three distinct properties of wealth—assets, composition, and net worth—are connected in ways that are critical to our understanding of wealth accumulation and inequality. First, wealth portfolios are closely correlated with household total net worth, since wealth accumulation over the life course typically starts with the ownership of liquid assets and a car, and eventually grows to include a main residence and financial and income-producing assets (Keister 2000).
Second, wealth inequality can be understood only as a product of these three properties of wealth and the cumulative nature of the relations among them. Differential access to particular assets, such as real estate or pension plans, generates inter-household disparities in the composition of wealth portfolios and influences the total net worth that households control. In the same way, fluctuations in the price of certain assets such as housing or stocks alter the share of these assets in total household net worth and can in principle contribute to a rise or a decline in the wealth gap between asset owners and the asset-poor. Finally, higher levels of net worth allow for more diverse portfolios, which may affect households’ net worth (Keister and Moller 2000; Spilerman 2000). Most financial advisors, for example, instruct investors to reduce their share of “risky” assets as they grow older.
Theorizing wealth
Although useful for analytical purposes, the three properties of wealth outlined in the previous section tell us little about the unique role that wealth plays in people’s lives, as reflected in the quotations at the start of this chapter, or about the social contexts and mechanisms that contribute to this role. In order to make sense of the diverse functions and meanings attached to wealth—from the heavy weight of financial debt that inhibits the future plans of a young professional to the pride expressed by a first-time homeowner or to the sense of security that wealth provides—one needs a social theory of wealth mobility and inequality. Any attempt to conceptualize the multilayered role of wealth in society and the social processes underpinning economic security (or asset poverty) in contemporary societies can benefit from the insights provided by the social theories of the late nineteenth and early twentieth centuries. In contemplating many of the questions that guide wealth studies today, these early theories offer a rich—if not always comprehensive or consistent—conceptual foundation for contemporary wealth processes. The objective of the next section is to explore some of the key concepts within these seminal works, which complement the more recent, predominantly empirical and quantitative, research on wealth.
The social origin of private property: Exclusion, exchange, and transfers
Elaborated more than a century ago, the sociological theories that we now call “classical” were motivated by the major social, political, and economic transformations that took place in Europe and America in the nineteenth century. In the aftermath of political revolutions in the US and France, the nineteenth century was characterized by a growing reliance on science and positivism, the spread of industrialization from Britain to Europe and North America, and the advent of capitalism as the dominant economic system (Lemert 2013). This period also witnessed an increase in the concentration of wealth that reached its peak on the eve of World War I. One of the main contributions of the early sociological canon to twenty-first-century understandings of wealth is its emphasis on the interplay between economic and social processes. Specifically, early theorists viewed property ownership and wealth accumulation as products of the social processes of exclusion, exchange, and transfer that, when combined, drew up boundaries among social and economic groups.
Exclusion
Of all the early works on property and wealth, Max Weber’s persuasive analysis of property is, arguably, the most comprehensive and relevant one, incorporating as it does historical, legal, and sociological perspectives. As Swedberg (2005) notes, private property in Weber’s work is best understood in the context of social relations, particularly of exclusion, as in the case of a “closed” relationship where the participation of certain persons “is excluded, limited, or subjected to conditions” (Weber 1978: 43). Material interests are among the factors that motivate social closure and guarantee the appropriation of advantages or “rights,” which benefit particular social groups and individuals (Swedberg 2005). Émile Durkheim’s work, which provided the foundation for structural–functional theory, outlines key historical changes in the social function of private property, including the shift from a collective to a private, individual-based form of ownership. By creating a social boundary between the individual and the group, exclusion emerges as a principal characteristic of property ownership: “the right of property is the right of a given individual to exclude other individual and collective entities from the usage of a given thing” (Durkheim 1992: 142; see also Beckert 2002).
Concurring that property is a “social creation” rather than a product of individual effort, American sociologist W. E. B. Du Bois’s theory of social property postulates that property should benefit society instead of the individual owner (Zhang 2001: 115). Du Bois’s empirical work (1899), which drew on evidence from observations and surveys, highlighted a different dimension of private property and exclusion, shifting the focus from purely class boundaries to exclusion based on social group membership. Studying African American families’ living conditions in the seventh ward of Philadelphia in the late nineteenth century, Du Bois’s research demonstrated the detrimental effect that “color prejudice” and institutional exclusion from property ownership (homeownership) have on housing conditions and on the high rents paid by the study’s participants (see also Bobo 2000). Accordingly, Du Bois viewed wealth buildup in the form of savings, investment, and homeownership as a crucial path to upward mobility and financial independence (Du Bois 1899: 184–185). Existing research has documented the various discriminatory practices, such as redlining and steering, used by real estate intermediaries (banks, insurance companies, and realtors) to exclude potential buyers who are members of certain racial and ethnic groups from access to housing units in desirable neighborhoods (Oliver and Shapiro 1995; Dymski 2006; see esp. Chapter 5 here).
Marketplace exchange and family transfers
While exclusion delineates social boundaries by enacting the methods and patterns that restrict access to assets, the exchange and transfer of material possessions are based on enhancing social interactions within and across social groups. Durkheim (1992) rejected the notion that asset ownership is solely acquired through labor and suggested instead that it emerges from two sources: exchange in the marketplace and intergenerational transfers in the form of inheritance and gifts inter vivos (between living persons) (Durkheim 1992: 123). The value of assets exchanged in the marketplace has a social component, since it reflects people’s changing perceptions and tastes. Thus the price of a new house built by its owner can increase if the property “suddenly becomes sought after for its qualities of charm or some other reason.” Durkheim (1992: 126) explains: “my property, or what I own, might double its market value, without my lifting a finger.” Weber emphasized the importance of exchange to the formation of social class, stating that class position is determined by the returns people receive on their tangible and non-tangible (i.e. educational and skills-based) assets, which makes these resources valuable to the owner only in the context of exchange and competition in the market (Breen 2005).
While economic exchanges based on competition and on the calculated assessment of costs and benefits take place in the market, intergenerational transfers of wealth in the form of inter vivos gifts and bequests occur within the realm of the family. According to Durkheim (1992), both exchanges and transfers involve social interactions. But, while exchange creates “new objects of ownership,” inheritance entails the acquisition of existing material property, which is unrelated to effort and therefore immoral, as it produces inequalities that undermine the principle of meritocracy:
The inheritor is endowed with goods and chattels of which he is not the originator and which
