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A rich person can own companies, shares, houses used for renting etc. that are worth billions of $US. That is the wealth that is generating income. I would call it income-generating wealth or income+jobs-generating wealth or growth-generating wealth

On the other hand, the rich person can own wealth like cash, bank accounts, houses, yachts, land used for playing golf etc. that is not used to generate income - this is a wealth that he is using for enjoying life. I would call this wealth leisure wealth.

A rich person can have an income-generating wealth worth billions of $US and in the same time it can have a leisure wealth that is close to zero. He/she can also have an income that is equal with the medium income. And then he/she can have only his own wage as a leisure wealth.

There are fundamental differences between the income-generating wealth and leisure wealth

  • The income-generating wealth is actually used to spin the wheel of the economy and it is also directly creating jobs.
  • In the same time, the leisure wealth is used by the rich person in order to actually live like a rich guy - or to live like an average citizen - depending of his/her choice. The leisure wealth is owned on personal name (not assets owned by a company of the owner) and it's for personal use - i.e. not used by any clients (like the houses for rent)

I think there should be distinct terms for the two in order to make a clear distinction between them.

Is there an already invented term for the wealth that I'm calling leisure wealth?

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    $\begingroup$ I'm not aware of such a distinction, but it would be a great descriptive exercise, given sufficently good wealth data. I however doubt one can clearly make a division. As an example, if the owner of the yacht / the landhouse hires a few people to run or clean them, it could be labbeld income-generating wealth. $\endgroup$ – E. Sommer Apr 1 at 18:22
  • $\begingroup$ @E. Sommer: paying a company to clean your yacht is like buying a hamburger - it does generate income, but indirectly. You pay to the company and then the company pays the employees. So the yacht is still leisure wealth, just like your house. If you spend the money of your own compnay for leisure that means theft - or larceny. Like for example the CEO of Tyco - Dennis Kozlowski or like Eddie Antar (Crazy Eddie electronics shops chain) or Sarma Melngailis (pure food restaurant owner) - and the list can continue with thousands of names. $\endgroup$ – Joe Jobs Apr 1 at 20:27
  • $\begingroup$ This is really a linguistic question. Your “leisure wealth” items are mostly referred to as “possessions”. Things like yachts, golf clubs or whatever are probably classified as consumer durable goods. Excluding bank deposits is questionable; they are a financial claim, and are part of portfolios. And “income generating” doesn’t work; people can buy vacant land as a speculative investment, and it generates no income until sold. $\endgroup$ – Brian Romanchuk Apr 3 at 23:00
  • $\begingroup$ @Brian Romanchuk - this question is indeed linguistic as it is a question about language. But in the same time the question is about economic language so it's about economic terminology. And terminology is already a well defined tag on Economics SE $\endgroup$ – Joe Jobs Apr 4 at 2:14
  • $\begingroup$ @Brian Romanchuk - You mean that when you are owning a company or shares in a company, those things are not possessions? A company can own yachts, golf clubs and carbon fiber (durable) baseball bats and then rent them to the people so those consumer durable goods will generate income. Question: houses are consumer durable goods? $\endgroup$ – Joe Jobs Apr 4 at 2:22
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I do not believe that your suggested definitions will hold up. Since this is a forum for questions about economics, I do not see the point of proposing a new definition here. Who is going to see it?

What you call “income generating wealth” is captured by “wealth” in its standard usages. However, what you exclude (such as bank deposits) will be included in “wealth” or “claims on wealth.” From a portfolio perspective, it makes no sense to exclude bank deposits. Furthermore, “income” is well defined, and there are assets that generate no income for the holder, and yet are wealth (for example, a personal residence). Rephrasing to include future income does not help, since the sale of a primary residence is not considered income.

Everything else would be classified as “consumer goods.” If you want to only include things that “make you look like a rich person,” you would end up with the fuzzy category of “positional goods.”

Why not include consumer goods in wealth? One of the regularities of consumer goods is that they have almost no resale value. So there’s no good way to measure its value.

The lines are blurry. For a collector that buys and sells particular goods, those goods are actually assets that are expected to make a profit. However, no statistician could hope to measure the value of these exceptions.

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  • $\begingroup$ I did not know that I'm proposing new definitions. I was hoping these definitions already exist. But it seems they are new definitions. If they pass the test - i.e. if they are valid definitions - then they can be used by anyone. Anyone can point to this question so the people can see it and make use of those definitions. $\endgroup$ – Joe Jobs Apr 5 at 23:40
  • $\begingroup$ I didn't say "to make you look like a rich person”. I said "to live like a rich person" - i.e. "to live the life of a rich person". This is not about showing anything but actually about the way the person lives and the amount of money they spend and own for living in a certain way. You can live like a rich person and in the same time you can be very discreet about it so very few people know that. $\endgroup$ – Joe Jobs Apr 5 at 23:48
  • $\begingroup$ The goods of the collector are on his/her own personal name and they can be used by the collector (they are not rented). So it's leisure wealth. The same with the land used for speculation. The same with a yacht that the owner pays a company for cleaning it - they are all for personal use. On the other hand, the houses or the land used for renting are not for personal use and they are generating income and growth - so those assets are growth-generating wealth. On top of that, those who make a living from speculating on the items in their collections are very few - exceptions and insignificant $\endgroup$ – Joe Jobs Apr 6 at 1:48
  • $\begingroup$ 1) The only people that will see this question are people searching for answers to questions. How many people are going to find this question? 2) As was pointed out in “The Millionaire Next Door”, most rich people do not consume positional goods - that’s why they are rich. $\endgroup$ – Brian Romanchuk Apr 6 at 18:07
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The distinction between the two is not well specified. If I own an apartment I can rent it out or I can live in it. If I own an art collection I can hang it in my house or charge others to see it. Cash in bank accounts is lent out by banks to form investments in other firms and projects. Land might be used for long walks or used for farming, natural resource extraction, or simply held for future development. Nevertheless, a useful distinction in the spirit of your question is between inputs to production and "Durable Consumption". Durable consumption goods are a form of consumption good that is provides a stream of consumption services rather than totally consumed by the act of consumption. Contrast a car (durable consumption good) with a vacation (a service, which is a kind of non-durable consumption).

Here is the St. Louis Fed on Factors of Production - The Economic Lowdown Podcast Series, Episode 2

The first factor of production is land, but this includes any natural resource used to produce goods and services. This includes not just land, but anything that comes from the land. Some common land or natural resources are water, oil, copper, natural gas, coal, and forests. Land resources are the raw materials in the production process. These resources can be renewable, such as forests, or nonrenewable such as oil or natural gas. The income that resource owners earn in return for land resources is called rent.

The second factor of production is labor. Labor is the effort that people contribute to the production of goods and services. Labor resources include the work done by the waiter who brings your food at a local restaurant as well as the engineer who designed the bus that transports you to school. It includes an artist's creation of a painting as well as the work of the pilot flying the airplane overhead. If you have ever been paid for a job, you have contributed labor resources to the production of goods or services. The income earned by labor resources is called wages and is the largest source of income for most people.

The third factor of production is capital. Think of capital as the machinery, tools and buildings humans use to produce goods and services. Some common examples of capital include hammers, forklifts, conveyer belts, computers, and delivery vans. Capital differs based on the worker and the type of work being done. For example, a doctor may use a stethoscope and an examination room to provide medical services. Your teacher may use textbooks, desks, and a whiteboard to produce education services. The income earned by owners of capital resources is interest.

The fourth factor of production is entrepreneurship. An entrepreneur is a person who combines the other factors of production - land, labor, and capital - to earn a profit. The most successful entrepreneurs are innovators who find new ways produce goods and services or who develop new goods and services to bring to market. Without the entrepreneur combining land, labor, and capital in new ways, many of the innovations we see around us would not exist. Think of the entrepreneurship of Henry Ford or Bill Gates. Entrepreneurs are a vital engine of economic growth helping to build some of the largest firms in the world as well as some of the small businesses in your neighborhood. Entrepreneurs thrive in economies where they have the freedom to start businesses and buy resources freely. The payment to entrepreneurship is profit.

A person might have a great deal of wealth, but all of it held in durable consumption goods which they are using (the British royal family might be a good example of this type). Another person might have little consumption of any sort, but own lots of capital, land, and entrepreneurship (Hetty Green is a famous example of this type, but so might be Warren Buffet, at least relatively speaking).

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