Hackonomics, Part II

by: Barry Ritholtz

A quick follow up to last week's Hackonomics discussion, where we looked at how little alleged wealth inequality there is in America.

Part of our critique was that dividing the US into quintiles was a variation of the median/average error, and only served to hide the exhorbitantly greater wealth, income and consumption of the top few percent. To that end, there are two pieces of evidence I want to point you towards: One anecdotal, and one data driven.

The first one is THE ONE PERCENT, to be shown Thursday night on Cinemax, at 6:30pm Eastern (and throughout the month). The film is directed by Jamie Johnson (yes, Johnson as in the Johnson Johnson & Johnson). It's his follow up to his "Born Rich,” shown on HBO in 2003.

Here's the Cinemax description:

Four years after turning his camera on himself and other affluent youths in his documentary Born Rich, filmmaker Jamie Johnson presents this look at the "wealth gap": the growing divide between the rich and the poor in America. In this film, the 27-year-old heir to the Johnson & Johnson fortune explores the political, moral and emotional rationale that enables a tiny percentage of Americans--the one percent--to control nearly half of the wealth in the entire country. Along the way, Johnson collects the points of view from a wide variety of Americans, ranging from media mogul Steve Forbes and Kinko's founder Paul Orfalea to Florida taxi drivers and Chicago residents in danger of losing their low-income homes.

Looks to be rather intriguing.

One last thing: In the original Hackonomics, I buried the detailed spending habits of the upper echelon of wealth in America. I suspect you will find this data a bit more unequal than the quintile nonsense we saw from Alm and Cox.

Here is how this group spent their money as follows:

Dollars Spent Category - 2007 Spending per Affluent Elite Household
Summer Spending * 2007 * 2005 Change 2007/2005
Activity % $ Spent % $ Spent $Change %Change
Yacht Rentals 10.60% $384,000 9.50% $317,000 $67,000 21.14%
Redecorating 44.90% $129,000 30.90% 137,000 ($8,000) -5.84%
Villa Rentals 15.70% $106,000 13.80% $79,000 $27,000 34.18%
Experiential
Excursions 25.80% $103,000 22.70% $79,000 $24,000 30.38%
Jewelry/watches 73.70% $94,000 63.20% $63,000 $31,000 49.21%
Luxury Cruises 47.50% $92,000 43.10% $71,000 $21,000 29.58%
Charitable Giving 97.50% $82,000 98.40% $52,000 $30,000 57.69%
Vacation Home
Rentals 12.10% $82,000 11.80% $64,000 $18,000 28.13%
Out-of-Home Spa
Services 67.70% $61,000 48.70% $49,000 $12,000 24.49%
Summer
Entertaining 93.90% $56,000 92.40% $39,000 $17,000 43.59%
Luxury Hotels 95.50% $48,000 93.40% $36,000 $12,000 33.33%
Luxury Resorts 84.80% $41,000 82.60% $23,000 $18,000 78.26%
At-Home Spa
Services 53.50% $38,000 47.40% $26,000 $12,000 46.15%
Apparel/accessories 92.40% $34,000 86.80% $16,000 $18,000 112.50%
Audio/visual 51.50% $31,000 50.70% $14,000 $17,000 121.43%
Wines and Spirits
for Social
Entertaining 86.90% $24,000 77.00% $19,000 $5,000 26.32%
Wines and Spirits
for Personal
Consumption 84.80% $17,000 74.30% $11,000 $6,000 54.55%

2007 2005 $Change %Change
Total Luxury Summer
Spending/Household $622,202.02 $399,187.50 $223,015 55.87%

*Percentage of those surveyed spending in this category
Survey of Households with Net Worth $10 Million +

Prince & Associates (2007)

Yeah, that consumption spending looks pretty egalitarian to me! I got your top quintile RIGHT HERE.

~~~

Source:
A Gaping Divide: Straddling Capitalism’s Fault Line
By GINIA BELLAFANTE
NYT, February 21, 2008

The One Percent
Jamie Johnson
February 19, 2008 | 06:31 PM (EST)

see also:

Borrow and Spend
Floyd Norris
NYT, February 11, 2008, 12:42 pm

Consumption and Income Inequality
Economist's View February 10, 2008

What is wealth?
Saturday, May 22, 2004 | 08:34 AM