They’re all talking about it over there. And one of their pieces of evidence is the racial wealth gap. It being entirely true that familial wealth is lower among blacks than whites. The implication being that this is a legacy of that slavery – people haven’t accumulated assets over the 150 years.
This is just a thought. Low income people have fewer assets than higher income people. The marginal propensity to save, the inverse, the marginal propensity to consume. So, if we’ve a group that generally has lower incomes then we’d expect them to have lower wealth.
Seems obvious enough.
We also know that black Americans generally – or on average if you prefer – have lower incomes than whites. Which leads to a thought.
Can we explain the lower household wealth entirely by the income gap? That is, is it all current, not historical, in cause. OK, we can then go on to think about whether the lower incomes are historical in cause but still, bear with me.
Say, and imagine just for clarity, the following. Black income is $25k a year, white $50k. Wealth levels are different. But, is that black wealth level different from that of whites on $25k a year? Again, have to be careful we’re not including whites on $25k a year in dividends and interest income alone but, you grasp the point?
Is there actually any difference in wealth levels once we correct for income?
Do blacks, average income $25k, have the same wealth levels as whites on $25k?
The importance here being that if this is true then it’s the current system that needs to be changed. It’s nothing historical in the sense of capital accumulation over time.
It’s take a much better economist than I to work this out but that is a question I’d love to see the answer to. If we compare the race based wealth distribution to one stripped of race and instead measured as compared to income, does our race effect simply vanish?
My intuition is that it will absolutely and certainly be a part of it. But whether it’s the majority, or even all of it, dunno.