Distribution of Wealth III

You’re a Rich Girl

You're a rich girl, and you've gone too far
'Cause you know it don't matter anyway
You can rely on the old man's money
You can rely on the old man's money

How rich are we? And how rich should we be?

The United States is the wealthiest county on the planet. This is according to the Credit Suisse Global Wealth Databook for 2021 as reported in Wikipedia. Out of the 162 countries, or sub-units of countries, (e.g. Hong Kong and Taiwan are reported as separate sub-units of China), the United States is reported to have a wealth of 126 trillion USD, more than 30% of the world’s reported wealth, more than 168% of wealth of the second‑place country China, and more than 41 times the wealth of Russia. The country with the least wealth is São Tomé and Príncipe in Africa, but that country also only has a reported adult population of 104 thousand as opposed to the US adult population of 249 million, China’s adult population of 1.1 billion and Russia’s adult population of 111 million.,

Reporting the arithmetic mean of wealth per adult (national wealth divided by adult population) normalizes wealth by a country’s population. In this instance, the United States has a mean wealth of $505 thousand per adult, which is second place to Switzerland with a mean wealth per adult of $674 thousand per adult. However this same mean could also occur if all of the wealth is owned by only a few individuals. The median is the wealth at which 50% own more and 50% own less. The median wealth per adult in the United States is $79 thousand, which places it in 26th place, where the highest (first place) median wealth is Luxembourg with a median wealth per adult of $260 thousand. The mean and median wealth, when ranked, both seem to follow an exponential function, If this exponential trend continued, the first-place country should have a median wealth of $166 thousand per adult.

The distribution of wealth is often reported by the Gini coefficient, where a score of 100 indicates that all of the wealth is owned by one individual in a population. The Gini coefficient for the United States is 85.00 which ranks as 24^th place. When ranked, only two countries have a high Gini coefficient which does not follow the trend: Brunei with a Gini coefficient of 96.01 and Cameroon with a Gini coefficient of 94.30. The Gini coefficient does seem to show the distribution of wealth, but it does not give an expected normal distribution of wealth. It also shows the two most equitable countries, Iceland with a Gini Index of 50.9 and Slovakia with a Gini Index of 50.3, where 50 indicates an equal allocation of wealth throughout the population.

If the distribution of wealth followed a statistical normal distribution, the median would be equal to the mean. However a normal distribution must also allow for negative values, while wealth will only have positive values. Mean and median wealth appear to follow an exponential function which allows only positive values when ranked.  An exponential distribution is one where the median is 0.69 times the mean. This ratio of the mean to the median for an exponential distribution would be the inverse, 1.44, which is almost the ratio in Iceland and Slovakia.

If the linear trend between the 36^th and the 153^th ranked country continued, the expected ratio for the highest ranked country would be almost 4.0.  It is suggested that an equitable distribution for the United States thus might be when the median is 4 times the mean. This would suggest that the median wealth per adult, should be $126 thousand, which is $47 thousand higher than the reported amount. Those countries where the median income is less than this expected amount includes, not only the United States, but also Brunei, Bahrain, the United Arab Emirates, Brazil, Ukraine, Russia, Philippines, Lesotho, Laos, Yemen, Kuwait, South Africa, India, Zambia, Saudi Arabia, Nigeria, Botswana, Suriname, and Namibia. This may not be the best company to keep for an equitable distribution of wealth.