Top five wealthiest?

From the NZ$ Herald New Zealand ranks among world’s top five wealthiest countries per capita in rich list report. I don’t think it really makes sense to call this a “rich list” report, but New Zealand does indeed rank “among” the world’s top five wealthiest countries (obviously we’re in fifth place, otherwise we’d be “among” the top four).

As Damien Venuto at Stuff notes, this doesn’t sound right. Is NZ really wealthier than Norway or Denmark or Japan or the UK?

The report being quoted is here; nobody links. There are at least three things going on.

First, the numbers are means when we usually prefer medians for this sort of comparison. The means are much more strongly influenced by the richest people, and also are just larger.  The use of means isn’t some evil capitalist plot by Allianz — it’s just easier to find out the mean, since you get it by taking the total and dividing by the population.  Working out the median per capita financial assets would take some serious survey-based research.  I will note that they aren’t completely clear about how they define the population, but it won’t make much difference to comparisons.

The second issue, which is important in the Stuff piece, is that a big chunk of the ‘wealth’ in New Zealand and Australia is over-valued real estate.  Real estate is problematic for wealth because it’s hard to extract the wealth that is nominally generated and use it to pay for stuff.  It’s even harder for large chunks of society to extract their real-estate wealth, since doing so would tend to bring prices back in line with reality.

A third issue, especially when comparing with the USA on one hand and the Scandinavian countries on the other hand, is what expenses need to be covered by that wealth.  In the USA, private assets pay for a larger fraction of healthcare and education than they do in New Zealand, and in turn we pay privately for more of these than they do in Norway.  When the public sector provides less, it will tend to use less  money, leaving private households more money to spend on the services they now have to buy.   The per-capita mean is not the best statistic for tracking this sort of thing: distribution of wealth and income matters.

As a final note, there is a whole chapter on distribution in the report that neither NZ paper mentioned.  The chapter isn’t very positive — inequality between between countries seems to have stopped decreasing, and it hasn’t improved within countries either.