1.INTRODUCTIONOurknowledgeaboutthepast,present,andfutureofwealthinequa - PDF document

1.INTRODUCTIONOurknowledgeaboutthepast,present,andfutureofwealthinequalityisincomplete.Whilethefutureisperhapsunknowable,ourlackofknowledgeaboutthehistoricalandcontemporarydistributionofwealthisduetoadearthofdataand,inatleastonecasepointedoutbythispaper,afailuretofullyexploitavailabledata.Thecuttingedgeofeconomicresearchonwealthanditsdistributionisthereforestillpartiallyandoftenchie yconcernedwithwhatmightseemlikethetrivialtaskofsimplydescribingthedistributionofwealth.Examplesofcutting-edgeresearchonthedistributionofwealthintheUnitedStates(US)include:KopczukandSaez(2004)whoapplytheestate-multipliermethodtoestate-taxdatainordertotrytoestimatetopwealthshares;SaezandZucman(2014)whoprovideslidesforforthcomingworkthatwillapplytheincome-multipliermethodtoincome-taxdatainordertotrytodothesame;Pfeeretal.(2013)whouseawealthsurveyconductedaspartofthePanelStudyofIncomeDynamics(PSID);andKennickell(2011)andWol(2014)whousetheFederalReserve'sSurveyofConsumerFinances(SFC).1Thepurposeofthispaperistocontributetoourknowledgeofwealthinequalitybyusingasourceofdatathatisreadilyavailablebutwhichhasnotbeenfullyexploitedandwhichhasbeenlargelyneglectedbyacademicresearcherswithsomenotableexceptionsnotedbelow.Thatdatasourceisalistofthe400wealthiestAmericansthathasbeenpublishedineveryyearsince1982bythepopularmagazineForbesMagazine.Althoughapopularmagazinemayseemlikeadubioussourceofdata,themagazine'slistisarguablythebestsourceofdataontheverytopofthedistributionofwealthintheUSoverrecentdecades,asthispaperwillargue.The400wealthiestAmericansmayalsoseeminsignicantinhumantermsbecausetheyareaninnitesimallysmallpercentageoftheAmericanpopulation,buttheyaresignicantineconomictermsbecausetheyownadisproportionatelylargeshareoftheirnation'swealth,asdetailedbelow.GiventhatitisarguablythebestsourceofdataontheverytopoftheUSwealthdistribution,andgiventheeconomicsignicanceofthatpartofthedistribution,themagazine'slistdeservesseriousstudyratherthanneglect.2 1Foranoverviewofthedataandmethodsusedtoestimatethedistributionofwealth,seeDaviesandShorrocks(2000).Anotherexampleofcutting-edgeresearchontheUSwealthdistributionisPiketty(2014a)whopresentsnewtime-seriesestimatesoftopwealthsharesthatwerecreatedbycombiningpreviousestimates(includingthosebyKennickell2009,KopczukandSaez2004,Wol2010)thatcovereddierentperiodsoftimeanduseddierentdataormethods.SeePiketty(2014b,6{7)foradefenseofhisestimates.PartofhisdefenseisthatSaezandZucman's(2014)presentationshowssimilarestimates,buthisprimarydefenseisthatourknowledgeabouttheUSwealthdistributionisfarfromcomplete.2Manyofthe400wealthiestAmericanshavealsobeensomeofthewealthiestpeopleintheentireworldoverrecentdecades(atleastaccordingtoanannuallistoftheworld'sbillionairespublishedbyForbesMagazine,whichstartedasanextensiontoitsannuallistofthe400wealthiestAmericans),sotheyowna1/45 Or,only400peoplecouldbecomfortableintheballroombecausethatwasthenumberwhopossessedtherequisitemannersofsucharoom(Homberger2002;Munk2005;Patterson2000).\Ifyougooutsidethatnumber,"oneofMrs.Astor'sfellowsocialitesoncesaid,\youstrikethosewhoareeithernotateaseinaballroomorelsemakeotherpeoplenotatease"(quotedinPatterson2000,83).Ofnote,thepeoplewhomadeitontoherlisttendedtocomefrom\old"ratherthan\new"moneyandtendedtoconsumeinamannerthattheircontemporaryThorsteinVeblencalledconspicuous(Jaher1975).Theyconsumedexpensiveitemslike\splendidartcollections,pricelessjewelry,Europeanantiques,yachtsthesizeofoceanliners,lavishsocialgatherings,andstablesofracehorses,"inparticular(ibid.,279{80).WhetherthewealthiestAmericansstillconsumesuchgoodsandservicesisdiscussedbelow,but,whereasinclusioninMrs.Astor'slistwasbasedonballroommannersandavarietyofothercriteria,sucientwealthandAmericancitizenshiparetheonlycriteriaforinclusioninForbesMagazine'slist.4Puttingtogethertheinauguralyearofthelistapparentlytook\overayear"andcost\overaquarterofamilliondollarsonstaandresearch"(ForbesMagazine1983,168).Apermanentstahasbeendedicatedtoputtingthelisttogethereversinceitsinauguralyear(ibid.).Inordertoputthelisttogether,thestastartswithalistofpeoplewhomaypotentiallybewealthyenoughtobeoneofthe400wealthiestAmericans.Thosepeoplepresumablycomefromthepreviousyear'slist,amongotherplaces.Thestathentriestointervieweachpersonandtheirassociatessuchastheir\employees,handlers,rivals,peers,attorneys,andex-spouses"(ForbesMagazine2012,262).Othersources,including\SecuritiesandExchangeCommissiondocuments,courtrecords,probaterecords,federalnancialdisclosures,andWebandprintstories,"arealsoconsulted(ibid.).Usingtheinformationgleanedfromthosevarioussources,thestaatthemagazinetriestoidentifythe400wealthiestAmericansandestimatewhateachofthemisworthintermsofthedierencebetweenthetotalvalueoftheirassetsandthetotalvalueoftheirdebts.Themagazineapparentlytriestoaccountforallassets(\stakesinpublicandprivatecompanies,realestate,art,yachts,planes,ranches,vineyards,jewelry,carcollections,andmore")andalldebts(ibid.).Themagazineonlyrevealssomuchabouthowitvaluesdierenttypesofassets,butpubliclytradedstocksarevaluedatthecloseofthestockmarketononeday 4Duringthemiddleofthetwentiethcenturyatatimewheninequalityhadfallenandnotyetrisenagain,JohnKennethGalbraithwouldwritethatmanyofthegoodsandservicesconsumedbyMrs.Astorandherfellowsocialites|\thegreathouses,thegreatyachts,thegreatballs,thestables,andtheexpansivejewel-encrustedbosoms"|hadbecomepasseamongwealthyAmericans(Galbraith[1958]1998,74{75).Thethreatofexpropriationwasonereasonwhysuchitemsfelloutofstyle,accordingtoGalbraith,buta\deeper"reasonwasthatordinaryAmericanscouldnowaordthesameorsimilaritems(ibid.,74{77).3/45 datalikesurveysorestate-taxrecordsoeronlyincompleteaccountsoftheverytopofthewealthdistribution.Considersurveys.Surveysthatarenotdesignedtotrytoover-sampletheverytopofthewealthdistributionoftenfailtocapturethatpartofthewealthdistribution(DaviesandShorrocks2000,629{30).ThewealthsurveyconductedaspartofthePSIDisanexampleofasurveythatoftenfailsinthatregard(Justeretal.1999).Evenifsuchsurveysdidtrytoover-sampletheverytopofthewealthdistribution,thesurveyscouldstillbeinaccurateaccountsduetothenon-responseandmisreportingproblemsthatplaguesurveysofthewealthy(Davies2009,129{30;DaviesandShorrocks2000,630{1).ForbesMagazinemaymisssomeofthe400wealthiestAmericansormisestimatewhatsomeofthemareworth,ofcourse,butthereisnoguaranteethatthewealthywouldresponseaccuratelyorrespondatalltoasurvey.TheFederalReserve'sSCFisgenerallyseenasthebestsurveyonwealthintheUnitedStatesatleastpartlybecauseitisdesignedtotrytoover-sampletheverytopofthewealthdistribution(DaviesandShorrocks2000,632).TheSCFisstillanincompleteaccountoftheverytopofthewealthdistribution,however,giventhatthesurveyisexplicitlydesignedtoexcludethepeople(or,tobemoreprecise,thehouseholdsofthepeople)whoappearonForbesMagazine'slistofthe400wealthiestAmericans(Kennickell2006,84).Someofthereasonsthathavebeengivenforexcludingthe(householdsofthe)peoplewhoappearonthemagazine'slistarethatitwouldbetoodiculttogetthemtorespondand,eveniftheydidrespond,itwouldbetoodiculttoprotecttheircondentiality(Kennickell2007,2).Yet,eveniftheSCFwasnotdesignedtoexcludepartoftheverytopofthewealthdistribution,thesurveymightstillbeaninaccurateaccountduetonon-responseormisreportingerrors.6Anothersourceofdataontheverytopofthewealthdistributionisestate-taxrecordsfromtheInternationalRevenueService(IRS).Estate-taxrecordsprovidedataonsomeofthewealthiestAmericans,butonlythosewhodieandpaytheestateorso-called\death"tax.ThewealthofthewealthiestlivingAmericansmustbeinferredbyusingthedeadasasamplefortheliving.Suchinferenceshavepotentialproblems,eveniftaxavoidanceandevasionareassumedaway(Atkinson2008,sec.2.3;DaviesandShorrocks2000,sec.3.3).ForbesMagazine'slist,incontrast,isreservedforAmericanswhoarestillalive.Themagazine'slistofthe400wealthiestAmericansisthereforearguablythebestsourceofdataontheverytopofthewealthdistribution,atleastinacross-sectionalsense.Thelistisalsoarguablythebestsourceofdataforstudyingmobilitythroughoutthatpartof 6Duetoitsdesign,theSCFcanadjustfornon-responseerrors(Kennickell2007,2),butthereisnoguaranteethatthoseadjustmentseliminatenon-responseerrors.5/45 OtherlimitationsofForbesMagazine'slistarenotablebutlessconcerning.Anobviouslimitationisthat,evenifresearchersacceptthatthemagazine'slististhebestsourceofdataanthe400wealthiestAmericans,itwouldstillonlybeasourceofdataonasmallnumberofpeople.Thenotionthatagroupofpeoplecanbetoosmalltobeworthyofstudyseemsultimatelyindefensible,but,evenifthe400wealthiestAmericanswereseenasinsignicantinhumanterms,theywouldstillbesignicantineconomicterms,asthispaperwillnowdetail.WhileinformationonalargergroupofthewealthiestAmericansmightprovidemoreinsightsintowealthanditsdistribution,thatdoesnotimplythatanyinsightsoeredbythemagazine'slistofthe400wealthiestAmericanshouldbeignored.3.THEIRABSOLUTEWEALTHGiventhatForbesMagazine'slistisarguablythebestsourceofdataontheverytopofthewealthdistributionintheUnitedStates,thispapernowusesthatlisttostudyhowthe400wealthiestAmericanshavefaredoverrecentdecades.Tobegin,wewillstudyhowtheyhavefaredasagroupinabsoluteterms,ignoringwhotheyhavebeenasindividuals.Insubsequentsections,wewillturntostudyingtheirwealthasagroupinrelativetermsandalsostudyingthemastheuniqueindividualstheyhavebeen.Accordingtothemagazine'slist,thetotalwealthofthe400wealthiestAmericansincreaseddramaticallybetweentheinauguralyearofitslistin1982andthemost-recentyearofitslistasofwriting,whichwastheyear2013.Theincreaseinthenominalwealthofthe400wealthiestAmericanswasespeciallydramatic.Theirnominalwealthincreasedover20-foldfromabout92billiontotwotrillioncurrentdollarsbetween1982and2013(ForbesMagazine1982,2013).Thatincreaseintheirnominalwealthisshownaspartofgure1inthissection.7Ofcourse,forcomparisonsovertime,nominalvaluesshouldbeadjustedtoaccountforchangestothevalueofadollar.PreviousstudiesbasedonForbesMagazine'slistofthe400wealthiestAmericanshaveeithererroneouslyignoredthedistinctionbetweennominalandrealwealth(Klassetal.2006)orusedaversionoftheConsumerPriceIndex(CPI)made 7Intheyears1982to1989,ForbesMagazinedidnotreportanestimateofthewealthofoneofthe400wealthiestAmericansonitslist,MalcolmStevensonForbes,whowastheeditor-in-chiefofthemagazine.\Peoplewouldhaveassumedthattheprintedgure[formywealth]wasreal,notanestimate,asalltherestare,"heexplained(ForbesMagazine1983,168).Weimputehiswealthinagivenyearasthemedianwealthoftheother399wealthiestAmericansinthatyear.Previousstudiesthathaveusedthemagazine'slisttostudythewealthofthe400wealthiestAmericanswithoutanyimputationforthatmissingwealthareonlystudiesofthewealthof399outofthe400wealthiestAmericansupuntiltheyear1990,therefore.7/45 people"(1993),\ordinaryworkers"(1989),and\ordinarypeople"(2001).AndwhereastheCLEWIhasbeencastasanindexofthecostoflivinghighly,lavishly,richly,andreally,extremelywell(again,asnotedabove),theCPIhasbeencastasanindexofthecostof\necessities"(1987),\anordinarylifestyle"(1987),\amiddle-classlifestyle"(1989),\justliving"(1995),and\justgettingby"(1998).ThemagazinehasthereforesuggestedthattheCLEWImeasuresthecostoflivingforAmericanswhoareasextraordinarilywealthyasthe400wealthiest,whiletheCPImeasuresthecostoflivingformoreordinaryAmericans.However,contrarytothemagazine'ssuggestion,thereisadebateamongeconomistsoverwhethertheCPIis(orcouldbeorshouldbe)acost-of-livingindex(see,e.g.,Baker1998).Economiststypicallydrawadistinctionbetweena\cost-of-livingindex,"whichmeasuresthecostofagivenlevelofsomethingcalledutility,anda\cost-of-goodsindex,"whichmeasuresthecostofagivenbasketofgoodsandalsoservices(wherethecostofagivenlevelofutilityandthecostofagivenbasketofgoodsandservicesarenotthoughttogenerallycoincide).TheCPImeasuresthecostofagivenbasketofgoodsandservices,soitshouldperhapsbecalledacost-of-goodsindex.TheCLEWIalsomeasuresthecostofagivenbasketofgoodsandservices,soitshouldperhapsbecalledacost-of-goodsindex,too(Devine2000,150).ThegoodsandservicesincludedintheCLEWIfallintocertaincategories.ThosecategorieswerechosenbythemagazinetomatchsomeofthecategoriesintheCPI,althoughthegoodsandservicesineachcategoryaremuchmoreluxuriousthanthegoodsandservicesinthecorrespondingcategoriesintheCPI.Forexample:TheCLEWI'sbasketincludesacategoryforfoodandbeverages,butthatcategoryincludesakiloofcaviarandacaseofchampagne,ratherthantheloafofwhitebreadandothermodestitemsincludedinthecorrespondingcategoryintheCPI.OthercategoriesintheCLEWIincludeotherluxuriousgoodsandservices.Theapparelcategoryincludesafurcoat,thetransportationcategoryincludesaprivatejet,theentertainmentcategoryincludesticketstotheopera,andthehealthcarecategoryincludesaface-lift,togiveseveralexamples(see,e.g.,CLEWI1986).ThereareotherwaysinwhichtheCPIandCLEWIdier,besidestheluxuriousnatureofthegoodsandservicesincludedinthelatterindex.TheCLEWIonlyincludesasmallnumberofgoodsandservices.Only40goodsandservicesareincludedintheindex,asofwriting(CLEWI2012).TheCPI,incontrast,ismadeupofhundredsofgoodsandservices(see,e.g.,Baker1998,51).Also,theCPIisaweightedaverageofthepriceofeachiteminitsbasket(ibid.),whereastheCLEWIisanunweightedaverage(see,e.g.,CLEWI2012).WhethertheCLEWIisanappropriatede atorforthewealthofthe400wealthiestAmericansobviouslydependsonwhetheritisappropriatetomeasuretheirwealthinterms9/45 TheincreasesintheirCPI-andCLEWI-de atedwealtharelessdramaticthantheincreaseintheirnominalwealthbecause,overthesameperiodoftime,theCPIroughlydoubledandtheCLEWIalmostquintupled,asshowningure2ofthispaper.ItisperhapsnotsurprisingthattheCLEWIoutpacedtheCPIoverthatperiodoftime.AspointedoutbyPoterba(2000,110),thedemandfortheluxuriousgoodsandservicesincludedintheCLEWIpresumablyincreasedrelativetothedemandforthemoremodestitemsintheCPIasthewealthiestAmericansbecamewealthier.IfthesupplyoftheitemsintheCLEWIwasrelativelyinelastic,thenincreaseddemandforthoseitemswouldhavepusheduptheirpricesrelativetothepricesoftheitemsintheCPI(ibid.).ExcessdemandpressurespresumablypusheduptheCLEWIrelativetotheCPI,therefore.Yet,again,despitethefactthattheCLEWIoutpacedtheCPIbetween1982and2013,theCLEWI-de atedwealthofthe400wealthiestAmericansstillalmosttripledoverthatsameperiodoftime.Asseeningure1,thewealthofthe400wealthiestAmericans|whetheritismeasuredinnominal,CPI-de ated,orCLEWI-de atedterms|didnotincreaseineveryyearbetween1982and2013.Theirwealthdecreasedinsomeyears.Themost-dramaticdecreaseintheirwealthoccurredaftertheirwealthpeakedintheyear2000andthenfelloverthenexttwoyears.Theirwealthpeakedintheyear2000atabout1.2trilliondollarsinnominalterms,1.6trillioninCPI-de atedterms,and2.1trillioninCLEWI-de atedterms.Theirwealththenfellbetween2000and20002byabout325,491,and668billiondollarsinnominal,CPI-de ated,andCLEWI-de atedterms,respectively.Thedeclineintheirwealthaftertheyear2000isshownaspartofgure3.Therun-upanddeclineintheirwealtharoundthoseyearscanbeassociatedwiththestock-marketboomofthelate1990sthatwentbustintheearly2000s.Bytheyear2007,thewealthofthe400wealthiestAmericanshadexceededitspreviouspeakinbothnominalandCPI-de ated(althoughnotCLEWI-de ated)terms,buttheirwealththenfellagainoverthenexttwoyear.Theirwealthfellbyabout272billiondollarsinnominalterms,353billioninCPI-de atedterms,and515billioninCLEWI-de atedtermsbetween2007and2009.Thatdeclineintheirwealth|whichcanbeassociatedwiththerecenteconomiccrisisthatsawthecollapseofahousingbubble,apanicinnancialmarkets,acrashinthestockmarket,andadeeprecessionthatrivaledtheGreatDepression(ForbesMagazine2007{2009)|wasrelativelymodest,relativetothedeclineintheirwealthafterthestock-marketcrashoftheearly2000s,asseeningure3ofthispaper.Otherdeclinesintheirwealthwereevenmoremodest.Between1987and1988,aswellasbetween1989and1990,theirwealthdecreasedslightlyinrealtermsandincreasedslightly11/45 quarterandtheendofthethirdquarter,whichiswhyaweightedaverageofthewealthofthehouseholdsectorattheendofthosetwoquarterswasusedabove.Thewealthofthehouseholdsectorattheendofaquarterwasweightedmoreheavilyifthedateonwhichthemagazinetookitssnapshotofthewealthwascloser(intermsofnumberofdays)totheendofthatquarter.Unfortunately,forsomeyears,themagazinedoesnotappeartohavereportedthedayonwhichittookasnapshotofwealth.Totheauthor'sknowledge,themagazinedidnotreportthedayittookasnapshotofwealthforitslistsin1982,1999,2000,and2003to2005,althoughthemagazinedidreportthatits1982listwasasnapshotofwealthin\mid-August"(ForbesMagazine1982,101).Forthoseyears,thewealthofthehouseholdsectorattheendofthesecondquarterwasweightedequallywiththeirwealthattheendofthethirdquarter.Usingaweightedaverageofthewealthofthehouseholdsectorattheendofthesecondandthirdquartersdoesnotnecessarilyresolvethetimingissue.Thatwouldonlyresolvetheissueifthewealthofthehouseholdsectorchangedinalinearfashionbetweentheendofonequarterandthenext.Yet,ifweweretousetheFlow-of-Fundsestimatesofthewealthofthehouseholdsectorattheendofanyquarterinagivenyear,thentrendsinthewealthofthe400wealthiestAmericansasashareofthewealthofthehouseholdsectorwouldbequantitativelysimilar.Tobemorespecic,iftheFlow-of-Fundsestimatesattheendofanyquarterinagivenyearwereused,thentheirwealthsharewouldbeestimatedtobeaslowasabout0.82andashighasabout0.87percentin1982,anditwouldbeestimatedtobeanywherebetweenabout2.62and2.85percentin2013.Theirshareofhouseholdwealthwouldhavethereforeincreasedbetweenthoseyearsbyafactorthatwasanywherebetweenaboutthreetothree-and-a-halfpercent|roughlytripling.Althoughtheirshareofwealthhasroughlytripledoverrecentdecades(atleastaccordingtoForbesMagazine'slist),someeconomistshavesuggestedthat,evenattheirlargest,theshareofwealthheldbythe400wealthiestAmericanshasstillbeensmall.Forexample:Inafootnotetotheir2002article,twoeconomistsfromtheFederalReservenotedthattheSCFisdesignedtoexcludethe(householdsofthe)peoplewhoappearonForbesMagazine'slist(BertautandStarr2002,214,n.10).Theynotedinthesamefootnotethattheshareofhouseholdwealthheldbythepeopleonthemagazine'slistwas\ontheorderof2.5percent,"whichtheysuggestedwasmerelya\modest"share(ibid.).Asanotherexample:Ata2003conference,aneconomistfromtheFederalReservepresentedapaperinwhichheusedForbesMagazine'slisttosupplementtheSCF(Kennickell2003).HeusedthatlisttosupplementtheSCFbecause,asnotedabove,theSCFisdesigned13/45 yearsoftheSCFarenotcomparabletolatteryearsofthatsurveybecausethesurveywasredesigned(Kennickell2011,11,n.10),andmore-recentyearsofthesurveyarenotyetavailable,but,again,thetwodatasourcescanbeusedtocomparethesharesofwealthheldbythetwogroupsineverythreeyearsbetween1989and2010.In1989,theshareofwealthheldbythewealthiestonepercentofAmericanhouseholdswasabout30.1percent,accordingtoestimatesmadebyKennickell(2012,5,table3)fromtheSCF.Kennickell(2012)reportedthatwealthsharewithoutreportingeitheranestimateofthetotalwealthofthewealthiestonepercentofAmericanhouseholdsoranestimateofthetotalwealthofallthehouseholdsinAmerica,buthedidreportanestimateofthemeanwealthofAmericanhouseholds.Heestimatedthattheirmeanwealthwasabout188.9thousandcurrentdollars(Kennickell2012,4,table2,iftheconstant-dollargurehereportsisconvertedto1989dollarsbyusingtheCPI-U-RS).ThetotalwealthofAmericanhouseholdsmusthavethereforebeenestimatedtobeabout17.6trillioncurrentdollars,giventhatthenumberofhouseholdsrepresentedbytheSCFinthatyearwasapparently93.1million(KennickellandStarr1994,880,n.22).11Thatestimateofhouseholdwealthbasedonthe1989SCFissimilarto,althoughnotexactlythesameas,Flow-of-Fundsestimatesofhouseholdwealthattheendofanyquarterinthatyear.AccordingtotheFlowofFundsAccounts,householdwealthrangedfromabout17.7to19.0trillioncurrentdollarsoverthatyear.IfthewealthiestonepercentofAmericanhouseholdswereestimatedtobeworth30.1percentofabout17.6trillioncurrentdollars,thentheymusthavebeenestimatedtobeworthabout5.3trillioncurrentdollars.Bycomparison,thewealthofthe400wealthiestAmericanswasabout270billioncurrentdollarsin1989,whichwouldhavebeenabout5.1percentofthatamount.However,ifwefollowKennickell(2006)andaddthemagazine'sestimateofthewealthofthe400wealthiestAmericanstotheSCFestimates,thenthewealthiestonepercentofhouseholdswouldhavebeenworthabout31.2percentofhouseholdwealth,andthe400wealthiestAmericanswouldhavebeenworthabout4.8percentofthat.Inasimilarcontext,Kennickell(2006)addsthemagazine'sestimatebecause,again,theSCFisdesignedtoexcludethe(householdsofthe)peoplewhoappearonthemagazine'slist.Thewealthofthe400wealthiestAmericansasashareoftheSCFestimateofhouseholdwealthwithForbesMagazine'sestimateoftheirwealthaddedtoit(or,forthatmatter,withoutthemagazine's 11ThenumberofhouseholdsrepresentedbytheSCFovertheyearshasapparentlybeen,inmillionsofhouseholds,93.1in1989(KennickellandStarr1994,880,n.22),95.9in1992(ibid.),99.0in1995(Kennickelletal.2000,27,n.35),102.6in1998(ibid.),106.5in2001(Brickeretal.2012,78,tableA.3),112.1in2004(ibid.),116.1in2007(ibid.),and117.6in2010(ibid.).15/45 statisticontheshareofwealthheldbythe400wealthiestAmericansrelativetotheshareofwealthheldbythewealthiestonepercentofAmericanhouseholds,hasbeenemphasizedbyFosterandHolleman(2010)amongothers.12Theshareofwealthheldbythe400wealthiestAmericansoverrecentdecadeshsasthereforebeendisproportionatelylargerelativetotheirshareofthepopulation,roughlyequaltotheshareofwealthheldbytheleast-wealthyhalfofAmericanhouseholds,andarguablylargerelativetotheshareofwealthheldbythewealthiestonepercentofAmericanhouseholds.Theirshareofwealthhasalsobeenlargerinrecentyearsthanitwasinearlieryears,despitethefacttheyshrunkasashareofthepopulation.WhetherthewealthofthehouseholdsectorismeasuredbasedontheSCFortheFlowofFundsAccounts,thewealthofthe400wealthiestAmericansincreasedrelativetothewealthofeveryoneelseoverrecentdecades,asseeningure4ofthispaper.Theirshareofwealthdidnotincreaseineveryyear,however,asseeninthesamegure.Theirwealthsharefellbyarelativelylargeamountamidthestock-marketcrashoftheearly2000s,recoveredtoalargeextent,andthenfellbyasmalleramountamidtherecenteconomiccrisis.Themost-recentestimatessuggestthattheirwealthsharehasallbutrecovered.5.THEIRINDIVIDUALFATESAsdiscussedintheprevioussection,ForbesMagazine'slistsuggeststhat,ifweignorewhotheyhavebeenasindividuals,thenthewealthofthe400wealthiestAmericansasagroupincreasedrelativetothewealthofeveryoneelseoverrecentdecades.Themagazine'slistalsosuggeststhat,ifwecontinuetoignorewhotheyhavebeenasindividualsthenthewealthofwealthierpeopleincreasedrelativetothewealthofless-wealthypeopleevenamongthe400wealthiestAmericansthemselves.Figure7shows,forthewealthiesttothe400thwealthiestAmericansin1982and2013(whoevertheyhappenedtobeinthosetwoyears),thechangeintheirwealthinbillionsofconstant(specically,CPI-U-RSde ated,2013)dollars.Notethattheordinateaxisinthegureusesaninversehyperbolicsinetransformation.13Asseen 12Anotherstrikingstatistic|whichwasestimatedbyAllegretto(2011),emphasizedbyStiglitz(2012,8),andexpoundeduponbyBivens(2012)andothers|isthattheshareofhouseholdwealthheldbythesixheirsofWalmartin2007wasroughlyequaltotheshareofwealthheldbytheleast-wealthy30percentofAmericanhouseholdsinthatyear.13Thatistosay,ifydenotesthevariableofinterest,thenthatvariablewastransformedaslnfy+(2y2+1)1=2g=,wherethescaleparameterwassomewhatarbitrarilysettooneone-thousandth.Aninversehyperbolicsineor\arcsinh"transformationapproximatesalogarithmictransformationatextremevalues,buttheformerismorepopularthanthelatterintheliteratureonwealthbecause,whilewealthcanbezeroornegative,thelogofanon-positivenumberisinniteorimaginary(Kennickell2006,84;Pence2006).(Atvaluesclosetozero,anarcsinhtransformationapproximatesalineartransformationor,equivalently,no17/45 14Theoneotherpersonwhowasonthelistin1982buteventuallydroppedothelistbecauseherenouncedhisAmericancitizenshipwasCampbellSoupCompanyheirJohnThompsonDorranceIII.Hewasstillaliveandstillwealthyenoughtobeoneofthe400wealthiestAmericansin2013ifonlyhewasstillanAmericancitizen(atleastaccordingtoForbesMagazine'slistoftheworld'sbillionairesin2013),sohischangeinwealthwasbetterthanthechangeshowningure8.19/45 Thus,thechangesinwealthamongthe400wealthiestAmericansbetween1982and2013wereperhapsnotaspro-wealthyasgure7mightsuggest.Relativelywealthiermembersofthe400wealthiestAmericansbecamerelativelywealthierbetween1982and2013,butthe400wealthiestAmericansin1982werenotexactlythesamepeople|orevenmostlythesamepeople|asthe400wealthiestAmericansin2013,andpeoplewhowerethesamemovedupanddowntheranks.Thechangeinthewealthofthe400wealthiestAmericansasagroupbetween1982and2013wasalsoperhapsnotaspro-wealthyastheincreaseintheirwealthrelativetothewealthofeveryoneelsemightsuggest.Thechangeinthetheirwealthbetweenthosetwoyearscanbedecomposedintothecontributionsofthepeoplewhoappearedonthelistinbothyears,peoplewhocameontothelist,andpeoplewhodroppedo.Thecontributionofpeoplewhoappearedonthelistinbothyears(\incumbents")issimplythesumofthechangesintheirwealth.Ifsomeoneappearedonthemagazine'slistinbothyears,andifhisorherwealthincreasedbyagivenamount,thenthewealthofthe400wealthiestAmericansmusthavealsoincreasedbythatamount.Thecontributionsofthepeoplewhocameontothelist(\entrants")andthepeoplewhodroppedothelist(\dropouts")canbecalculatedasthesumofthedierencesbetweenaperson'swealthin2013andtheminimumwealthofthe400wealthiestAmericansin1982,intheformercase,andthenegativeofthesumofthedierencesbetweentheminimumwealthofthe400wealthiestAmericansin1982andaperson'swealthin2013,inthelattercase.Ifsomeonewasonthelistin1982butdroppedoby2013,andifallotherthingswereequal,thenthewealthofthe400wealthiestAmericanswouldhavedecreasedbythedierencebetweenhisorherinitialwealthandtheminimumwealthofthe400wealthiestAmericans.Likewise,ifsomeonewasnotonthelistin1982butcameontothelistby2013,andifallotherthingswereequal,thenthewealthofthe400wealthiestAmericanswouldhaveincreasedbythedierencebetweenhisorherinitialwealthandtheminimumwealthofthe400wealthiestAmericans.Allotherthingswerenotequal,ofcourse.Theminimumwealthofthe400wealthiestincreasedbetween1982and2013,forexample.Yet,decomposingthechangeinthewealthofthe400wealthiestAmericansinthatwaystillseemssensible.Thecontributionsofthepeoplewhodroppedothelistcanbefurtherdecomposedintothecontributionsofthepeoplewhodroppedothelistbecausetheydied(\decedents"),thepeoplewhodroppedothelistbecausetheyrenouncedtheirAmericancitizenship(\renunciants"),andthepeoplewhodroppedothelistbecausetheirwealthdeclinedineitherabsoluteorrelativeterms(\otherdropouts").21/45 amountorabout135billiondollars.Theunweightedandweightedaverageoftheirrstyearsonthelistisabout2000and1997,respectively.ForbesMagazine'slistthereforesuggeststhat,outofthe1,807-billion-constant-dollarincreaseinthewealthofthe400wealthiestAmericansbetween1982and2013,about792billioncanbeattributedto38peoplewhowerealreadyoneofthe400wealthiestAmericansbackin1982aswellas106peoplewhobecameoneofthe400wealthiestAmericansby2013withoutbuildingtheirfortunesbythemselves.About1,134billioncanbeattributedto256self-madepeoplewhobecameoneofthe400wealthiestAmericansby2013.Thediscrepancyinthedollar-valueamountsisduetopeoplewhoeitherdied,experiencedadeclineintheirwealth,orrenouncedtheirAmericancitizenship.Thecontributionsofeachgrouparesummarizedintable1.Althoughtheextenttowhichtheself-mademembersofthemagazine'slistactuallystartedfromalowlystationinlifehasyettobequantiedinanyprecisemanner(seeKaplanandRauh's(2013foronerecentattempt),ariseinthenumberofself-mademembershasbeenseenasasignofincreasedwealthmobilityintotheverytopofthewealthdistribution(see,e.g.,ibid.).Onewayinwhichtotrytodiscernwhetherwealthmobilityhasactuallyrisen,fallen,orstayedthesameistostudythenumberofself-madeentrants,notovertheentireperiodfrom1982to2013,butinsteadoverseveralshorterperiods.Partofgure9shows,fortheyearsbetween1995and2013,thenumberofpeoplewhocameontoForbesMagazine'slistbetweenoneyearandthenextandwhowereconsideredself-madebythemagazine.Theguredoesnotgoallthewaybackto1982becausethemagazinedidnotstarttosystematicallyreportwhethersomeone'swealthwasself-madeuntilitstartedpublishingitslistonlinein1996.Asseeninthegure,thenumberofself-madeentrantsbyyearhasbeenrelativelysmallandrelativelyconstant.Asmanyas400self-madeentrantscouldhavecomeontothelistbetweenanyoneyearandthenext,iftherewascompleteturnover,andifthatturnoverwasdrivenbyself-mademenandwomenrisinguptheranks.Theaveragenumberofnewentrantsperyearhasonlybeenabout33people,however.Thehighestthenumberhasbeenis57people.Thenumberwasthathighbetween1998and1999attheheightofthedot-comboom.Thenumberofself-madeentrantswasaslowas19peoplebetween2002and2003inthewakeofthedot-comcrash.Thesamegurealsoshows,forthesameyears,thenumberofpeoplewhocameontothelistbetweenoneyearandthenextbutwhowerenotconsideredself-madebythemagazine(\otherentrants").Thenumberofthosepeoplehasalsobeenrelativelysmallandconstant23/45 people,ofcourse.Thepeopleonthelistinagivenyearareonlythetemporarytenantsoftheverytopofthewealthdistribution.Thatsaid,thetenancyofsomepeoplehasbeenextended,someone'stenancycouldperhapsbepermanentifnotforthelimitsofhumanlongevity,andcertainpeoplelikeSamWaltonhaveaectedthedistributionofwealthlongaftertheirdeath.6.FINALREFLECTIONSOntheoccasionofthe10thanniversaryofitsannuallistofthe400wealthiestAmericans,ForbesMagazineaskedthequestion,\WhathastheForbes400accomplishedin10years?"(ForbesMagazine1991,145).Themagazineclaimedthattheaccomplishmentofitslistwasthat\theForbes400ll[ed]whatwasonceanimportantblankspotintheportraitofAmericansociety"(ibid.,146).Themetaphoricalblankspotthatthelistlledwastheverytopofthewealthdistribution.Accordingtothemagazine,itslistlledthatblankspotby\showingwhatconcentratedprivatewealthinthiscountryisreallylike,asopposedtowhatideologuesandpoliticalopportunistsofeverystripewantpeopletobelieveitislike"(ibid.).Themagazine'slistmaynotbeanaccuraterepresentationofthepartoftheAmericanportraitthatitpurportstoll,ofcourse,eitherbecauseofinadvertentmistakesorperhapsevenideology,opportunism,orsomeothernefariousforce.Yet,ForbesMagazine'slistisarguablythebestsourceofdataontheverytopofthewealthdistribution,asthispaperarguedabove.Thelistwouldthereforeseemtodeservestudybysocialscientistsandnotjustcasualreaders.Usingthemagazine'slist,thispaperstudiedhowsomeofthewealthiestAmericansfaredasindividualsandasagroupoverrecentdecades.Thepapershowedthatthe400wealthiestAmericansbecamewealthierasagroupinbothabsoluteandrelativetermsoverrecentdecades.Theincreaseintheirwealthasagroupwaspartially,butonlypartially,drivenbyanincreaseinthewealthofindividualswhowerealreadysomeofthewealthiestAmericansinearlieryears.MuchoftheincreaseintheirwealthwasdrivenbyanincreaseinthewealthofindividualswhoonlybecameoneofthewealthiestAmericansinrecentyears,althoughatleastsomeofthepeoplewhoceasedbeingoneofthewealthiestAmericansonlydidsobecausetheydied,andatleastsomeofthepeoplewhobecameoneofthewealthiestAmericansonlydidsobecausetheyinheritedwealth.AcompleteexplanationoftheincreaseinthewealthofthewealthiestAmericansasagroupoverrecentdecadeswouldthereforerequireanexplanationoftherisingandfallingfortunesofadiversesetofindividuals,includingthediversesetofindividualswhowere25/45 thepeoplewhohaveappearedonthemagazine'slisthavebeendiverseenoughthatitseemsdicultifnotimpossibletooeranall-encompassingexplanationoftheirrisingandfallingfortunes.Partialexplanationsarestillpossible,however,giventhatchangestothewealthofthewealthiestAmericansasagroupcanbepartiallyexplainedintermsofthechangingfortunesofsmaller,morehomogeneousgroups.Justoneperson,BillGates,accountsforaboutfourpercentoftheincreaseinthewealthofthe400wealthiestAmericansbetween1982and2013.Almostalloftheincreaseinhiswealthwassurelyduetotheincreaseinthevalueofthecompanythatheco-founded,Microsoft.Theotherco-founderofMicrosoft(PaulAllen)andanearlyemployeeandthecurrentCEOofthatcompany(SteveBallmer)accountforaboutanothertwopercentoftheincreaseinthewealthofthe400wealthiestAmericansoverthesameyears.AlmostalloftheincreaseinthewealthofthosetwomenwassurelyduetotheincreaseinthevalueMicrosoft,aswell.Thus,iftheincreaseinthevalueofMicrosoftcouldbeexplained,thenthatbyitselfwouldgoarelativelylongway|aboutsixpercentoftheway|towardsexplainingtheincreaseinthewealthofthe400wealthiestAmericans,atleastinsomesense.AnexplanationoftheincreaseinthevalueofMicrosoftisperhapsbestleftasacasestudyforscholarsatabusinessschool,butitispresumablyastoryaboutanoperatingsystemthatcametodominatethemarket(MS-DOS,theMicrosoftDiskOperatingSystem)andotherproductsthatthathadvaryingdegreesofsuccessandwhosesuccesseswereatleastpartlypredicatedonthesuccessofitsoperatingsystem(theWordword-processingsoftware,theExcelspreadsheetsoftware,theInternetExplorerwebbrowser,theZunemediaplayer,theBingsearchengine,etc.).FortheNobel-prize-winningeconomistJosephStiglitz,thatstoryisastoryoftechno-logicallock-inratherthantechnologicalinnovation.Microsoftwasnota\realinnovator,"accordingtoStiglitz(2012,57).Henotedthat,\Microsoft[:::]didnotdeveloptherstwidelyusedwordprocessor,therstspreadsheet,therstbrowser,therstmediaplayer,ortherstdominantsearchengine"(ibid.,57{58).ItcanalsobenotedthatMicrosoftdidnotevendeveloptheoperatingsystem(QDOS,theQuickandDirtyOperatingSystem)thatwasthebasisforitsoperatingsystemthatcametodominatethemarket.Theymerelylicensedanoperatingsystemfromsomeoneelse(namely,TimPaterson)whowassmartenoughtodevelopitanddumbenoughtolicenseitforameagersum.Ratherthanbeingarealinnovator,Microsoftwasmerelyacompanywhoseoperatingsystembenetedfromnetworkexternalitiesinherenttosuchsystemsandwhouseditsdominantpositioninthatmarkettosucceededinothermarkets,again,accordingtoStiglitz(2012,56{58).27/45 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Figure1:Wealthofthe400WealthiestAmericans,1982{2013Source:DataadaptedfromBLS(2013);(ForbesMagazine1982,1983,1984,1985,1986,1987,1988,1989,1990,1991,1992,1993,1994,1995,1996,1997,1998,1999,2000,2001,2002,2003,2004,2005,2006,2007,2008,2009,2010,2011,2012,2013).Note:Thisgureshowsthewealthofthe400wealthiestAmericans,basedonForbesMagazine'slistfromtheyears1982to2013.Theirwealthisshowninnominaldollars,CPI-de ateddollars,andCLEWI-de ateddollarswith2013asthebaseyear.35/45 Figure2:Pricelevels,1982{2013Source:DataadaptedfromBureauofLaborStatistics(2013)andCLEWI(1986{2013)Note:Thisgureshows,fortheyearsfrom1982to2013,theleveloftheCostofLivingExtremelyWellIndex(CLEWI)andConsumerPriceIndex(CPI).36/45 Figure3:PercentageChangeintheWealthofthe400WealthiestAmericansOverSelectYearsSource:DataadaptedfromBLS(2013);ForbesMagazine(1987{2010).Note:Thisgureshows,foryearsaftertheirwealthpeaked,thepercentagechangeinthewealthofthe400wealthiestAmericans,relativetotheirpeakwealth.DollarvaluesareCPI-de ated,2013dollars.37/45 Figure4:ShareofWealthHeldbythe400WealthiestAmericans,1982{2013Source:DataadaptedfromBrickeretal.(2012);BLS(2013);FlowofFundsAccounts;ForbesMagazine(1982{2013);Kennickell(2011,2012);KennickellandStarr(1994);Kennickelletal.(2000).Note:Thisgureshowsthewealthofthe400wealthiestAmericans,basedonForbesMagazine'slist,asashareofhouseholdwealth,basedoneithertheFlowofFundsAccounts(FOFA)ortheSurveyofConsumerFinances(SCF),foryearsbetween1982and2013.38/45 Figure5:SharesofWealthHeldbytheWealthiestOnePercentofAmericanHouseholdsandthe400WealthiestAmericans,1989{2010Source:DataadaptedfromBrickeretal.(2012);BLS(2013);ForbesMagazine(1989{2010);Kennickell(2011,2012);KennickellandStarr(1994);Kennickelletal.(2000).39/45 Figure6:SharesofWealthHeldbytheLeast-wealthyHalfofAmericanHouseholdsandthe400WealthiestAmericans,1989{2010Source:Dataadaptedfromthesamesourcesasgure5.40/45 Figure7:AnonymousChangesinWealth,1982{2013Source:DataadaptedfromForbesMagazine(1982{2013).Note:Thisgureshows,onasemi-arcsinhscale,changesinthewealthofthewealthiesttothe400thwealthiestAmericansbetween1982and2013(inbillionsofCPI-de ated,2013dollars),ignoringwhotheywereasindividualsineitherofthoseyears(solidline).Theaveragechangeintheirwealthisalsoshown(dashedline).41/45 Figure8:Non-anonymousChangesinWealth,1982{2013Source:Dataadaptedfromthesamesourcesasgure7.Note:Thisgureshows,onasemi-arcsinhscale,changesinthewealthofthewealthiesttothe400thwealthiestAmericansbetween1982and2013,ignoringwhotheywereasindividuals(solidline).Uncensoredorcensoredchangesinthewealthofindividualswhowereoneofthe400wealthiestAmericansin1982or2013arealsoshown(points).42/45 Figure9:NumberofIncumbentsandSelf-madeorOtherEntrants,1995{2013Source:DataadaptedfromForbesMagazine(1995{2013).Note:Thisgureshows,fortheyearsbetween1995and2013,thenumberofpeopleonForbesMagazine'slistinagivenyearwhoappearedonthelistagaininthenextyear(\incumbents")andthenumberofself-madeorotherentrantswhocameontothelistbythenextyearforeitherthersttimeorafteranabsence.Thegureissplitintotwoinordertobetterillustratetherelativelylimitedvariation.43/45 Figure10:ProportionofEntrantsWhoWereSelfMade,1995{2013Source:DataadaptedfromForbesMagazine(1995{2013).Note:Thisgureshows,fortheyearsbetween1995and2013,thenumberofentrantsbetweenoneyearandthenextwhowereselfmadeasaproportionofthetotalnumberofentrants.Thehighestproportionwasabout92percentforthepeoplewhocameontothelistbetween2010and2011;thelowestproportionwasabout56percentbetween2003and2004;andtheaverageperyearwasabout76percent.44/45 Table1:DecompositionoftheChangeintheWealthofthe400WealthiestAmericans,1982{2013 GroupContribution($Bs) Incumbents273EntrantsSelf-madeentrants1;134Otherentrants519DropoutsDecedents�57Renunciants�1Otherdropouts�61 Allgroups1;807 Source:DataadaptedfromForbesMagazine(1982{2013).Note:Thistableshowshowthechangeinthetotalwealthofthe400wealthiestAmericansbetween1982and2013canbedecomposedintothecontributionsmadebydierentgroupsofuniqueindividuals.Thedecompositionisdiscussedinthetext.ThedollarvaluesarebillonsofCPI-de ated,2013dollars.45/45