## Saturday, July 28, 2012

### Mathbabe — Income distributions and misleading poll questions (#OWS)

Looking at the deciles and convincing the plebs.

Income distributions and misleading poll questions (#OWS)
Cathy O'Neil, mathbabe

Clonal said...
This comment has been removed by the author.
Clonal said...

First,

The title of her article is incorrect, as the title says income, while the body of the article deals with the wealth distribution. There is a big difference between wealth and income.

I redid her calculations, and came up with a very different way of presenting her suggestions.

So here goes:

Let us cap Wealth at the average of what the top 5% minus the top 1% have

That average is 27.3/4 = 6.825 %

So the top 5% now get 6.825 x 5 = 34.125

The difference between what the top 5% and the new top 5% = 34.6 + 27.3 - 34.125 = 61.9 - 34.125 = 27.775

No we distribute the 27.775 equally to everybody = 0.27775%

So New Distribution shows the increase for each group, and their comparson to the new bottom 40% wealth level.

Bottom 40% share = 0.2+ 40 x 0.2775 = 11.31 average = 0.283 Increase 56 x or 1 x bot 40%
Middle 20% share = 4 + 20 x 0.2775 = 9.56 average = 0.478 Increase 2.39 x or 1.68 x b40
60-80% share = 10.9 + 20 x 0.2775 = 16.44 average = 0.822 Increase 1.5 x or 2.9 x b40
Next 10% share = 12% + 10 x 0.2775 = 14.78 average = 1.478 Increase 1.23 x or 5.2 x b40
Next 5% share = 11.2 + 5 x 0.2775 = 12.59 average = 2.518 Increase 1.13 x 8.9 or x b40
Next 4% share = 27.3 + 4 x 0.2775 = 28.41 average = 7.10 Increase 1.04 x or 25x b40
Top 1% share = 6.825 + 1 x 0.2775 = 7.1 average = 7.10 Decrease 0.20 x or 25x b40

A similar analysis can done for the income levels - which I intend to do.

Clonal said...

If I look at the data provided by the IRS on Tax Returns and do a similar arithmetic by re-instituting the 90% top tax rate on incomes above \$250K while keeping the other tax brackets the same, and distributing that tax revenue (from 250K and above) as a tax credit equally across the board -- income disparity between the CEO of a Fortune 500 corp and its lowest paid worker from 600 to 1 today back to 26:1 as it was in the 1960's

Matt Franko said...

"as the title says income, while the body of the article deals with the wealth"

Right the first is a flow and the second is a stock....

We can see how normal brain function is disrupted once the topic becomes one based on "money".... here a woman who probably is pretty decent at math is caught up in not recognizing the difference between a stock and a flow....

rsp,

paul meli said...

I think even stock is a misnomer - it is a running total not a static "quantity" of things.

Again these are merely semantic constructs devised to describe abstract processes. It isn't that cut-and-dried in my view, hence the reason there are always disagreements ovr these kinds of arguments.

Whether or not she is talking about flows or stocks she is focused on making a broader point without writing a technical paper on it.

Those of us that look at things in the abstract sense first should be able to read between the lines and see the broader argument.

Those that are semantic-based thinkers (majority) may have trouble grasping the finer points and making those distinctions may confuse them.

Or maybe I'm just navel-gazing…

Clonal said...

Stocks vs flows

Hence the logic of the income tax. If you want to reduce the amount of water in a leaky bucket, you start by reducing the flow from the tap!