Why Economists Ignore Much of Rich People’s Income

Capital gains are 15-25% of household income, but:

[I]n economics […] capital gains aren’t counted as income. And they don’t contribute to “saving.” Those gains are completely invisible to a huge bulk of the economics work (both empirical and theoretical) that is built on income and saving concepts and measures.

One reason capital gains are not measure is because of “[t]he justification is that income is payments to “factors of production” — labor, capital, natural resources, etc.,” but

[W[hen existing-asset markets go up, that’s the market looking at our previously created assets and “realizing” they’re worth more than they thought they were at the time of production and sale. So cap gains are delivering income from production — production in previous periods.



Source : Evonomics


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s