A problem with wealth and poverty research

I am not well versed in economics but I saw this and it stuck in my throat -- from the New Scientist (an otherwise excellent resource):

Why it is hard to share the wealth
The rich are getting richer while the poor remain poor. If you doubt it, ponder these numbers from the US, a country widely considered meritocratic, where talent and hard work are thought to be enough to propel anyone through the ranks of the rich. In 1979, the top 1% of the US population earned, on average, 33.1 times as much as the lowest 20%. In 2000, this multiplier had grown to 88.5. If inequality is growing in the US, what does this mean for other countries?

First of all, I need to get something out of the way here. The issue with poverty is not a distribution of cash. Here are two little secrets: #1) - There is no fixed amount of cash. You can piss away cash and you can grow cash. There is no one pile of it which is carved up and distributed between rich and poor people. Taking money away from rich people and giving it to poor people will help neither the rich nor the poor. #2) - You can manufacture cash out of thin air. All it takes is an idea, some hard work, some brains, the right attitude and working 60 hours/week. For an example, take a look at J. K. Rowling -- she was a single mom, living on welfare and had an idea for several Children's Books. Now, Harry Potter has made her worth One Billion Dollars according to Forbes Magazine. Where did her wealth come from? An Idea and some very hard work. Let's look at the numbers in the New Scientist article: In 1979 -- the top 1% earned 33.1 times more than the lowest 20%. In 2000 -- the top 1% earned 88.5 times more than the lowest 20%. This means that: #1) - rich people are getting richer and #2) - more poor people are becoming rich. (remember, you are counting by dollar value here, not numbers of people) Poor people today have cell phones, cars, new clothes, heating and air conditioning, television -- the standard of living for people classified as "poor" has been rising very nicely. Now back to the New Scientist article -- there is a conference coming up in India which is addressing the following:

Economists will join physicists to discuss these issues next week in Kolkata, India, at the first ever conference on the "econophysics" of wealth distribution. "We are interested in understanding whether there is some kind of social injustice behind this skewed distribution," says Sudhakar Yarlagadda of the Saha Institute of Nuclear Physics (SINP) in Kolkata.

It is well known that wealth is shared out unfairly. "People on the whole have normally distributed attributes, talents and motivations, yet we finish up with wealth distributions that are much more unequal than that," says Robin Marris, emeritus professor of economics at Birkbeck, University of London.

If you read this article, the problem that lept out at me was that all of the presentations seem to treat wealth/poverty as coming from that one fixed pool of funds. This is not the case and these models are therefore highly flawed. One example:

Saving plans
A more sophisticated model developed by Bikas Chakrabarti of the SINP and his colleagues paints a slightly less bleak picture for the poor. His team adjusted the gas model to allow people to save various proportions of their money.

This model predicts both the wealth classes that Yakovenko found. It also suggests that if you save more you are more likely to end up rich, although there are no guarantees. Changing people's saving habits could be an effective way of making the wealth distribution fairer, rather than enforcing taxes, says Chakrabarti, who is one of the Kolkata conference organisers.

These people need to talk to some entrepreneurs. The secret here (in four steps) is: #1) - work your $#@* butt off #2) - have a good idea #3) - be realistic #4) - go from here to #1) and repeat until wealthy... As it goes: A Rising Tide Floats All Boats.