Explaining the scientific difference between wealth and income to David Andolfatto
January 24, 2014Leave a commentGo to comments
Wow. The way David Andolfotto uses economic phraseology in his blog is vague, incoherent, inconsistent and fuzzy – at least against the background of the scientific definition of these phrases. He does not seem to know the totally crucial distinction between wealth (a stock) and income (a flow), which probably means (but that’s kind of fuzzy) that he does not understands the ‘multiplier’. What’s the matter?
A proper science needs proper definitions. In macro-economics, these definitions are not tinkered in heaven at universities but carefully crafted by economic statisticians, working at all kind of statistical institutes. The division of labour, you know. But there seems to be a kind of coördination failure because of this division of labour. Many an academic economists (P.K. being a notable exception) has not really mastered these definitions and is therewith somewhat lost in the scientific woods when it comes to using them.
Two of the concepts defined by these macro-statisticians are ‘wealth’ and ‘income’, wealth being the difference between assets and liabilities of, for instance, households and income being the (net) flow of wages, interest, profits and rents to, for instance, households. Wealth is a stock, income is a flow.
wealth.
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