Eh, not necessarily. Income/wealth inequality may overstate consumption inequality. It's important to see that the poor can have access to the same gadgets that the rich do. I live in North Phillly - not exactly the Mainline here in PA - and many people here have iPhones, even the new ones. If we just looked at income inequality, that'd be lost.

How do you think people allocate their resources though? Incredibly rich people aren't earning money so they can save it and then..... never use it. They save their money so they can retire early, have more freedom to move from job to job, take off work whenever they want to, have more liquidity to insure themselves against negative wealth shocks.

Of course consumption and leisure will not perfectly correlate with wealth/income because people are assumed to be intertemporally optimizing agents. So are richer people just irrationally sitting on all their money and not intertemporally maximizing their utility?

Look I was pretty poor for a good chunk of time between dropping out and reentering undergrad. It sucked. Because I didn't know if I'd be going back to undergrad, I couldn't rationally consume more than my income and then make it up with higher future projected earnings. My liquidity constraints fucked me over hard. I had to go over a year without a computer because I broke mine and couldn't afford to replace it.

And it's different for me present day. I'm still broke and hardly make any money, but my future job prospects are pretty swell, and I could even drop out of grad school any time and get a relatively well paying job. I am not consuming more, hell I am not even earning so much more, but thanks to the magic of an exogenous shock to my future projected earnings I am less constrained present day and that has a lot of bearing on my ability to smooth out my consumption function in the long-run as well as insure my assets against negative wealth shocks.