I've been studying economics for at least 54 years, but learned most of what you write hear in the last 20 years via the MMT school. Your focus on wealth and assets is a useful extension to MMT, IMO.
Very true, MMT and PostK def lead the way on these accounting-based understandings. But even there, and even from the old warhorses of MMT, you find glaring errors that persist from mainstream. eg that "Saving" = ∆NW, which isn't even vaguely close to correct.
Marvellous! Tremendously concise the fundamentals for an real understanding of our economy. I wish we – particularly also journalists – would check the statements from politicians, ‹experts› etc. concerning these fundamentals. IMO, whoever does not apply what you laid out in these 10 points will – inevitably – talk gibberish.
This said, I would like to point out that we use (or put out) a definition of what we consider as «assets» (or «wealth») which is – IMO – too narrow and in that sense even wrong as it is to our all demise. I am talking about this: Whenever we produce something a part or all of it gets added to our assets accounting sheet. Hurrah!
But we do not or hardly take (or want to take) into account (= our accounting) the ‹wealth/assets› which get depleted or destroyed (i.e.. resources in the ground, fish stock in the oceans, pollution of water, air, fertile land).
What are the reasons not to account for these assets? If a person – at least nowadays – does not hold a title of possession on something it is to a large degree of no interest (= value) to him. And even when he holds a title on it: The way we are taught to think and the way our economy (and accounting methods) are structured makes it «sensible» to exploit that asset, meaning: make short term monetary/accounting gains and do not take into consideration (= do not account for) the depletion/losses in the long run and the – over human kind (an the biosphere over all) ‹finely disbursed› – negative externalities.
> whoever does not apply what you laid out in these 10 points will – inevitably – talk gibberish
Well *I* certainly agree... 😁 These understandings need to be (baked) in(to) the Econ 101 textbooks.
> definition of what we consider as «assets» (or «wealth») which is – IMO – too narrow
Totally agree but there are huge impediments (both conceptual and empirical) to extending the current *numeric* tally to include eg human and natural capital. I won't get into those issues here. Huge rabbit hole...
Wealth untethered from owned-asset dollar accounting is kind of like utility: a truly excellent *concept* in the abstract but...you'll notice that this graph for instance is (unavoidably) dimensionless, no numbers on the axes. https://x.com/asymptosis/status/1794047390930092188
There is no "true," "real" numeric, monetary measure of wealth besides accounted wealth. Units of account are *pure* accounting concepts, so...there ya go. Using accounted wealth means that your very term, wealth, is precisely defined by a perfectly coherent web of accounting identities.
I'm thinking I should add that as #11. (Or #1?)
"The only *true* wealth is…the love of friends and family." I totally agree, but...
> extending the current *numeric* tally to include eg human and natural capital. I won't get into those issues here. Huge rabbit hole…
Good to know that I am not the only one who gets the feeling that it is a «huge rabbit hole» … and then opts for the real thing: "The only *true* wealth is…the love of friends and family."
But even if I stay away from the rabbit hole there still some question on the numeric side I would be happy to have your take on it.
In a recent comment you mentioned that the wealth of US(-residents) households is about $175T. My questions:
- Wealth is here (about) the same as net worth?
- Are the «nonprofits» of any significance? Am I right to assume that we talk here mainly of trusts (like the one of the Gates)?
- Corporations (including banks) are not mentioned because they are ultimately owned by households/nonprofits. Therefore $175T is all the wealth there is on the non-state side, or not?
- If so, is there a number floating around about the wealth (net worth) of the state (federal, state and local government, various agencies, FED)? (I assume we are talking here mainly about infrastructure/buildings, power plants, equipment, land property, licences on resource extraction; some financial wealth minus the debt (which is partly held by the FED).)
Check the popup menu upper-left here. (And play with the other options/menus!) You can see Assets, Liabilities, and subcategories of each. As minus Ls = NW.
- Are the «nonprofits» of any significance? Am I right to assume that we talk here mainly of trusts (like the one of the Gates)?
NPISHes hold about 6% of combined "personal"-sector assets.
- Corporations (including banks) are not mentioned because they are ultimately owned by households/nonprofits. Therefore $175T is all the wealth there is on the non-state side, or not?
Right. HH wealth is the only measure there is of "national wealth." In the Table B.1 they try to measure just "real" nonfinancial assets. But for the corporate and foreign sectors, they have no choice: they punt, and show show the value of outstanding equity shares at market prices. So kind of a weird Frankenstein monster of a methodology.
B.1 wealth is basically just household wealth minus the U.S. Net International Investment Position (US holdings of foreign assets minus foreign holdings of US assets).
Excellent post!
I've been studying economics for at least 54 years, but learned most of what you write hear in the last 20 years via the MMT school. Your focus on wealth and assets is a useful extension to MMT, IMO.
This falls within the Post-Keynesian school (highlighting accounting & sectoral balances) according to my view of the academic economic world. -- http://1stuu.org/Communications/EvolutionOfSelectedEconomicSchools.pdf.
The accounting perspective really helps and should be (but isn't) at the heart of economics, in my view.
Very true, MMT and PostK def lead the way on these accounting-based understandings. But even there, and even from the old warhorses of MMT, you find glaring errors that persist from mainstream. eg that "Saving" = ∆NW, which isn't even vaguely close to correct.
Well since you put it that way this makes all the cents in the world.
<grin>
Marvellous! Tremendously concise the fundamentals for an real understanding of our economy. I wish we – particularly also journalists – would check the statements from politicians, ‹experts› etc. concerning these fundamentals. IMO, whoever does not apply what you laid out in these 10 points will – inevitably – talk gibberish.
This said, I would like to point out that we use (or put out) a definition of what we consider as «assets» (or «wealth») which is – IMO – too narrow and in that sense even wrong as it is to our all demise. I am talking about this: Whenever we produce something a part or all of it gets added to our assets accounting sheet. Hurrah!
But we do not or hardly take (or want to take) into account (= our accounting) the ‹wealth/assets› which get depleted or destroyed (i.e.. resources in the ground, fish stock in the oceans, pollution of water, air, fertile land).
What are the reasons not to account for these assets? If a person – at least nowadays – does not hold a title of possession on something it is to a large degree of no interest (= value) to him. And even when he holds a title on it: The way we are taught to think and the way our economy (and accounting methods) are structured makes it «sensible» to exploit that asset, meaning: make short term monetary/accounting gains and do not take into consideration (= do not account for) the depletion/losses in the long run and the – over human kind (an the biosphere over all) ‹finely disbursed› – negative externalities.
Thanks!
> whoever does not apply what you laid out in these 10 points will – inevitably – talk gibberish
Well *I* certainly agree... 😁 These understandings need to be (baked) in(to) the Econ 101 textbooks.
> definition of what we consider as «assets» (or «wealth») which is – IMO – too narrow
Totally agree but there are huge impediments (both conceptual and empirical) to extending the current *numeric* tally to include eg human and natural capital. I won't get into those issues here. Huge rabbit hole...
Wealth untethered from owned-asset dollar accounting is kind of like utility: a truly excellent *concept* in the abstract but...you'll notice that this graph for instance is (unavoidably) dimensionless, no numbers on the axes. https://x.com/asymptosis/status/1794047390930092188
There is no "true," "real" numeric, monetary measure of wealth besides accounted wealth. Units of account are *pure* accounting concepts, so...there ya go. Using accounted wealth means that your very term, wealth, is precisely defined by a perfectly coherent web of accounting identities.
I'm thinking I should add that as #11. (Or #1?)
"The only *true* wealth is…the love of friends and family." I totally agree, but...
> extending the current *numeric* tally to include eg human and natural capital. I won't get into those issues here. Huge rabbit hole…
Good to know that I am not the only one who gets the feeling that it is a «huge rabbit hole» … and then opts for the real thing: "The only *true* wealth is…the love of friends and family."
But even if I stay away from the rabbit hole there still some question on the numeric side I would be happy to have your take on it.
In a recent comment you mentioned that the wealth of US(-residents) households is about $175T. My questions:
- Wealth is here (about) the same as net worth?
- Are the «nonprofits» of any significance? Am I right to assume that we talk here mainly of trusts (like the one of the Gates)?
- Corporations (including banks) are not mentioned because they are ultimately owned by households/nonprofits. Therefore $175T is all the wealth there is on the non-state side, or not?
- If so, is there a number floating around about the wealth (net worth) of the state (federal, state and local government, various agencies, FED)? (I assume we are talking here mainly about infrastructure/buildings, power plants, equipment, land property, licences on resource extraction; some financial wealth minus the debt (which is partly held by the FED).)
>Wealth is here (about) the same as net worth?
Check the popup menu upper-left here. (And play with the other options/menus!) You can see Assets, Liabilities, and subcategories of each. As minus Ls = NW.
https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/#quarter:138;series:Liabilities;demographic:networth;population:1,3,5,7,9;units:levels
- Are the «nonprofits» of any significance? Am I right to assume that we talk here mainly of trusts (like the one of the Gates)?
NPISHes hold about 6% of combined "personal"-sector assets.
- Corporations (including banks) are not mentioned because they are ultimately owned by households/nonprofits. Therefore $175T is all the wealth there is on the non-state side, or not?
Right. HH wealth is the only measure there is of "national wealth." In the Table B.1 they try to measure just "real" nonfinancial assets. But for the corporate and foreign sectors, they have no choice: they punt, and show show the value of outstanding equity shares at market prices. So kind of a weird Frankenstein monster of a methodology.
B.1 wealth is basically just household wealth minus the U.S. Net International Investment Position (US holdings of foreign assets minus foreign holdings of US assets).