{"id":287,"date":"2015-11-20T23:30:35","date_gmt":"2015-11-21T04:30:35","guid":{"rendered":"http:\/\/commoncents.blogwyrm.com\/?p=287"},"modified":"2023-05-06T18:55:32","modified_gmt":"2023-05-06T22:55:32","slug":"the-numbers-dont-add-up","status":"publish","type":"post","link":"https:\/\/commoncents.blogwyrm.com\/?p=287","title":{"rendered":"The Numbers Don\u2019t Add Up"},"content":{"rendered":"<p>In his 1988 book <a href=\"http:\/\/www.amazon.com\/Innumeracy-Mathematical-Illiteracy-Its-Consequences\/dp\/0809058405\">Innumeracy<\/a>, the mathematician John Allen Paulos explores the inability of many people, some highly educated some not, to grasp what large numbers really mean.\u00a0 The book was something of a best-seller and is often discussed within certain intellectual and academic circles but its influence seems to be short-reached based on the fact that people still seem to be innumerate.<\/p>\n<p>This failure is particular troublesome when the large numbers are associated with probability and statistics, and even more bothersome when the large numbers are about money and the statistics are about who holds what in terms of wealth.<\/p>\n<p>A recent example of this kind of sloppy thinking is found in the following video, which went viral recently<\/p>\n<p><center><iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/0e50fQLyebI\" frameborder=\"0\" allowfullscreen><\/iframe><\/center><\/p>\n<p>As Neil Cavuto, the host of the show, pointed out to Keely Mullen, the organizer of the Million Student March, the central question here is not one of judgement but of numbers.\u00a0 Society can decide politically where it stands on her three core demands for free public college, the cancellation of student debt, and an across the board $15 dollar\/hour minimum wage.\u00a0 The economics question is how to pay for it.<\/p>\n<p>And here the innumeracy comes rushing to the front and crashing down on her.\u00a0 All she could say in defense of her program is that she doesn\u2019t believe Cavuto when he says that confiscating the wealth of the rich would not be enough to pay for her core demands.\u00a0 She couldn\u2019t argue with his points.<\/p>\n<p>At the heart of the discussion was the concept of \u2018who pays for this all\u2019.\u00a0 Here her poor understanding of large numbers has harmed her.\u00a0 The basic numbers are:<\/p>\n<ul>\n<li>The <a href=\"http:\/\/www.pewresearch.org\/fact-tank\/2014\/09\/18\/the-nations-wealth-recovers-but-largely-for-those-at-the-top\/\">total wealth in the US held by households and nonprofits<\/a> is approximately $82 Trillion dollars<\/li>\n<li><a href=\"http:\/\/www2.ucsc.edu\/whorulesamerica\/power\/wealth.html\">The wealthiest 1% holds<\/a>, on average, 35.86% of the wealth<\/li>\n<li><a href=\"http:\/\/www.forbes.com\/sites\/specialfeatures\/2013\/08\/07\/how-the-college-debt-is-crippling-students-parents-and-the-economy\/\">Student debt is 1.2 trillion dollars<\/a><\/li>\n<li>The <a href=\"http:\/\/trends.collegeboard.org\/college-pricing\/figures-tables\/2015-16-state-tuition-and-fees-public-four-year-institutions-state-and-five-year-percentage\">average US cost for public colleges<\/a> is $9410\/year<\/li>\n<li>The <a href=\"http:\/\/nces.ed.gov\/programs\/coe\/indicator_cha.asp\">number of students enrolled in higher education<\/a> is 17.5 million students<\/li>\n<\/ul>\n<p>Now let\u2019s do some trivial analysis; analysis that any fifth grader should be able to do, let alone a college educated activist.\u00a0 First let\u2019s calculate the wealth held by the one percent by multiplying the percentage wealth held by the total wealth.\u00a0 This value comes out to be 29 trillion dollars of wealth.\u00a0 It is a misleading number but we\u2019ll come back to that.\u00a0 Next let\u2019s estimate the total cost for public college.\u00a0 A reasonable estimate is that about 2\/3 of the student population attends public college resulting in a yearly cost of around 110 billion dollars.\u00a0 So, on the surface, if we make the one percent cough-up their fair share there should be ample money to meet the first two demands.<\/p>\n<p>Just for giggles, let\u2019s assume their fair share is 100%.\u00a0 How long can we run the system?\u00a0 Well 29 trillion take away 1.2 trillion for student loan forgiveness leaves just under 28 trillion of with which to pay for free college.\u00a0 At 100 billion a year, that gives us about 255 years of free college.\u00a0 So what if the system eventually runs out we will all be cozily dead and by that time (255 years into the future) we may not need college \u2013 we can just learn like they did in the matrix.<\/p>\n<p><center><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/6vMO3XmNXe4\" width=\"420\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/center><\/p>\n<p>At the very minimum, Keely could have thrown these numbers into Cavuto\u2019s face.\u00a0 Had she done so, he no doubt would have pointed out the difference between wealth and fungible wealth.\u00a0 To understand the difference, let\u2019s consider how that 29 trillion held by the one percent is put to use.<\/p>\n<p>For the sake of argument, let\u2019s assume that all 29 trillion were placed in a simple savings account and then ask what purpose does that money serve?\u00a0 Clearly the bank will loan it out for some businesses to get started, or loan it to a family to buy a house, and so on.\u00a0 So we can\u2019t simply take the money out of the bank and spend it on colleges with no consequences.\u00a0 True the money is in the economy either way, but only in certain cases is it used to produce while in other ways its movement results in nothing.<\/p>\n<p>In reality, that 29 trillion is tied up in lots of ways and earmarking it for one function will hurt people who depend on it for other functions.\u00a0 The pros and cons of such a movement is what economics is all about. If we can only tap a tenth of that wealth, then the free-college system can only sustain itself for 25 years; hardly long enough for Keely's own children to attend for free. But what about the fact that the one percent will earn more? Well if we confiscate their money what incentive do they have to accumulate vast wealth again? Why not just be a normal working class dude like the rest of us, with all their needs take care of (but by whom?)?<\/p>\n<p>Of course, a more profitable use of Keely\u2019s time would have been to rail against the following two statistics.<\/p>\n<ul>\n<li>The cost of college has grown <a href=\"http:\/\/www.forbes.com\/2011\/02\/01\/college-education-bubble-opinions-contributors-louis-lataif.html\">four times faster<\/a> than inflation<\/li>\n<li>The amount of wealth held by the one percent has fluctuated only about 2% (1 standard deviation) up or down in the last 35 years<\/li>\n<\/ul>\n<p><a href=\"https:\/\/commoncents.blogwyrm.com\/wp-content\/uploads\/2015\/11\/Wealth-held-by-the-1-percent.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-291\" src=\"https:\/\/commoncents.blogwyrm.com\/wp-content\/uploads\/2015\/11\/Wealth-held-by-the-1-percent.jpg\" alt=\"Wealth held by the 1 percent\" width=\"857\" height=\"627\" srcset=\"https:\/\/commoncents.blogwyrm.com\/wp-content\/uploads\/2015\/11\/Wealth-held-by-the-1-percent.jpg 857w, https:\/\/commoncents.blogwyrm.com\/wp-content\/uploads\/2015\/11\/Wealth-held-by-the-1-percent-300x219.jpg 300w, https:\/\/commoncents.blogwyrm.com\/wp-content\/uploads\/2015\/11\/Wealth-held-by-the-1-percent-810x593.jpg 810w\" sizes=\"auto, (max-width: 857px) 100vw, 857px\" \/><\/a><\/p>\n<p>So what she should really be marching about with her 999,999 fellow students (or is that number too large?) is the fact that higher education is a bubble market \u2013 it consumes lots of money and produces far too many students for whom the numbers simply don\u2019t add up.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In his 1988 book Innumeracy, the mathematician John Allen Paulos explores the inability of many people, some highly educated some not, to grasp what large numbers really mean.\u00a0 The book... <a class=\"read-more-button\" href=\"https:\/\/commoncents.blogwyrm.com\/?p=287\">Read more &gt;<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-287","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts\/287","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=287"}],"version-history":[{"count":11,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts\/287\/revisions"}],"predecessor-version":[{"id":1203,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts\/287\/revisions\/1203"}],"wp:attachment":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}