SERVING THE QUANTITATIVE FINANCE COMMUNITY

farmer
Posts: 13477
Joined: December 16th, 2002, 7:09 am

QuoteOriginally posted by: CrashedMintSo what you're saying is that the figure of $50k average income is incorrect because young households make considerably less and older households make, on average, considerably more. Romney is referring to people at the height of the economic success and those, say 50-59 year old households tend to not make$50k but rather $200k. Am I reading that right?When you talk about the sheer numbers of people who are "middle income" relative to some exclusive group, the first group is huge. So even if some small percentage of "Middle income Americans" ever made$200,000 at age 60, it could still easily account for a larger total number of $200,000-income years, than all the$200,000 years experienced by the top 1% of lifetime earners.I don't have the data. But consider there are 99 times as many people not in the top 1% as in some top 1%. If only some tiny percentage - 1 out of the 99 - manages to make $200,000 for one year each year, then "Middle income Americans" will account for 50% of$200,000 income years!There are just so many poor people. The supply of poor people who can get lucky for one year at age 55 and be poor every other year is very big. It is much easier to make $200,000 years out of lucky poor people, and out of old poor people, than out of consistent rich people.Because it is easier to make$200,000 one year than to do it every year. So more people will achieve the first feat. The idea that it is so hard to get to $200,000, but the people who do it do it over and over rather than there being any turnover, is silly.It is easier to make$200,00 in one year of your life than to do it in two years of your life. It would make sense if you told me that 80% of $200,000 years came from people who only managed to do it once, 15% from people who managed to do it twice, and 5% from people who managed to do it three or more times. Last edited by farmer on September 16th, 2012, 10:00 pm, edited 1 time in total. CrashedMint Posts: 2591 Joined: January 25th, 2008, 9:12 pm ### Mitt Romney will be the G QuoteOriginally posted by: farmerQuoteOriginally posted by: CrashedMintSo what you're saying is that the figure of$50k average income is incorrect because young households make considerably less and older households make, on average, considerably more. Romney is referring to people at the height of the economic success and those, say 50-59 year old households tend to not make $50k but rather$200k. Am I reading that right?When you talk about the sheer numbers of people who are "middle income" relative to some exclusive group, the first group is huge. So even if some small percentage of "Middle income Americans" ever made $200,000 at age 60, it could still easily account for a larger total number of$200,000-income years, than all the $200,000 years experienced by the top 1% of lifetime earners.I don't have the data. But consider there are 99 times as many people not in the top 1% as in some top 1%. If only some tiny percentage - 1 out of the 99 - manages to make$200,000 for one year each year, then "Middle income Americans" will account for 50% of $200,000 income years!There are just so many poor people. The supply of poor people who can get lucky for one year at age 55 and be poor every other year is very big. It is much easier to make$200,000 years out of lucky poor people, and out of old poor people, than out of consistent rich people.Because it is easier to make $200,000 one year than to do it every year. So more people will achieve the first feat. The idea that it is so hard to get to$200,000, but the people who do it do it over and over rather than there being any turnover, is silly.It is easier to make $200,00 in one year of your life than to do it in two years of your life. It would make sense if you told me that 80% of$200,000 years came from people who only managed to do it once, 15% from people who managed to do it twice, and 5% from people who managed to do it three or more times.A few observations:1) I don't disagree that people who make $200k are more middle class than really rich, because$200k is really not that much. In fact I know several guy with just a few years of job experience who make, or almost make, that kind of money alone. After taxes and a nice place and London expenses they're living a good life, but they are far away from lighting cigars with $100 bills.2) I do disagree that it is likely that families just dip into that ">$200k pouch" once in their lives, simply because $200k is not crazy money, it's not something you make when you're insanely lucky, rather if you get a good degree and work at a respectable company you will probably earn it sooner or later. I don't see why people would suddenly, and in large numbers, fall out of this bracket.3) Your math is bogus: To first artificially define a middle class to set that up against an upper class, then to argue that this middle class is (by definition) larger than the upper class and everybody is equally likely to make it rich, and therefore middle class people are more often rich -- doesn't seem too convincing to me. 4) You are right that the average income does increase with age, but this increase is considerably less than you imagine. Luckily we have new census data on this page 6, table 1:2011 Household income by age of householder15-24 years:$30k25-34 years: $50k35-44 years:$62k45-54 years: $64k55-64 years:$55k65+ years: $33k5) So why would I attack Romney, if at the same time I'm agreeing that$200k is not super-rich: Because 1) probably almost everybody here on this board is a privileged asshole with advanced degrees a high-paying job or some government grant to carry a PhD well into his 30s. Sure, I might bitch that I'm only getting $100k entry level pay, but compared to almost every other person on this planet even half that amount would be completely unattainable. 2) It's stupid to express it the way he did. It gives his opponents ammunition and it either is or seems like a direct slap in the face of exactly the kind of people he needs to win against Obama: Average to low income white bible belt families who are hurt because of the economy. Last edited by CrashedMint on September 16th, 2012, 10:00 pm, edited 1 time in total. gardener3 Posts: 1496 Joined: April 5th, 2004, 3:25 pm ### Mitt Romney will be the G The turnover rate at the top is very low. As I mentioned before 70% of those in the top 5% are still there after 10 years. Of the population of neurosurgeons, for instance, those that will make$200K one year and not in other years will be very low. My estimate is ~8% of the population will reach the 5% at one point during their working life. That's the average. If you are in the top 20% but no in the top 5%, the probability is significantly higher.

farmer
Posts: 13477
Joined: December 16th, 2002, 7:09 am

QuoteOriginally posted by: gardener3The turnover rate at the top is very low. As I mentioned before 70% of those in the top 5% are still there after 10 years.But this has little to do with $200,000 household income. This includes people who drop from$1 billion to $100 million in dividends, and everyone in between. The relevant question is not what percentage of people who make$200,000 to $100 billion make over$200,000 in consecutive years. The relevant question is what percentage of people who are touched by a $200,000 income tax bracket but not touched by a$400,000 tax bracket fall into the 1 standard deviation of median lifetime earners.Of course the further people are out on the tail, the more unique they will be. The argument is whether $200,000 earners come from the middle of the bell curve, or from this freakshow. They come from the middle.If someone in a race is 1,000 miles ahead of every other runner, he is not going to drop to the middle of the pack all at once. But if someone is at the front of the pack, he can very easily trade places with the 20 people 1 step behind him. farmer Posts: 13477 Joined: December 16th, 2002, 7:09 am ### Mitt Romney will be the G QuoteOriginally posted by: CrashedMintit's not something you make when you're insanely lucky, rather if you get a good degree and work at a respectable company you will probably earn it sooner or later. I don't see why people would suddenly, and in large numbers, fall out of this bracket.This is a very professional and educated perspective. In a city like Miami, with tons of immigrants who own jewelry shops, condo speculators who go broke, club promoters, and various other types of small-business entrepreneurs, residual claimants may end up with a lot or nothing.I remember a stripper came from New York to Miami, and asked me where are the rich guys? It seems like every guy I meet with money in his pocket owns some sort of small business and had a good year.Lots of people drop out. People who over-invest in restaurant expansions and go bust, Flo Rida, Scott Storch, and strippers and hookers who turn 30. One guy bought a beautiful old sailboat to restore. It sank. traderjoe1976 Posts: 1544 Joined: May 19th, 2006, 9:50 am ### Mitt Romney will be the G I am afraid that CrashedMint is correct on this one issue. He should not back down, because statistically, he is absolutely correct. Anomanderis Posts: 610 Joined: November 15th, 2011, 10:07 pm ### Mitt Romney will be the G QuoteOriginally posted by: traderjoe1976I am afraid that CrashedMint is correct on this one issue. He should not back down, because statistically, he is absolutely correct.Actually, I prefer to say Farmer is wrong.Then again, Farmer is always wrong. farmer Posts: 13477 Joined: December 16th, 2002, 7:09 am ### Mitt Romney will be the G QuoteOriginally posted by: traderjoe1976I am afraid that CrashedMint is correct on this one issue. He should not back downHe has not yet stepped forward!Gardener3 stepped forward with a napkin estimate that 8% reach the top 5%. CrashedMint has not offered anything as concrete (or at least wooden) on$200,000 household earners. Nor should he. It would be a genuine research project to get to his level of confidence. His confidence far exceeds his analysis.
Last edited by farmer on September 16th, 2012, 10:00 pm, edited 1 time in total.

CrashedMint
Posts: 2591
Joined: January 25th, 2008, 9:12 pm

### Mitt Romney will be the G

QuoteOriginally posted by: farmerQuoteOriginally posted by: traderjoe1976I am afraid that CrashedMint is correct on this one issue. He should not back downHe has not yet stepped forward!Gardener3 stepped forward with a napkin estimate that 8% reach the top 5%. CrashedMint has not offered anything as concrete (or at least wooden) on $200,000 household earners. Nor should he. It would be a genuine research project to get to his level of confidence. His confidence far exceeds his analysis.Actually the guy who's making wild guesses not backed up by data is you, as you have hypothesized a lot but failed to find any data supporting it. Census data showing that even the age group with the highest income makes$65k on average per household, together with the other data in the census report makes me very confident that I am right. I don't see a need to pretend stuff or do any sort of additional napkin analysis.
Last edited by CrashedMint on September 16th, 2012, 10:00 pm, edited 1 time in total.

farmer
Posts: 13477
Joined: December 16th, 2002, 7:09 am

QuoteOriginally posted by: CrashedMintprobably almost everybody here on this board is a privileged assholeNot me. I may have inherited $27 million, but I was born into some kind of Planet of the Apes with you and Fermion. I would give it all up to live on my home planet. zerdna Posts: 3856 Joined: July 14th, 2002, 3:00 am ### Mitt Romney will be the G QuoteOriginally posted by: farmerQuoteOriginally posted by: CrashedMintprobably almost everybody here on this board is a privileged assholeNot me. I may have inherited$27 million, but I was born into some kind of Planet of the Apes with you and Fermion. I would give it all up to live on my home planet.It could have been worse. You could have actually gave up your inheritance to escape the planet of fermion apes. However, when you arrived to what expected to be your home planet, you could have discovered it's overrun by fermion apes just the same. Its government burns the foundations this planet was built on, and its zombified citizens repeat with enthusiasm whatever lies government lackeys feed to them. The similar kind of lies your heard on your original planet.

daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

### Mitt Romney will be the G

Romney suffers from "foot in mouth" disease
knowledge comes, wisdom lingers

CrashedMint
Posts: 2591
Joined: January 25th, 2008, 9:12 pm

### Mitt Romney will be the G

QuoteOriginally posted by: daveangelRomney suffers from "foot in mouth" diseaseI for one find him more eloquent and likable in these videos than in any campaign speech.It might even be true that 4X% of Americans will vote Obama no matter what. But at the same time 4X% of Americans will not vote Obama no matter what.

farmer
Posts: 13477
Joined: December 16th, 2002, 7:09 am

### Mitt Romney will be the G

If Obama wins, it will be a bittersweet victory for his supporters who end up collecting their free rusty-scalpel healthcare while living in this egg carton:This may be the natural state of human beings, so I cannot say I particularly care if they all die of tuberculosis.

EscapeArtist999
Posts: 1620
Joined: May 20th, 2009, 2:49 pm

### Mitt Romney will be the G

QuoteOriginally posted by: farmerIf Obama wins, it will be a bittersweet victory for his supporters who end up collecting their free rusty-scalpel healthcare while living in this egg carton:This may be the natural state of human beings, so I cannot say I particularly care if they all die of tuberculosis.where is this delightful building?