

Stop adding up the wealth of the poor - hacknat
http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding-up-the-wealth-of-the-poor/
I wonder if there is a good way to measure what these various sound byte facts are trying to get at?
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001sky
_The result is that if you take the bottom 30% of the world’s population — the
poorest 2 billion people in the world — their total aggregate net worth is not
low, it’s not zero, it’s negative._

This is the main point of contention.

The author takes the view that "poor" people being insolvent don't "control
assets". This is arguably misguided; when we look at a company's value we
don't look at the company "less the debt", we look at the company's equity +
its debt. Because this is the total of capital the company has under its
control.

The general context here is in comparisons of the assets controlled by the
wealth and those by the poor. I believe the same argument applies: if the
wealth control a million dollar house, they should not be valued at the $200K
of net equity in the house. While that is the net worth of the household, the
household controls $1M+ in assets (thanks t the magic of liabilities).

This simple change seems to solve some problems. But maybe I'm wrong or the
data isn't avail to do this /. readily.

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guan
There are multiple ways of looking at a company’s value. What you describe is
usually called “enterprise value”. Other measures of value are the market
value of equity and the book value of equity. All are valid and useful for
different things.

I do think the market value of equity is used a lot more often than enterprise
value, because market value of equity measures the value owned by those (the
shareholders) who control the company.

Similarly, assets and equity are both legitimate measures of the wealth of a
household. If you are looking at wealth as a way to generate income, equity is
very relevant: if you own a house worth $1 million with no debt, and the
rental equivalent is $50,000 per year, then you’ve saved $50,000 a year in
rent compared to a counterfactual where you don’t own a house. But if you have
$50,000 per year in mortgage payments, you are, in many ways (not counting
capital gains/losses and the benefits/costs of owning vs renting), not much
better off than a non-homeowner who simply rents.

The point the original article makes is that if you want to _add up_ the
wealth of the poor, equity is a bad measure.

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hacknat
I wonder if there is a metric that could better reflect the sound byte fact
that these organizations are trying to get at?

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analog31
Quite possibly, just don't count debt. Or give wealth as two numbers: The
positive part and the negative part. My rationale is that debt is primarily
handed out to people who are expected to pay it off someday.

