree, Internet access, a computer, and no health insurance, and an income nowhere near the lower-middle-class income line. Me, for example. I realize I'm rich compared to the average citizen in some of the countries I've been to, but most days, it doesn't feel like it.

In my opinion being rich in terms of having a lot of money is a definition of the past. Nowadays I do not need a lot of money to fulfill most of my materialistic dreams.
And I also know several people who actually have money but cannot buy happiness, even the 3rd Porsche does not help (maybe for several days or weeks you are happy but finally you are thrown back to you and your "inner mechanisms").

So for me richness means having the ability to dream, having the ability to love, having the ability to relax, having the freedom to decide/choose, having found myself (to know who I am and what are my values), having friends and having the ability to reflect on my action.

It is one of my tasks in my life to put most of these aspects into reality.

And generally if someone wants to talk about money he should better use the term "financial independence" instead of "richness".

Charles Dickens definition?

"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

I read an article in the Telegraph a few days ago that said that the entry-level to the (UK) "millionaire" lifestyle now costs 3 million.

I am rich. I have a place to live which I can afford, and which keeps me warm and dry. I have all the food I need, even the luxury of choosing what to eat. I have a car, so I can get around freely on my own. I have an education, so I have a variety of options for employment. I have a job. I have a savings account. I even have health insurance.

I know that many many people struggle because they do not have one or more or any of the above. I have struggles too, but they generally do not relate to a lack of financial resources. So I consider myself rich, and fortunate.

You could also say that someone in a poor country reading this is much richer relatively than us, reading this from a rich country (France in my case!).

Comparative feeling of wealth is a great point.

Is the consumption society designed to make us feel poor and unsatisfied?

This is an easy one... Cold hard cash and assets is how you measure wealth. For those that say money can't buy happiness, you may be right (but I doubt it), but then poverty won't have you cracking a smile either. I choose cash and fake a grin if need be.

i have asked several people in rural burkina faso what "rich" meant to them. one said "living in a house made of real bricks, not mud bricks", another "a motorcycle", another "have a job with a salary instead of farming". all answers pointed in one direction: to dispose of money rather than just what you grow - to be able to buy goods, be it for health (medicine or treatment by a doctor), transport (bicycle or motorcycle), education (books and paper for school children) or housing (real bricks, metal blinds as windows).

ps. the joie de vivre in burkina faso is unrivaled compared to industrialized countries. also a form of wealth, i'd say.

Peter, there is a difference between looking into these things from the outside and experiencing them first-hand yourself. Objectively speaking, I don't think anyone could unemotionally look at their children go hungry and fixate analytically on defining the term that would most accurately describe their condition. Of what use would this be? So sure, you've seen poor people, but you have not had to live like them. You have options and opportunities which in comparison to them make you rich. I think everyone could use a little hell and adversity in their lives. It gives you perspective.

On your question Thomas, I think it's we who desire to consume - gadgets, gizmos, devices - all manner of toys. Sometimes I wonder if it's not he who accumulates the most money who wins. It's he who accumulates the most toys who wins. : ) To accomplish that however, it's not enough to be just rich; you have to be wealthy. Being rich means you have a million dollars in the bank whereas being wealthy means having a guaranteed minimum income of one million dollars coming into your bank account every year. At least, that's how I define it.

Noel: People who want to actually make a difference in the world (as opposed to, say, simply pontificating to make themselves feel better) want to measure things like socioeconomic status with as much precision as possible so that scarce resources can be directed with as much precision as possible to those who, by some consistent and scientifically meaningful standard (as opposed to a less analytical but emotionally self-gratifying standard-never mind how sloppy it is), need them.

That is what use it would be.

Here’s an experiment:

Starve an economist for, say, twenty days. Then carry them into a room and sit them in front of a table containing two objects: one, a steaming hot bowl of vegetable soup; the other, a heavy tome titled: 'Statistical Anomalies In Socioeconomic Status Tables, 2005. Revised Edition.'

Record which object the economist reaches for first. Repeat experiment.

Noel, Peter is a pretty green economist who's still going through a “quantitative” phase, and hasn't internalized yet why his branch of endeavour is called “dismal” ;-)

Noel, Mostly Vowels is a complete charlatan who apparently doesn't even really understand what NBER is. So if I'm "pretty green" he is essenially like a high school student by analogy.

The whole point of this seems to be that I am obviously so priveleged that I don't what's what in terms of understanding what socioeconomic status is. A few responses:
1. Yes, I don't know what it means to live in the places like the worst slums of Dhaka (though I have been, for instance, to some of the worst slums of Dhaka-how many of you who think I'm a cold, clueless number cruncher can claim that??), but beyond a certain point Crampton is right: if you are participating in this exchange in all likelihood neither can you. So temper your tone with that reality in mind.
2. I am far enough into my career, and having watched the general trends in it so far, that I am fairly confident that I'm likely only deepen my commitment to the quantitative phase. If this seems unbelievable to MostlyVowels, I can provide him with a short list of a few hundred prominent economists who made the same turn. The reason is that I don't see how else to proceed. Yes, the analytical approach to things can seem cold, but what alternative is there? Saying "I think everyone could use a little hell and adversity in their lives. It gives you perspective" really doesn't get, for instance, a national immunization program first to those communities that are the poorest and most in need of it. Only a carefully conceived analytical approach (and even here a truly persuasive approach really does not exist, though progress toward one is constant) can do that as well as we can do it at this phase of the human experience.

Oh, and by the way, the topic was how you measure the rich, and not your own experiences with wealth or poverty.

FYI: The longest I've gone without food in my adult life is probably 2 days (long story), and at the end I reached first for a tasting dinner at V9 restaurant at the top of the Sofitel on Silom Rd. in Bangkok. I forget the wine theme, but I do remember that all but a few were tired and a bit cliched. The food, however, was excellent.

Let the snickering begin.

Peter, Thomas Crampton has proposed a fairly reasonable definition of “being rich”, that is independent of most quantitative metrics you could come up with, yet has a sociological and cultural validity that most reasonable participants here would recognize.

What are the relevance of quantitative research, say, into an immunization program — presumably implemented in a developing country — or an analysis of asset ownership patterns in developed countries to the qualitative discussion here among an objectively fairly priviledged cross-section of the world population ? Do tell us.

Reading your reply, it occurs to me that you're still mortified about that on-line chat we had a few months ago... :-)

About me being a fraud: I'm *still* waiting for your own theory as to why a small- or medium-sized software company's management might *not* make a game theory-inspired decision as to whether to apply for a software patent.
Being able to cite some independent research (i.e. not based on your own unsubstantiated intuition) to support your views about the value of software patents would be nice too, if you want to have some credibility...

Actually, you are one of my favorite people on the blogosphere.

Point by point:

-"that is independent of most quantitative metrics you could come up with": actually, people have used the kind of indicators he talks about as inputs to "quantitative metric" measurment schemes for measuring SES
-The sort of approaches I am talking have everything to do with it: he is talking about how to identify the rich. One would to do that in the most logical and consistent fashion possible.

I have to go: a big truck just parked blocking my drive. Sorry.

Sorry about that: my neighborhood is being paved and the workers were planning on leaving a paving truck parked mostly blocking my drive.
To continue:
Identifying the rich and poor in a consistent and meaningful way involves a huge over lap of issues. If you want to ID the rich, and go beyond the standard cloud talk, these issues are meaningful.
-About you being a fraud. Don't take it too personally: its just one "green economist's" view. The issue is not whether there is evidence support the position you stated: there is (and the stuff I'd heard of was actually different work from what you cited). The issue was one of whether there is a consensus (in the context I believe it was whether "NBER" had a viewpoint on the subject.) There is a vast body of theoretical and empirical research, with, to my knowledge (limited, since I am a health economist and this topic is usually the domain of other fields) no consensus (to be expected: I studied enough theory to know that you can get any theoretical result you want with the right assumptions and am now an applied economist who knows too well how the data will eventually confess if you torture it enough) and the general weight of opinion leans toward the idea that eliminating monpoly rents to innovation hugely reduces the returns to innovation. The issue isn't whether there is any evidence to support your views: it is the degree to which you overstate your case, and the strength of the evidence behind it. I'm not sure what it is you do, but your rather uncynical attitude toward the empirical evidence you cited convinces me that you are certainly no economist.

To tell you the truth, on some topics (I can vaguely recall your input on some exchanges regarding the troubled past and present between China and Japan) I have actually agreed with you.


By the by, apologies but I'll have to let you get the last word. I'm moving over to this dicussion about the weird shooting video from France.

Peter, thank you for admitting the truth at last. All this talk about needing "the analytical approach", "theoretical and empirical research", "consistent and scientifically meaningful standard" etc. etc. and you have just confessed that this information that you so strenuously gather over your lobster tails and bottles of barolo can be manipulated to say whatever you want and is therefore worth precisely nothing. It's refreshing to see you being so honest ... finally.

In real life, I have a (sadly justified) reputation of being a cynic, a doubter and a contrarian. On-line, OTOH, I'm generally trying to behave, but if I come across as being overbearing, it's because I'm too used to expect of people whom I have a discussion with to demonstrate a fairly convincing knowledge and understanding of the subject, to be able to elegantly parry my questioning, preferably coupled with an awareness of the audience profile to which they'll be providing their input or advice
:-P

Ok, I can't resist:
Noel: Just because their quacks does not mean that there are not good doctors as well. Really good empirical people can typically sniff out gamesmanship. So what I said was in no way an admission. Sorry, but the world is complex.

And, FYI, Barolo is generally a horrible match for lobster tails (it is hard to think of a preparation where it might work). Just because we live at the plebian end of the wealth spectrum does not mean that we have to have plebian taste.

MostlyVowels: Your statement was unclear to me. Your expectation is with respect to your off or online life? If you were referring to the latter, are we surfing the same blogosphere?

Finally, you probably are already well aware of this, but have you tried out the Beck-Posner blog (http://www.becker-posner-blog.com/)? You might have some real fun there.

My god: barolo and lobster tails?

Are you blogging in from a cave???

Sorry, meant to write "Just because there are quacks... "

The sad fact of living in the 'civilized' world is that even though externally, it seems as if those living there are 'rich' relative to those in the less developed world, we are poor in the sense that our society discourages, it seems, anything which encourages extended families or sharing. In the US, it seems, encouraging people to share, housing, food, conversation, even, is looked at as subversive on some level. And the media is desperately trying to eliminate fora that are not purchased - i.e. controlled, by them.

Community-based public and educational radio disappear, replaced by commercial stations that receive their programming from afar..from satellites..

The village green (public) is replaced by the mall (privately owned, with no right of free speech)

Busses and trolleys (where people can talk) are replaced by freeways and private cars for the well off, and dysfunctional busses that are allowed to rot and then retired.. "because they are obsolete, now that we have cars".

People are encouraged to buy more and more, more than they can afford, to keep up with their neighbors. People who choose not to consume the latest fad are ostracized, marginalized..

Everyone is sold longing for a figure, a lifestyle, an unattainable world of freedom and leisure that is to them, cruelly unattainable, even if machines are making work unnecessary (sooner than we think) and lifespans potentially infinite (for those who survive the culture wars?)

And then everyone wonders why Americans seem unhappy...

Peter! Weren't you letting us have the last word here? Silly me. I thought you were telling the truth.

"Sorry, but the world is complex."

You have no idea. Try facing the world with nothing in your pocket.

I don't care what wine you drink with your boiled alive sea creatures. If you are tasteless enough to turn a discussion, which was essentially set up to define how lucky we are, into a conversation about what expensive wine works or does not work with what expensive tortured creature after professing how as part of your work you spend so much time in places where people have tasted neither barolo nor lobster tails and by your definition are uncultured plebians living in caves, then you, Peter, are too rich for my taste.

"Bye, bye, darling. I'm off to measure the starving in Africa."

"Do you have your slide-rule, your reference manuals and your pince-nez?"

"Of course. I never leave home without them."

"Right-oh, pumpkin. Shall I send you a few crates of that bearable barolo?"

"Please do, stinky floral. Those uncouth savages out there living in caves wouldn't know a good barolo from a bottle of Welch's grape juice. It's disgusting work, but I suppose someone has to be unemotional enough to do it."

"You're so brave, my little sadistic lobster-boiler you. What a shame you won't be here for the dinner party. The servants are force-feeding the ortolans as we speak. We’ll be drowning them tomorrow.”

“Oh yummy! ... You know what, darling? Never mind. I’ll nip out there, take a few cursory measurements and then structure the data however I like. The plebs won’t know the difference and enough of them will get immunized to stop the Red Cross breathing down our necks. I’ll be back in time for that party. Toodle loo!”

Look, Noel, the thing about wine was a joke (though it is true: its all fun and games until someone tries to match barolo and lobster). You are obviously determined to take yourself extremely seriously here. I *have* had nothing in my pocket before (apparently I have to spell things out slowly for you: you evidently didn't pick up things like my reference to living at the plebian end of the wealth spectrum), and your posts link back to an extremely strangely suggestive site for someone who has never had the experience of having a couple steaks in the freezer. In terms of whether we want to find actual outrage in this dialogue (or whether I have the "moral" acuity to buy into yours), I think the difference between you and me is the degree to which you are determined to take yourself absurdly seriously in terms of your own obviously tragically Dickensian personal narrative.

Thank God for people like Noel: after all, they remind people like me about what it *important*.

Jesus, Noel. You must be a real hit at dinner parties. MostlyVowels and I may rip into each other continuously, but I think that both of us at least "get" the tone of comedy buried in our mutual condescension.

I am glad you take yourself light-heartedly enough to have enjoyed my previous post.

the shortest definition I could come up is...

being rich means suffering under a lack of unsatisfied needs

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