John-Thomas Didymus

Author's note: This is the first installment of a trilogy. Part 2 can be found here.

Two scholars published a research paper in March that sought to explain the seeming discrepancy in the sharp rise in income inequality since the1980s and the relatively modest increase in wealth concentration in the top economic bracket.

While approaching the problem, focusing on the question of how to measure the total wealth of the rich, the duo may have opened a new can of worms on the hidden wealth of the superrich.

In the study, "The Distribution of Wealth: Capital Income and Returns since 1913," Professors Emmanuel Saez of the University of California-Berkeley and Gabriel Zucman of the London School of Economics, developed a new technique to estimate the wealth of the economic upper classes by capitalizing income tax returns using IRS data on dividends, interests and rents.

This method is a way of deriving the level of wealth accumulation or net worth by working back from available data on investment income using estimates of rates of return for different categories of assets – a painstaking procedure that requires micro data on the different categories of investment income.

They found that there has been a greater increase in the concentration of wealth, or, more appropriately, net worth – measured as the value of assets less liabilities – than previously thought, and that previous studies have missed the fact because they failed to detect that the increase was concentrated mostly in the top 0.1 percent.

In a separate paper titled, "The Missing Wealth of Nations: Are Europe and US Net Debtors or Net Creditor?," Zucman was able to demonstrate that the official statistics of the wealthiest Western nations significantly underestimates the value of their net foreign assets, largely because they underestimate the total wealth that the superrich have stashed away in secret offshore tax havens.

The implication of Zucman's study is that the superrich are richer than anyone ever suspected. The authors pointed out that the findings of the first paper contradict the findings of previous research based on survey.

The Slate's Jordan Weissmann refers to a previous study by New York University's Edward Wolff (PDF) which found that since the 1990s, households in the top 10 percent bracket increased their share of the national wealth considerably.

Wolff's study suggested that the top 1 percent of households in the US actually dropped some of their share of the national wealth or net worth since the 1980s.

But the study had been based on data obtained through government surveys which tend to underestimate the size of the wealth of the superrich and thus the national wealth inequality.

The new study by Saez and Zucman suggests that previous studies have looked at the wrong section of the economic hierarchy for where all the wealth went. According to Saez and Zucman, all the national wealth is actually being sucked up by the top 0.1 percent, whom the authors identify as those with wealth above $20 million.

Saez and Zucman's analysis suggest that since 1984, the top 0.1 percent of American households with a minimum net worth of about $20 million have doubled their share of the national wealth from about 9.6 percent to about 21.6 percent.

The study found that while the top 0.1 percent were able to double their share of the national wealth, the top 1-0.1 percent only managed to increase their share of the total wealth from 15.8 percent to about 18 percent.

Unfortunately the graphs in the PDF document by Saez and Zucman are not numbered for easy reference. The interested reader should look for the graphs titled "Top 0.1 percent wealth share in the US, 1913-2012," "Top 1-0.1 percent wealth share in the US, 1913-2012" and "Top 1 percent wealth share in US" to follow the discussion.

Jordan Weissmann, who received a detailed spreadsheet analysis from the authors, has a convenient graphic representation of the clutter of figures, titled "US Wealth Distribution: 1984 v. 2012.”

The reader should pause to consider the tremendous significance of the difference between the total wealth held by the top 0.1 percent and the wealth held by the top 1 to 0.1 percent.

The top 1 percent hold a total wealth that is about 39.6 percent of the national wealth. When we consider the total wealth of the top 1 percent of the economic hierarchy in isolation, we find that the top 0.1 percent hold more than 50 percent.

This is remarkable. It reveals that the Occupy movement should not have contrasted the top 1 percent with the bottom 99 percent, but the top 0.1 percent with the bottom 99.9 percent.

It emerges from the analysis by Saez and Zucman that there is a world of difference between the superrich and the ordinary rich or "affluent."

Saez and Zucmam were able to show that while the super rich – the top 0.1 percent – have prospered, the top 1 percent to 0.5 percent have only managed to keep running in the same spot (see the graph above).

In comparison, the top 0.5 percent to 0.1 percent have done slightly better. But it is the top 0.1 percent that has taken the lion's share of wealth gains.

The researchers found that the relative gains are even greater with the top 0.01 percent (those with net worth more than $100 million).

If we call the top 0.1 percent the superrich what do we call the top 0.01 percent?

Slate's Timothy Noah suggests we call them the "stinking rich."