Thursday, March 1, 2007

Choices and Wealth

TCS Daily has a great article entitled "Two Americas, Indeed" in which the author discusses the point that becoming wealthy is largely a function of a basic choice, namely, to live below one's means, and not simply a function of how much money one earns (which, itself is also partially a function of previous choices). Citing the book "The Millionaire Next Door", which I've never found the time to read, the author points out such facts as, among millionaires, most have not inherited their wealth and fewer than 20% have inherited 10% of their wealth.

A number of thoughts either contained in the article or evoked by it are 1) trying to "fight" income inequality via government intervention or any other measure won't necessarily have a big impact on wealth inequality since, again, wealth is not entirely a function of income, but rather of lifestyle choices; 2) I consider the purpose of saving, investing, growing wealth etc. not an end unto itself, but rather spending that wealth later, whether on myself or giving it away as I see fit. Thus, growing wealth is an exercise is delayed gratification. Thus, to a great extent, trying to close the wealth gap by taxing or otherwise punishing people who manage to accumulate a certain amount of wealth is, to a great extent, simply punishing the choice to enjoy the fruits of one's labor later rather than immediately, which seems an awfully arbitrary thing to do.

I encourage you to read the entire article.


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