Wealth

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In economics and business, wealth (or net worth) of a person or nation is the value of assets owned net of liabilities owed (to foreigners in the case of a nation) at a point in time.

Wealth may be measured in nominal or real values. 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.

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.

Environmental assets aren't currently accounted for when measuring wealth, in part due to the difficulty of valuing environmental assets. However, it has been argued that although imperfect, an educated valuation system is superior to a blanket value of zero (the current value of environmental assets).^[1]

See also

• Distribution (economics)
• Distribution of wealth
• Income, including section Meaning in economics and use in economic theory
• National accounts
• Wealth effect
• Wealth elasticity of demand

Notes

References

• Robert J. Barro (1974). "Are Government Bonds Net Wealth?," Journal of Political Economy, 8(6), pp. 1095-111.
• John Bates Clark (1902). The Distribution of Wealth Aanalytical Table of Contents.
• Laurence J. Kotlikoff, 1987, “social security," The New Palgrave: A Dictionary of Economics, v. 4, pp. 413-18. Stockton Press.
• _____, 1992, Generational Accounting. Free Press.
• David S. Landes. (1998) The Wealth and Poverty of Nations. Book preview.
• Nancy D. Ruggles (1987). "social accounting," The New Palgrave: A Dictionary of Economics, v. 3, pp. 377-82, esp. p. 380.
• Paul A. Samuelson and William D. Nordhaus (2004, 18th ed.). Economics, "Glossary of Terms."
• Adam Smith (1776). The Wealth of Nations.
• Partha Dasgupta (1993). An Inquiry into Well-Being and Destitution. (Pub. description)
• E.N. Wolff (2002). "Wealth Distribution," International Encyclopedia of the Social & Behavioral Sciences, pp. 16394-16401. Abstract.

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