Occupy Nothing. The 99% Statistic and Why It's BS

For at least the last 12 years or more, I've heard this statistic thrown around that "99% of this country's wealth is held by 1% of the population." Originally, I was shocked and appalled. I thought to myself, "WOW That is SERIOUSLY messed up! Something should be done to fix this problem!" As I looked into the statistic and why our distribution of wealth was so skewed, I discovered a number of things that changed my perspective, initiated my current academic interest in economics and made me take a political U-Turn from 21st century Liberalism to a more Libertarian, 18th century Liberalism (a.k.a. Non-religious "Conservatism.")

At the beginning I sought to find out what this statistic was all about and where it came from. Honestly, I thought to myself - "There's no way less than 1 million people hold almost all the money in the US!" In looking for the source of the statistic and trying to find other data that supported it, I ran into my first dilemma; "How do I define wealth? How does the statistic define wealth? Is that 99% statistic based on GDP, or the total money held by people in bank accounts?" In asking this question, I realized that most people call "Wealth" the money in their pocket at the end of the day. It's what's in their savings account, what they can save or how quickly they can save it.

For a household of 4 after a mortgage, food, paying for extracurricular activities for the kids, taxes, transportation etc, that may not be much, considering median household income in the US is $46k. (I'm using 2009 data here) Yet, for a single person with no kids, $46k is a different story entirely. With modest living expenses, a person making $46k a year could save a lot of money. So, "wealth" in that regard becomes largely relative to one's circumstances and choices - Having kids costs money, so does buying a house. Assuming a 46k income, "Wealth" is relative to how much you spend/save. Or more correctly "Wealth" is defined by what's coming in vs. what's going out.

(To add some perspective on why I used that $46k figure here. I based this on US Census data (which can be found here) which shows that the median income in the US is $46k. Now, for the sake of comparison, the US Census also defines poverty based on household size. For a family of 4, that's any household below $22k. Only 14.7% of the people in the country make below that figure based on household size. My point here was to contrast the idea of income vs. expense. I realize many who read this blog don't make $46k, but understand that everyone who reads this blog is well above poverty level.)

Let's run with that for the time being. The concept of wealth in the context of "99% of the wealth is held by 1% of the population" is relative to incomes - Who makes the most money? This should mean then, that 99% of the gross income in the country went to only 1% of the population (which would be approximately 3 million people, for reference.) Bring in the IRS statistics of income (which can be found here.) According to this neat publication, the adjusted gross income across all tax returns filed in 2009 is...

$7,648,676,270,000 - Seven Trillion, Six hundred and forty eight billion, six hundred and seventy six million, two hundred and seventy thousand dollars. Approximately.

99% of which, is $7,572,189,507,300.

So, if the 99% statistic is accurate, that means that 3 million tax returns should show somewhere around that 7.5 trillion dollar mark, right? Well... this is where I got angry.

The number of tax returns that reported more than $250,000 in income for 2009, was 2,498,021. About 500,000 short of our 3 million people marker. The total gross income they reported was $1,621,416,514,000. Just about 20% of the total income in the country, and no where near 7.5 trillion.

Now, as I read through these statistics I found something else interesting... the vast majority of the income reported in 2009, came from tax returns that reported between $50k and $100k (about 2.1 trillion). - We call that the middle class, and they take about 24% of the total income in the country, making it impossible for 1% of the population to possess 99% of the income in the country.

The short version of all that number crunching is this - The majority of the income and purchasing power held by the country, is held by the people who make between $50k and 100k, even as recent as 2009, after the start of our economic dip.

The media, my peers, even the education that I was receiving all denied the numbers and data I was able to see with my own eyes. I couldn't see this 1% / 99% thing.

I looked harder. I thought it could be a GDP thing. The US GDP is about 14,526,550,000,000. Here again, the 99% statistic is impossible considering the purchasing power of the middle class at 2.1 trillion. Also consider that tangible assets held by business entities (not directly held by people) many of which are held and controlled by shareholders and business owners, much of which is part of that middle class group.

So... after spending a great deal of time researching these statistics, digging through numbers, trying to understand them, I've only been able to come to one conclusion - This 99% of wealth concept is completely and entirely wrong. Worse yet, it's not simply a lie, it has zero foundation in truth, what-so-ever. Most of those who would cite this figure are doing so to preach for some kind of economic change, and they're preaching goals that we have already reached. So, it's not even a willful or intentional misrepresentation of the truth, it's just ignorance of it.

I said before I started looking for this information over 12 years ago, and it's true. I'm using current numbers because they're easier to cite, but every year the IRS and US Census release their data, I check the numbers again to see if we're seeing a progression toward wealth accumulation in that small super-rich percentage of our population.... We're not.

This kind of statistical separation in Academia and the news is why I have a hard time taking either seriously.

The other funny part of this, is how much of the US GDP is wrapped up in tangible assets held by businesses, and how many people in this country hold stock in and work for those same companies. - Most of your IRA is corporate business investment.

In the end, Occupy Wall Street is...
An emotionally driven and largely unaware group of people upset about the current economic recession and disappointed by the fact that others are still living decently while they're either struggling or empathizing with those who are struggling. It is not, however, based on fact.

Now I ask for anyone to tell me... What did I miss?

A Priori and the Limitation of Human Knowledge

The beginning of this blog post requires prefacing a few things, as I often do. My goal here is to get to the origin of certain aspects of knowledge, and much of this is based on a statement made to me in the past that “Mathematics is an example of a priori knowledge.” I’m here to state, for the record, that such notion is BS. The first order of business is to define these terms “A Priori” and “A Posteriori.” “A Priori” is used in this context to refer to knowledge we possess independent of experience. “A Posteriori” is used to refer to knowledge that requires justification through empirical evidence. So, my point here is to say, all knowledge is A Posteriori, outside raw perceptual data provided by our senses. All human knowledge begins at sensory perception. The senses take in data in the form of light, sound, texture, taste, smell. Once the data is received by the brain, we can consciously interpret what that data means. For example, the reading process equates to perceiving light as it reflects off of a page then interpreting the data. This raw data is the simplest form of knowledge we can obtain. In the absence of input through our senses, our brains create false signals. With only 15 minutes of sensory deprivation, people will begin to experience hallucinations as real as those seen by someone on LSD. (Source: Wikipedia - Sensory Deprivation If you want more reliable data, you can search for the huge Kenyon study on Sensory Deprivation in PDF format, it’s hundreds of pages of technical data.) Once we possess that raw data provided by our senses, we can begin to analyze and extrapolate on our perceptions. We see a wood object that has a flat top, and four legs extending down, one from each corner. Is it a Chair? Is it a table? Abstraction is a process of separating the idea from the object. What separates the terms “Chair” and “Table” is the idea of their individual applications. The separation there is not implicit based on the raw data we have perceived. It is an abstraction we have developed based on the knowledge we already possess. So, this brings me to Math. Mathematics, strictly speaking is a PROCESS of defining things like space, quantity, change and structure. It is by definition, a process of abstraction based on experience (Read: A Posteriori.) Simple numbers that relate to quantity have nothing to do with mathematical process. “1+1 = 2” defines the process of adding one and one. It does not specifically define the perception of two of the same object. My general proof that mathematics is not A Priori is this: “2 – 3 = -1” A simple equation that demonstrates a core concept which is dependent upon data that is wholly abstract in nature. Subtracting three from two is, in reality, impossible. We cannot even lose three objects if all we possess is two, nor can we even fathom the concept outside theoretical boundaries. Proving that 2 – 3 = -1 can ONLY be done with what we educate as mathematics (which is actually called “pure mathematics”) wherein we teach math for the sake of math – As an abstraction; An idea separated from the object, and not A Priori. Perhaps my bigger purpose in writing about all of this is to convey an important point about the limitations of our knowledge. All knowledge begins at perception and the only knowledge that we possess that is A Priori is that sense data. (The A Priori / A Posteriori question is an epistemological one, not a metaphysical question.) “The sky is blue” is A Priori because we can determine such exclusively from sensory data alone. “All entomologists study bugs” is not A Priori. Even though “entomologist” specifically is defined as a person who studies insects, this distinction is literary, not epistemological. Ergo, statements such as “we don’t know” indicating that we do not know if there is another world beyond this, or that there is some order of existence we lack the faculty to perceive, are moot. Even information that isn’t directly provided by our senses (such as a frequency too high or low for the human ear to detect) can be measured through tools which still require sensory perception. We’re simply augmenting the means through which we perceive such data. Since our knowledge is ultimately limited to perceptual data in every context, theories about things we cannot perceive are not relevant to human existence. – If they affected our lives, we would be able to perceive them.