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What does Rich mean?

14

It is my belief that in economics, rich refers to a person with a high income. However, I asked 6 of my friends the following question:
Does the word rich refer to a person with?
a) A large income
b) a large net worth

All 6 selected b.

So, what does rich mean to an economist?

2 Answers

4

Being rich refers to a state of the world, i.e., you can measure if someone is rich at a point in time. Hence, the term must refer to the stock concept of net worth, not the flow concept of income. In contrast, having a high income means that someone will likely become rich as time progresses.

3

Neither. In economics, the category of "rich people" is as ill-defined as the category of "big numbers" would be to a mathematician. If an economist means either your A or B, they'll say so, probably with concrete numbers attached — or better yet, a percentile.

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What does Rich mean?

14

It is my belief that in economics, rich refers to a person with a high income. However, I asked 6 of my friends the following question:
Does the word rich refer to a person with?
a) A large income
b) a large net worth

All 6 selected b.

So, what does rich mean to an economist?

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9

Being rich refers to a state of the world, i.e., you can measure if someone is rich at a point in time. Hence, the term must refer to the stock concept of net worth, not the flow concept of income. In contrast, having a high income means that someone will likely become rich as time progresses.

edit

Interestingly, "poor" is typically defined as insufficient income to meet some threshold (sustain primary needs, be above 25% of the median etc.). The reason is surely that the "poorest" 10 percent or so do not have significant net worth at all which could be used as a criterion. Accordingly, one definition of the opposite -- rich -- could be: Able to save, i.e., run an income surplus. - Peter - Reinstate Monica Oct 17 at 11:39

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