About Wealth Distribution

Third-world countries and homeless populations cast a glaring reflection upon the rich and well-off in light of humanity's big picture. The "haves" and "have-nots" are as different in number as the dollars they so unequally share. And while a number of theories try to explain these disparities, perspectives vary according to how wealth distribution is defined.

Identification

As far as individual wealth goes, incoming money is just an aspect of wealth, since expenses are first deducted before wealth can be determined. Whatever economic value is left over after all liabilities are deducted is the true economic value, or wealth. True economic value can still be had whether or not an income exists. Any form of capital owned represents economic value. The International Association for Research in Income and Wealth shows global statistics indicating a wide disparity between wealth distribution, which far exceeds the gap in income distribution.

Features

Gross inequalities of wealth distribution is a topic that incorporates moral and economic viewpoints. Arguments address factors related to social stability, fairness, morality and the democratic ideal. In terms of social stability, economic inequality is akin to societal imbalance, causing problems that tear at human standards of conduct. Arguments concerning fairness regard equality and entitlement as a given, since all are born helpless and in need of support. Principles regarding morality draw from religious perspectives, which view wealth as a poison to the soul. Viewpoints based on democratic ideals consider wealth to be a means of power and control that redirects social policy for its own gain.

Theories/Speculation

One of many economic theories that addresses the cause of wealth distribution is known as the Pareto Effect. Vilfredo Pareto, an Italian economist from the late 1800s, devised an economic theory based on a pattern that appears when large organizations, or populations, are observed. This pattern is called the "network effect" and reflects a natural organizational flow that occurs in the midst of a group. Its emphasis is on how a network organizes itself, with little to no reference made to individual contributions within the network. Under this premise, economic flow is determined by an 80/20 ratio, where 20 percent of a population will earn 80 percent of its wealth.

Effects

Regardless of how wealth is obtained, those who possess it are in the best position to create more. This effect is called wealth condensation. It's a theory based on the premise that "wealth creates wealth." The theory's model, created by physicists Jean-Philippe Bouchard and Marc Mezard, shows that 90 percent of the world's wealth is owned by 5 percent of the population. This disparity is considered a natural function of any economic network in which money changes hands. The continued accumulation of wealth by the wealthy demonstrates a built-in "positive reinforcement" effect that plays out on a global scale.

Considerations

United States history shows the start of many an industry created by individuals with little to no wealth. Bill Gates, Andrew Carnegie and Henry Ford are a few examples of created wealth in spite of the patterns that underlie these distribution models. Having an idea, communicating it effectively and convincing those with money to invest enabled these men to redirect wealth. Having money wasn't so much an issue; getting a hold of it is what made it possible to create more.

Resources

• Distribution of Total Wealth by Income Group
• Distribution of Wealth Resources