At 11:26 PM 05/21/2001 -0400, you wrote:
>JD is splitting hairs IMO be distinguishing
>a rise in wealth from income. Any change
>in wealth IS income
maybe I was splitting hairs, but that's a hair that's oft split by the vast
majority of macroeconomists.
Y = income = a flow of money (wages, dividends, interest, rent, etc.)
during a time period such as a year, net of taxes and transfers.
W = wealth = a stock of assets, net of debt, at any specific point in time.
it's true that they are related, since they feed each other (allowing the
elite few to accumulate wealth seemingly without end), but the standard
consumption function separates them:
C = aW + bY, where b is the famous marginal propensity to consume and a
represents the wealth effect. It represents the "forward looking" (life
cycle or permanent income) part of the consumption function.
David was asking about the assumption that b is high for the rich. I
pointed out that an increase in W leads to shifts in the curve when drawn
in C, Y space.
the above is for an individual. Class differences come in when you aggregate.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~JDevine
