and further differentiates classes on the basis of the composition of the assets that people hold. Specifically, Weber identifies two general categories of property: “wealth,” which describes household possessions that are part of household consumption, and “capital,” which refers to productive assets used for acquiring more property and for generating income (Schweitzer 1980: 22; see also Curtis 1968). Among the non-propertied, class differentiation is based on skills, employment status, and property: “Only persons who are completely unskilled, without property and dependent on employment without regular occupation, are in a strictly identical class situation.” For property owners on the other hand, the type and allocation of assets—and the income these assets generate—demarcate class position and life chances. Members of the “positively privileged” propertied class, for example, are identified as persons who control private property and “typically live from property income” (Weber 2014: 175).
Another contribution of Weber’s multidimensional theory of stratification is the distinction he made between economic resources and social status. Unlike social classes, which are based on economic activity and determine “life chances,” status groups are classified according to consumption and differentiations in “life style”: through the consumption of distinct goods and services, property ownership determines social affiliation on the basis of differences in lifestyle—a criterion that creates “status groups” (Weber 1958). While conceptually, classes and status groups represent distinct dimensions of stratification, there is a strong relationship in capitalist societies between economic and social hierarchies (Coser 1977: 229). As Weber (1958: 165) writes, “[t]he social order is of course conditioned by the economic order to a high degree, and in its turn reacts upon it.” The sociologist Anthony Giddens has emphasized that the social and economic orders are linked via private property: “Possession of property is ... a major determinant of class situation and also provides the basis for following a definite ‘style of life’” (Giddens 2014: 185). Crucially, it is social closure and the exclusion of others from access to private property that produce and maintain the boundaries of social groups (Weber 1978: 43–46).
Conversion
On account of its accumulative nature, personal wealth can grow over time, and it can also be converted into economic and non-pecuniary resources. The Weberian theory of wealth stresses the possibility of wealth’s being transformed into capital, which provides property owners with significant economic advantages:
This mode of distribution gives to the propertied a monopoly on the possibility of transferring property from the sphere of use as a “fortune,” to the sphere of “capital goods,” that is, it gives them the entrepreneurial function and all chances to share directly or indirectly in returns on capital. (Weber 1958 182; see also Schweitzer 1980)
While income and wealth can be likened respectively to a stream and a pond, this analogy does not, as discussed earlier, capture the processes responsible for the conversion of existing wealth into greater wealth, namely property owners’ financial planning and decision-making regarding savings, consumption, and investment (Skopek et al. 2014). Building on the pond and stream analogy, the economist Hernando de Soto draws attention to the advanced market system of industrialized nations, which allows for the conversion of pond water (wealth) into energy (capital): “the additional value obtained from the lake is not a value of the lake itself … but rather a value of the man-made process extrinsic to the lake” (de Soto 2001: 45). Even during periods of unemployment, when no labor income is flowing into the family’s nest egg, wealth can be converted into capital and used for consumption, affording an adequate standard of living. These “capital-generating functions” of assets are unique to the property systems of highly developed industrialized economies, where private property is legally protected and transactions are documented and processed in a formal market (de Soto 2001).
Another type of conversion, noted by early and contemporary theorists alike, links property with non-pecuniary resources such as political power and social and cultural capital. The wealth–power nexus transcends economic and non-pecuniary processes, penetrating a number of other realms. Asset ownership increases political participation, since property owners generally have both stronger incentives and greater resources to participate in the political arena (Sherraden 1990; Manturuk et al. 2009; Zavisca and Gerber 2016). Among the economic elite, wealth and power are closely tied: wealth can be transformed into political power—both indirectly, as in the case of financial contributions to political campaigns, and directly, when candidates’ personal wealth is used to fund their own political campaigns—and political power can be used to protect the economic interests of the wealthy (Domhoff 2002; Stiglitz 2012). A key component of Domhoff’s (2002: 181–183) class-domination theory of power is the way in which economic resources are converted into social capital and political influence. The social networks that the American upper class establishes in private schools and social clubs and via assortative marriage patterns, for instance, create a form of social exclusion that enables the members of these networks to exert disproportionate influence on policy makers (Domhoff 2002).
In addition to political influence, accumulated wealth has been linked to social and cultural capital. Acknowledging that “economic capital is at the root of all the other types of capital,” Bourdieu (1986: 54) notes that the transformation of economic capital into social capital (e.g. in the form of beneficial social ties) and into cultural capital (e.g. through cultural signals, academic credentials, and educational attainment) requires great effort: “The different types of capital can be derived from economic capital, but only at the cost of a more or less great effort of transformation, which is needed to produce the type of power effective in the field in question.” Given its enduring nature, thanks to market transactions over the life course and family transfers that extend across generations, wealth attainment constitutes a particularly strong example of the transformative trait of tangible and non-pecuniary forms of capital. The intriguing relationship between such forms of capital will be further discussed in Chapter 4.
Correlation and causation: Wealth and quality of life
In addition to the conversion trait of wealth, both asset ownership and wealth function as important determinants of various measures of well-being. Despite never really making its way into mainstream sociology, quality of life (QOL) has long been a topic of sociological research (see Land 1975; Ferriss 2004; Nevarez 2011). The QOL literature studies subjective measures of well-being and their relationship with so-called objective conditions such as income and wealth. For example, Veenhoven’s (2000) model of QOL identifies two general categories of individual micro-level measures: the “life-ability of the individual” includes such attributes as health (physical and mental), life expectancy, and human capital (education), whereas “appreciation of life” includes such subjective measures of well-being as happiness, overall life satisfaction, and satisfaction with various domains of life (e.g. housing, neighborhood, and marriage). There is ample evidence to indicate that asset ownership and wealth are associated with both dimensions of QOL, but establishing the direction of the causal relationship between the two sets of measures (wealth and QOL) has long been a challenge for the research community. More recently, our understanding of this relationship has been furthered by the growing availability of longitudinal data on wealth and the concomitant development of more advanced econometric methods. By taking into consideration household asset ownership and net worth in addition to the “usual suspects” (level of education, marital status, income, and so on), the models generated through these econometric methods enable researchers to observe the “net effect” of each independent variable on QOL outcomes.
Financial satisfaction and life satisfaction
It is reasonable to expect that economic status would be strongly linked to people’s sense of well-being. Empirical support for this hypothesis has been feeble, however, as only weak associations are shown between income and subjective measures of well-being such as happiness and life
