Wealth
Wealth is the total value of a person’s or entity’s assets—both tangible (property, land) and intangible (investments, intellectual property)—minus liabilities (debts). It is a stock measured at a point in time, commonly expressed as net worth, and differs from income, which is a flow over time.
Key takeaways
- Wealth = assets − liabilities (net worth).
- Wealth is a stock variable; income is a flow variable that changes wealth over time.
- Money is the most common unit for measuring wealth, but societies have measured wealth using land, livestock, or commodities.
- Perceptions of well‑being are often tied to relative wealth—how one’s resources compare to others—rather than absolute amounts.
- Wealth enables access to opportunities and better financial outcomes.
Measuring wealth
- Net worth: the most widely used measure. Sum the market values of all assets and subtract outstanding debts.
- Monetary measurement: expressing different asset types in currency units allows aggregation and comparison.
- Business equivalents: for companies, net worth may appear as shareholders’ equity or book value.
- National vs. personal wealth: GDP measures economic output over time (flow), not stock wealth.
Wealth versus income
- Wealth (stock): the accumulation of resources at a given moment.
- Income (flow): earnings received over a period; positive net income over time tends to increase wealth.
- Confusing the two can mislead assessments of economic well‑being—for example, high GDP does not necessarily mean high national wealth per person.
Forms and cultural measures of wealth
- Modern economies typically use money or financial assets to measure wealth.
- Historically and culturally, wealth has been measured in land, grain, livestock, or other scarce goods depending on context.
- Only scarce goods provide meaningful bases for relative comparisons of wealth.
Building and managing wealth
- Building wealth generally requires saving a portion of income and allocating savings to investments that appreciate or generate returns.
- Wealth management refers to financial planning, investment advisory, and services tailored to preserve and grow high net worth.
- Generational wealth describes assets passed down across family generations and can influence long‑term economic mobility.
Distribution and social implications
- Wealth is unevenly distributed: a small share of the population often controls a large portion of total wealth.
- Relative wealth matters for perceived well‑being and for social mobility; higher inequality tends to correlate with lower upward mobility (illustrated conceptually by the Great Gatsby Curve).
Bottom line
Wealth captures the stock of resources available to an individual, household, or entity and is best measured by net worth. It differs fundamentally from income, plays a central role in economic opportunity and security, and is often evaluated in relative terms rather than absolute amounts. Building wealth requires disciplined saving, prudent investment, and, where relevant, professional wealth management.