The Difference Between Owning and Chasing

Economic Participation, Part 3: Assets, Appreciation, and the Position We Start From

In Part 2 of Economic Participation, I examined a relatively simple question that became more complicated the longer I looked at it: what can your income actually buy? Using housing as the primary example, I compared the movement of household income with the movement of housing prices. The purpose was not to claim that housing represents the entire economy, but to examine what happens when income increases while something a household may be trying to acquire increases at a very different rate.

That examination left another side of the relationship unresolved. I had been looking at housing from the position of someone trying to acquire it, but what happens when the thing increasing in value is something you already own? The price movement may be the same, yet the experience of that movement can be completely different depending on which side of ownership you are standing on.

You can follow The Resilient Philosopher and the Economic Participation series on Spotify. If you have not read Part 2, What Can Your Income Actually Buy? establishes the purchasing-power question that leads directly into this one.

The Same House Can Tell Two Different Economic Stories

Imagine two households with similar incomes. One purchased a house years ago, while the other is trying to purchase a comparable house today. If the value of that property increases, both households are looking at the same market movement, but they are not experiencing the same consequence.

The household that already owns the property owns the thing that is appreciating. The increase does not mean somebody deposited that appreciation into a checking account, and it does not erase the mortgage, insurance, taxes, maintenance, or other obligations attached to the property. What it does mean is that the household already possesses an asset whose market value has increased.

The prospective buyer experiences that same increase differently. The appreciating asset is not something the household already owns. It is something the household is still trying to reach through income, savings, credit, financing, or some combination of them. What may represent increased asset value to the existing owner can represent a higher entry price to the person trying to become an owner.

That is the distinction I wanted to isolate in this part of the series. The owner is riding the appreciation while the prospective owner is chasing it. Neither position, by itself, tells us whether the economy is healthy, whether the owner deserves the appreciation, or whether the prospective buyer made good or bad financial decisions. Those are separate questions, and separating them helps keep the analysis from becoming a moral judgment before the relationship itself is understood.

Ownership Changes the Relationship

An asset is not the same thing as income. Income flows into a household over time, while an asset is something the household owns that has economic value. That distinction may sound obvious, but it becomes important once prices begin moving.

Before ownership, increasing prices can make acquisition more difficult. After ownership, the same increase may raise the market value of something already held. The person has moved from trying to convert income into ownership to occupying the ownership position itself.

This does not mean ownership automatically produces financial security. Assets can decline in value, and ownership carries risk and continuing costs. A house can appreciate while insurance increases, repairs become necessary, property taxes change, or the household continues carrying substantial debt against the property.

That is one reason I do not want to use asset and wealth as though they mean the same thing. They are related, but they answer different questions. Part 3 is about what ownership changes. Part 4 will deal with what happens when assets and liabilities are brought together and we begin talking about net worth.

Income Alone Can Hide the Difference

If two households earn similar amounts of money, an income table may place them in approximately the same economic category. That classification tells us something useful about the flow of money into the households, but it does not tell us whether their economic positions are actually identical.

One household may own a property purchased years earlier. Another may rent while trying to accumulate enough savings and borrowing capacity to purchase a similar property at today’s price. Their current incomes can look similar while the histories behind their current positions are substantially different.

This is where I think single measurements can become misleading, even when the measurements themselves are accurate. The income number can be correct without capturing ownership, timing, debt, accumulated assets, or the conditions under which those assets were acquired. The problem is not necessarily the number. The problem begins when we ask the number to explain more than it was designed to measure.

That is similar to what I have seen in other systems. A measurement can tell us exactly what it is supposed to tell us and still leave important conditions outside the frame. If we forget the boundary of the measurement, we can begin treating a partial picture as though it were the whole system.

Participation Is Not the Same as Accumulation

This distinction also brings me back to the larger question behind Economic Participation. A household can participate continuously in the economy without necessarily accumulating assets that change its future position.

A worker earns income and uses that income to pay for housing, food, transportation, insurance, utilities, services, taxes, debt, and the other costs involved in living and continuing to work. Those transactions are economic participation. Businesses receive revenue, lenders receive payments, workers receive wages, and economic activity continues through the movement of money between people and organizations.

What I am asking is what remains after that participation. Does any portion of today’s labor eventually become something the household owns, or does most of the income remain committed to maintaining the ability to participate again tomorrow? That question shifts the analysis from economic activity alone toward the possibility of accumulation.

I am not suggesting that everyone must own a house, build a business, buy stocks, or follow one particular path toward ownership. Different people have different circumstances, risks, priorities, opportunities, and constraints. I am asking whether there is still a meaningful relationship between labor today and the possibility of ownership tomorrow.

That question becomes important because economic activity and economic resilience are not necessarily the same thing. A household can spend money every month, contribute to business revenue, pay taxes, remain employed, and participate actively in the economy while making very little progress toward acquiring assets of its own. Participation can keep the system moving without necessarily changing the household’s long-term position inside it.

Timing Is Part of Economic Position

Ownership also carries history with it. Someone who purchased an asset years ago does not have to repurchase that same asset every year at the new market price. The person entering the market today faces today’s conditions, while the existing owner entered under the conditions that existed when the original purchase occurred.

That does not mean earlier buyers had an easy experience. Their wages may have been lower, interest rates may have been different, employment may have been less secure, and the risks they accepted at the time may be difficult to see when looking backward from today’s property value. The argument does not require us to pretend the past was easier.

What it does require is recognizing that economic position can accumulate history. Current income does not necessarily reveal when an asset was acquired, what it originally cost, how much debt remains against it, or how much appreciation occurred while it was owned. Looking only at current income can erase part of the path that produced the current position.

That history becomes part of the present economic position even though it may be invisible in a current income figure. Two households can therefore stand near each other in income while standing much farther apart in relation to ownership.

This Is Not an Argument Against the Owner

Discussions about assets can turn into moral arguments quickly, and I do not think that helps us understand the relationship. A homeowner is not doing something wrong simply because a house increased in value, just as a prospective buyer is not automatically irresponsible because that house became more difficult to acquire. The economic relationship deserves to be understood before either person is turned into the explanation for it.

If I own something, accept the risk of owning it, maintain it, and its value increases, I can reasonably recognize that appreciation as beneficial to my position. At the same time, another person can reasonably look at the higher price of the same asset and recognize that the cost of reaching ownership has increased. Both observations can be true because they describe different positions inside the same system.

The appreciation itself does not have to change for its consequences to change. This is part of the reason I have been separating the concepts in this series instead of combining everything into one argument. Income, purchasing power, assets, wealth, labor, consumption, and economic participation interact with each other, but they are not interchangeable measurements.

Where This Part Stops

Housing is still only an example. This article does not establish that homeownership is the best choice for every household, that every homeowner became wealthy through appreciation, or that everyone who does not own a home was prevented from doing so by the economy. Those conclusions would require evidence this comparison does not provide.

It also does not tell us a household’s complete net worth. The Federal Reserve’s Survey of Consumer Finances separates what families own from what they owe and reports net housing value as home value minus home-secured debt. That distinction is exactly why I am keeping assets and net worth separate in this series.

For Part 3, I want to stop before crossing that line. An appreciating asset changes the owner’s position relative to somebody who is still trying to acquire it, and that relationship can be examined without pretending we have already answered the larger question of wealth.

Before We Ask Who Has the Wealth

The next part of the series will move from assets into wealth and net worth. That requires another distinction because owning something valuable is not the same as knowing the household’s complete financial position. Assets and liabilities have to be examined together, and once we do that, another question becomes unavoidable: who owns the appreciating assets, and how concentrated is that ownership?

I do not want to answer that question prematurely in this article because doing so would defeat the reason I separated the series into five parts. Part 1 separated income from wealth, Part 2 asked what income could actually acquire, and Part 3 asks what changes once the household already owns the asset. Only after those distinctions are established does it make sense to examine net worth and the distribution of ownership.

The distinction I am carrying forward is narrow, but its consequences are not. A rising asset price can benefit the person who already owns the asset while making entry more difficult for the person still trying to acquire it. The same economic movement can therefore represent appreciation from one position and increasing distance from another.

That is the difference between owning and chasing, and it is the relationship I wanted to understand before moving into wealth. The next part of the series can now ask a different question without pretending that assets, income, purchasing power, and net worth are the same thing.

Orlando J. Alvarez

Sources and Series Continuity

• Federal Housing Finance Agency, FHFA House Price Index Frequently Asked Questions
• Federal Reserve Board, Survey of Consumer Finances
• What Can Your Income Actually Buy? Economic Participation, Part 2
• The Resilient Philosopher on Spotify