The US Teen Pregnancy Rates

Are they falling? Why or Why not?

Why Have Teen Pregnancy Rates Dropped A new study shows how to reduce them even more.
By Darshak Sanghavi| Posted Tuesday, July 31, 2012, at 11:30 AM ET

The following recently uploaded article provides further critical discussion of the main points. http://www.scribd.com/doc/102384514/A-Second-Look-at-the-USTeenage-Pregnancy-Rates-Evidence-for-a-Predominant-Natural-Law. The following article discusses the fundamental reason why the ratio y/x is not a rate. http://www.scribd.com/doc/102000311/A-Little-Known-MathematicalProperty-of-a-Straight-Line-Strange-but-true-there-is-one

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Table of Contents
No. 1. 2. 3. 4. 5. 6.

Topic Summary Introduction Analysis of teenage pregnancy data Brief discussion of Rates versus Ratios Appendix I: Tax Law, Tax Equation, Marginal tax rate Appendix II: Bibliography of related articles

Page No. 3 5 6 17 20 24

Figures 1 to 10 in 3 are self-explanatory. Figure 11 in 4 provides a graphical illustration of how the ratio y/x varies as x increases, even on a PERFECT straight line, when the straight line does NOT pass through the origin. Hence, the ratio y/x can either increase or decrease with increasing x, yielding misleading conclusions. Everyone should actually know about this important mathematical property of a straight line, and its implications, before they graduate from middle school.

The child is the father of the man

- William Wordsworth in The Rainbow http://quotations.about.com/cs/poemlyrics/a/The_Rainbow.htm
My heart leaps up when I behold A Rainbow in the sky: So was it when my life began; So is it now I am a man; So be it when I shall grow old, Or let me die! The Child is father of the man; And I could wish my days to be Bound each to each by natural piety

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 1. Summary
According to the most recent data available, the US teenage pregnancy rate is now at a three-decade low. However, it should also be noted that although the highest teenage pregnancy rate occurred in 1990 this does NOT coincide with the highest total pregnancies (1,151,850) which occurred in 1980, when the relevant teenage female population was higher (10,381,000). In fact, there is a maximum point on the graph of all the three quantities mentioned here but they do not occur at the same time, suggesting a subtle (and overlooked) interaction between the actual pregnancy levels and the size of the female population. The exclusive focus on the pregnancy rate, in such studies, without due attention being paid to the size of the female population or the actual teenage pregnancy levels, does not tell the whole story. What is the pregnancy rate? This is defined as the ratio y/x where the numerator y is the number of pregnancies and the denominator x is the female population. A graphical representation of the available pregnancy data (1972-2008) reveals a complex relationship between the female population x and the total number of pregnancies y. However, local segments of this graph are linear and can be expressed by the simple mathematical law y = hx + c. The term pregnancy rate is often used for what is really just a simple ratio y/x. This ratio is not the same as a rate. This can be appreciated if we pay attention to an important, but surprisingly little known, mathematical property of a straight line. The ratio y/x = m = h + (c/x) is not a constant even for points (x, y) lying on a PERFECT straight line. If the variables x and y of interest to us (as in the teenage pregnancy problem) are related by a simple linear law y = hx + c, with a nonzero intercept c, the ratio y/x = m = h + (c/x) is NOT the same as the rate h. The rate h equals the ratio m if and only if the x-y graph passes through the origin (0, 0) and the intercept c = 0. The implications of this mathematical property have NOT been fully understood

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and cloud the interpretation of many important types of data, such as the teenage pregnancy data. Accurate predictions about the new value of y (total pregnancies), when x (teenage female population) increases or decreases, can only be made if we know the rate h, not by using the ratio y/x. The tax law is a good example where the term rate is used correctly. The rate at which taxes owed (y) increase with increasing (taxable) income (x) is given by the marginal tax rate. This is NOT the same as the ratio y/x. Indeed, the ratio y/x is rarely used in the context of tax law discussions. Similar distinctions must be made in many other situations where the ratio is being used when it is the rate that must be calculated. Finally, it should be noted that after several years of a steady decline (from 1978 to 1992), the teenage female population started rising again and is now back to nearly the same level as in 1980 (year of highest pregnancies) and 1990 (year of highest pregnancy rates). The current teenage female population (for 2008, latest figures) is 10,805,000 but the pregnancy rate (as defined following current accepted practice) is now significantly lower (67.8 per 1000). Finally, readers, especially young readers, are encouraged to simply study the graphs before studying the text. The figure captions tell the story. Also, the following recently uploaded article is recommended, which again discusses the fundamental reason why the ratio y/x cannot be used to predict the rate of change of interest to us (pregnancies, y, in this problem). http://www.scribd.com/doc/102000311/A-Little-Known-Mathematical-Propertyof-a-Straight-Line-Strange-but-true-there-is-one

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 2. Introduction
According to a recent article in the Slate magazine (by Dr. Darshak Sanghavi, see http://www.slate.com/articles/health_and_science/medical_examiner/2012/07/prev enting_unwanted_pregnancies_forget_sex_ed_and_compare_the_pill_to_iuds_.ht ml , July 31, 2012, and I quote) something quite remarkable has happened to teenage pregnancy rates in the past few years. Theyve reached a three-decade low, down by 40 percent since 1990. Teen births and abortions also have fallen respectively by one-third and one-half. When I clicked on reached a three-decade low, I was able to get the raw data on the number of females in the population, lets call this x, and the total number of pregnancies y. The pregnancy rate is the ratio y/x expressed as pregnancies per 1000 females. This is like converting a ratio into a percent by multiplying by 100. Here we multiply by 1000 instead. For example, http://www.guttmacher.org/pubs/USTPtrends.pdf, according to the latest figures available in Table 2.1 of this link, in 2006, the last year for which data is given, the female population (in the age group 15-19) was 10,389,000 (value of x) and the total pregnancies were 742,990 (value of y). Hence, the ratio y/x = (742,990/10,389,000) = 0.0715 and the pregnancy rate 1000(y/x) = 71.5; see also figure given in second column of Table 2.1 immediately following list of years in column 1. And, so on for other years. Based on such calculations, the teenage pregnancy rate has now reached a threedecade low. But, let us take a look also at how both x and y have changed, over time, instead of only considering the changes in the ratio y/x. The x-y graph is illustrated in Figures 1 and 2.

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 3. Analysis of Teenage Pregnancy Data

In the x-y graph of Figure 1, the pregnancy rate y/x = m is the slope of the ray joining any point (x, y) back to the origin (0, 0). The higher the slope m of this ray, the higher the pregnancy rate, and vice versa. All the observed (x, y) pairs fall between the rays A and B for the highest and lowest pregnancy rates, respectively.

Total pregnancies, y (ages 15-19) [in 000s]

1400

A
1200 1000 800

y/x = 0.1169
600 400

y/x = 0.0695
200 0 0 2000 4000 6000 8000 10000 12000

Female population, x (ages 15-19) [in 000s]

Figure 1: Graphical representation of the teenage pregnancy data (1972-2006). The slope m = y/x of the rays which join the point (x, y) back to the origin (0, 0) is the pregnancy rate. The lower the slope m, the lower the pregnancy rate. The two rays here are for the highest (in 1990) and the lowest (in 2005).

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Notice how the (x, y) pairs have executed almost a chaotic dance on this diagram, see Figure 2. These diagrams also highlight the importance of the size of the female population which is overlooked when we focus on the pregnancy rate. For example, the line segments with the arrows in Figure 2 show that the slope is sometimes positive and sometimes negative and changes in value. Thus, a portion of the data clearly shows that the female population x, in the age-group 15-19, was actually decreasing (see 1980-1984) when the pregnancy rates were decreasing. This is highlighted in Figure 3. We also see periods of decreasing pregnancy rate with increasing population (Figure 4) and increasing pregnancy rate with increasing population (Figure 5). This too highlights the importance of the sheer female population size over other social and public policy related factors.
1,200

Total pregnancies, y [in 000s]

1,100

1,000

900

800

700

600 8,000

8,500

9,000

9,500

10,000

10,500

11,000

Female population, x [in 000s]

Figure 2: The variations in the US female population (ages 15-19) and the total pregnancies, both expressed in thousands. The arrows attached to each line segment indicate the direction of the movement.

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With reference to Figure 3, the total number of pregnancies y clearly decreased between 1980 and 1984 while the population was decreasing. This provides a logical explanation for the decreasing pregnancy rates that were observed (rates dropped from 111.0 to 107.9) during these years. This finding certainly seems to minimize, if not totally negate, the critical role played by social policies and even the availability of contraceptives, etc. Regardless of the efforts made to minimize teen age pregnancies, this population size effect means that a certain number of teen agers will get pregnant and there is not much we can do about it. This is a law of nature. The data also reveals the very opposite trend in the five year period 1972-1976. The pregnancy rate was increasing with an increase in the female population (age 15-19). This is highlighted in Figure 4.

1,160

Total pregnancies, y [in 000s]

1,140 1,120 1,100 1,080 1,060 1,040 1,020 1,000

Inverse Type I y = 0.1366x 266.57

1980

1984
980 9,200
9,400 9,600

Decreasing pregnancy rate as we move down the line y = hx + c, with a positive slope h and negative intercept c. This seems to imply that population size is the dominant factor, not social policies.
9,800 10,000 10,200 10,400 10,600

Female population, x [in 000s]

Figure 3: The decreasing female population (age 15-19), between 1980-1984, resulted in decreased pregnancies and this also decreased the pregnancy rate y/x.
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Both x and y are expressed in thousands and hence the slope h is pure fraction. The equation of the line joining the (x, y) pairs for 1980 and 1984 is y = hx + c = 0.1366x 266.57 where the slope h = y/x = 0.1366 is positive although both x and y are negative (decreasing population and decreasing pregnancies). The fractional value of h must be multiplied by 1000 to convert to a rate as defined in the pregnancy studies. This simple linear relationship also explains the decreasing pregnancy rate y/x = m = 0.1366 (266.57/x), i.e., the slope m of the ray joining a point on this line to the origin (0, 0) decreases as x decreases. As x increases the pregnancy rate will increase and, conversely, as x decreases the pregnancy rate will decrease due to the positive h and negative c. The maximum value of y/x = h = 0.1366 or 136.6 pregnancy rate per 1000 female population. This behavior (positive h, negative c) is called INVERSE Type I since both population and pregnancies are decreasing as opposed to increasing which is the more natural state, or normal Type I.

1080

Total pregnancies, y [in 000s]

1060 1040 1020 1000 980 960 940 9,900

Type I y = 0.202x 1065

1976 4

10,000 10,100 10,200 10,300 10,400 10,500 10,600 10,700

1972 4

Female population, x [in 000s]

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Figure 4: An increasing female population (age 15-19), between 1972-1976, resulted in increased pregnancies. This also increased the pregnancy rate y/x. The equation of the line joining the (x, y) pairs for 1972 and 1976 is y = hx + c = 0.202x 1065 where the slope h = y/x = 0.202 is positive because both x and y are positive. This is the normal Type I behavior. This simple linear relationship revealed for this period also explains the increasing pregnancy rate y/x = 0.202 (1065/x). As x increases the pregnancy rate will increase due to the positive h and negative c. The maximum value of y/x = h = 0.202 or 202.2 pregnancy rate per 1000 female population. This behavior (with h > 0 and c < 0) is called normal Type I since it is only natural to find that as the female population increases the total pregnancies also increase. Finally, during the period 1992-2000, the pregnancy rate was decreasing with an increase in the female population (age 15-19). This is highlighted in Figure 5. We also observe the pregnancy rate increasing with decreasing female population, as seen in Figure 6.

940

Total pregnancies, y [in 000s]

920 900 880 860 840 820 800 8,200 8,400 8,600 8,800 9,000 9,200 9,400 9,600 9,800 10,000

Female population, x [in 000s]

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Figure 5: An increasing female population (ages 15-19), between 1992-2000, also resulted in decreasing pregnancies and hence a decreasing pregnancy rate. The line joining the (x, y) pairs for 1992 and 1999 indicates the general trend and has the equation y = -0.069x + 1511. The slope h = -0.069 is negative and this explains the decreasing pregnancy rate with increase female population. The pregnancy rate y/x = m = - 0.069 + (1511/x) decreases as the population x increases, i.e., the slope m of the ray joining a point on this line back to the origin (0, 0) decreases as x increases.
1020

Total pregnancies, y [in 000s]

1015 1010 1005 1000 995

990
985 980 975

970 8,600

8,700

8,800

8,900

9,000

9,100

9,200

9,300

Female population, x [in 000s]

Figure 6: A decreasing female population (ages 15-19), between 1986 to 1989, also resulted in an increase in pregnancies and hence an increasing pregnancy rate. The line joining the (x, y) pairs for 1985 and 1989 indicates the general trend and has the equation y = -0.047x + 1430.8. This explains the increasing pregnancy rate with decrease in the female population. (The 1986 and 1987 data fall below
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this line and correspond to the two lowest pregnancies here, the 1990 data is the high value at lower population but below the line.) The pregnancy rate y/x = m = 0.047 + (1430.8/x) increases as the population x decreases, i.e., the slope m of the ray joining a point on this line to the origin (0, 0) increases as x decreases. Finally, let us consider how the total pregnancies y and the female population x has changed over the years. This is illustrated in Figures 7 and 8. The total pregnancies y (ages 15-19) increased between 1972 to 1980 and have since been falling, see Figure 7. The female population (for the same ages 15-19) during the same period has also varied in a more complicated manner, see Figure 8.
1,400,000 1,200,000

Total pregnancies, y

1,000,000 800,000 600,000 400,000 200,000 0 1970

1975

1980

1985

1990

1995

2000

2005

2010

Time, t [in Calendar years]

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12,000

Female population, x [in 000s]

10,000

8,000

6,000

4,000

2,000

0 1970

1975

1980

1985

1990

1995

2000

2005

2010

Time, t [in Calendar years]

140.0

Pregnancy rate, 1000(y/x)

120.0 100.0 80.0

60.0
40.0 20.0 0.0 1970

1975

1980

1985

1990

1995

2000

2005

2010

Time, t [in Calendar years]

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Figure 7 (top) Variation in the total pregnancies y and Figure 8 (middle) female population x, as a function of time t, in calendar years. The variation in the pregnancy rate over the years is illustrated in Figure 9 (bottom). The female population was rising and went through a peak between 1972 to 1981, the peak years being 1976 and 1977 (roughly same x). It then started decreasing and reached a minimum in 1992 before rising again to the current values. It is also of interest to note that the total pregnancies was roughly constant and equal to about 1,000,000, between 1984 and 1990 but with a decreasing female population. It also crossed the one million mark, with a much lower population level, between 1973 and 1974. It is such unique points in the data that lead to new insights. More interesting, the pregnancy rate has been going down steadily since reaching its peak in 1990 with a steadily increasing female population, see also Figure 10. Furthermore, it should be noted that the highest pregnancy rate (116.9 per 1000) occurred in 1990 whereas the highest total number of pregnancies (1,151,850) occurred in 1980, when the teenage female population was higher. A re-scaled graph which plots pregnancies per 10,000 females (instead of per 1000 used currently) is presented in Figure 11. This reveals a tandem increase and decrease in both the number of pregnancies y and the re-scaled pregnancy rate per 10,000 females. In summary, the absolute level of teenage pregnancies (ages 15-19) has been decreasing over the last three decades (Figure 8, 1975-2005). However, this decrease was observed first with a decreasing female population (between 1981 and 1992, which should be hardly surprising and can be taken to be a natural law) and since then with an increasing female population (which is certainly a rather unnatural occurrence).

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1050

Total pregnancies, y [in 000s]

1990, year of the highest rate y/x

1000 950 900

1992 1998

850 800

750
700 650 600 8,000

2008

y = -0.061x + 1440.5
8,500 9,000 9,500 10,000 10,500 11,000 11,500 12,000

Female population, x [in 000s]

Figure 10: Data source http://www.guttmacher.org/pubs/USTPtrends08.pdf for 2007 and 2008. The total pregnancies have been decreasing steadily (at the fixed rate h) since 1992, see also Figure 5 which considers the period 1992-2000. The straight line y = hx + c, joining 1992 and 1998, y = -0.061x + 1440.5 is included here. The x-y relation is perfectly linear and the pregnancy rate deduced from this relation, y/x = m= -0.061 + (1440.5/x), decreases with increasing population. Notice also a more dramatic decrease in the total teenage pregnancies since 1998, even as the teenage female population continued to increase. The most recent data points fall below the operating line established between 1992 and 1998.

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1200

1100

Pregnancy rate y/x per 10,000

1000

900

800

Pregnancies y, in 000s
700

600 1970

1975

1980

1985

1990

1995

2000

2005

2010

Time, t [Calendar year]

Figure 11: The number of teen pregnancies y, expressed in thousands, yields numbers in the range of 600 to 1200, as seen in the above graph (red squares). If the pregnancy rate is also re-scaled and defined as pregnancies per 10,000 females (as opposed to the current definition, per 1000 females), we again get numbers in the same range (diamonds). It is now easy to see that the number of pregnancies and the pregnancy rate going up or down in tandem. Specifically, after the peak in the pregnancy rate in 1990, both the absolute number of pregnancies and the pregnancy rate has been decreasing steadily.

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Table 1: Summary of Observed Trends with Brief Comments Figure No. 3 Trend Inverse Type I Comment Natural law; pregnancies are decreasing, a desirable effect but this may be primarily due to decreasing population. Social policies may NOT be a dominant factor. Also a natural law; pregnancies increase with increasing population. Again minimizes or negates effect of socio-political policies. Unnatural DECREASE in pregnancies with increasing population; desirable effect and suggests social and political factors may be a significant contributing factor. Unnatural INCREASE in pregnancies with decreasing population; implies ineffectiveness of socio-political factors.

Type I

Type III

Inverse Type III

We also observe both up and down movements along the straight line segments with a positive slope h (with a negative intercept c on the y-axis) and also along straight lines with a negative slope h (with a positive intercept c on the y-axis). In three of the four scenarios highlighted here, by considering different time periods, the decrease (or increase) in the pregnancy rates shows an important population size effect which cannot be overlooked, see also comments in Table 1. Liberal social policies (e.g., sex education, ready availability of contraceptives and condoms), as well as conservative policies (teaching abstention as opposed to birth control), no doubt, also play a role since we observe both up and down movements with positive and negative slopes h. Nonetheless, the size effect may also be a far more important overlooked effect. The two trends noted here a) increasing pregnancies with decreasing population (INVERSE Type III) and b) decreasing pregnancies with increasing population (normal Type III), in particular, needs more careful investigation, since these are unnatural trends. Perhaps, the most important finding here might be that aggressive social policies (either liberal or conservative) may NOT be as effective as is widely
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believed. The natural effect of the population size in determining the total teenage pregnancies must also be taken into account. The dramatic decrease in pregnancy levels witnessed in recent years might just be the reflection of a general (and unavoidable) increase in awareness about these topics among the teenage population, akin to other technological advances that have made even young kids computer savvy, internet proficient, and skilled in the use many modern devices (mobile phones, GPS) and media tools that were unheard of two or three decades ago.

4. Discussion of Rates versus Ratios

Let x and y denote two variables of interest to us. Can we use the known value of the ratio y/x, at some point in time, to predict the new value of y when x increases or decreases? This requires a precise knowledge of the rate at which y increases or decreases as x increases or decreases. The rather unfortunate term rate is often used in the social, political, and economic sciences, to describe the ratio, y/x. In a very strict mathematical sense, the ratio y/x is NOT the same as a rate. Two important examples where we use the term rate to describe a ratio are unemployment rate and the teenage pregnancy rate, the topic of this article. The numerator y in the unemployment rate is the number of unemployed persons and the denominator x is the total labor force, which is simply equal to the number of employed plus the number of unemployed. Likewise, the numerator y in the pregnancy rate is the number of pregnancies and the denominator x is the number of females (in a given population, of a certain age-group, say the US population, in the age group 15-19). There are many such examples: traffic fatality rates (used to describe traffic accident related fatalities), birth rate, death rate, acceptance rate (for college admissions), and so on. An important example where the term rate is used correctly is the (highly controversial topic of) tax law. Here we encounter the term marginal tax rate. As discussed in Appendix I, the tax law, or the tax code, is actually a series of straight line segments with the general equation y = hx + c. Here x is the taxable income
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and y is the tax owed. The constants h and c keep on changing as the income level x changes. The slope h of the straight line segment, for the applicable income range, is the marginal tax rate. The ratio y/x is clearly not the same as the marginal tax rate. If income changes by a fixed amount x, the tax owed always changes by the same fixed amount y = hx. This is the significance of h, the marginal tax rate. More generally, if the variables x and y of interest to us are related by the simple linear law, y = hx + c, the slope h is the rate and the ratio y/x = m = h + (c/x). Even when all the (x, y) pairs lie on a PERFECT straight line, the ratio y/x will keep on changing, as x increases (or decreases), because of the nonzero c, see Figure 12. The rate h equals the ratio m if and only if the intercept c = 0. The significance of the nonzero intercept c cannot be overlooked; the tax law being a good example. We will continue this discussion in future updates of this article (see one recent update entitled A Second Look http://www.scribd.com/doc/102384514/ASecond-Look-at-the-US-Teenage-Pregnancy-Rates-Evidence-for-a-PredominantNatural-Law). For the moment, readers are urged to simply study the x-y diagrams presented here. The pregnancy rate, as used today, does not seem to tell us the whole story.

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1.0 0.9 0.8

y = 0.5x + 2 y/x = 0.5 + (2/x)

The ratio y/x

0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 0 20 40 60 80

y = 0.5x y/x = 0.5

A B

C
y = 0.5x - 2 y/x = 0.5 - (2/x)
100 120

Independent variable, x
Figure 12: The ratio y/x is NOT a constant and varies on different points on a straight line, if the straight line does NOT pass through the origin. The ratio y/x is a constant at all points on a straight line only it passes through the origin. The graph here illustrates the variation of the ratio y/x as x increases along a PERFECT straight line. We consider the straight lines: y = 0.5x, y = 0.5x + 2 and y = 0.5x 2, with zero intercept c = 0, positive intercept c = 2 and negative intercept c = - 2. Curve A is the graph of y/x = 0.5 + (2/x) for the case c = 2. The ratio y/x keeps on decreasing as x increases and becomes equal to the slope h = 0.5 for very large values of x. The graph of y/x is a falling hyperbola. The horizontal line B is for case of zero intercept. The ratio y/x = h = 0.5 = constant. Curve C, graph of y/x = 0.5 (2/x) for the case c = - 2. The ratio y/x keeps on increasing and becomes equal to the slope h = 0.5 for very large x. The graph of y/x is a rising hyperbola.

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 5. Appendix I
The tax law, tax equation, and the marginal tax rate
Let x denote the taxable income and y the tax owed. The tax law, or the tax equation, although such a term is rarely used, is a simple linear law y = hx + c where the constants h and c depend on the income level x. Note the emphasis on taxable income, not real income. The tax laws permit many adjustments to income which are available to all citizens and hence the income on which one is taxed is not the same as the total or gross income. In general, the higher the income, the greater the opportunities one has to exercise various adjustments. Why do tax laws always seem to favor the rich? One simple answer might just be we all think we are going to get rich! The other more realistic answer is that there is a lot of misunderstanding about the very nature of the tax law and how it is designed. There is no real understanding of the difference between the ratio y/x and the rate h = y/x. Demagogues essentially exploit this misunderstanding for their personal or political gains. The ratio y/x in the tax equation y = hx + c should be called the tax ratio but to date no such term has been used to discuss the implications of tax laws. Sometimes, the ratio y/x is called the average tax rate but few people really understand it or use it. The ratio y/x is certainly NOT the same as the marginal tax rate. What then is the marginal tax rate? It is the slope h of the x-y graph where x is taxable income and y is the tax owed. (If this is already getting too confusing or too difficult to follow, you now know the real reason why the US economy and US political discourse today is in such a sorry state. Sorry, but that is the bitter truth.) Let us imagine what will happen if the person with a taxable income x increases his or her income by a small amount x. The smallest increase that can be imagined is x = $1, or let us say, x = $100, or x = $1,000. When income x increases, the tax owed y will also increase. This is the law. The tax owed will therefore ALWAYS go up by a small amount y. This is called PROGRESSIVE taxation.
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The ratio h = y/x is the marginal tax rate. This is what we mean by the slope of the x-y graph. Sometimes, in order to make it easy to understand, this is known as the tax paid on the last dollar earned, or let us say the last $100 or the last $1000 earned. If income goes up from $20,000 to $21,000, the tax owed increases (by 15% for a single person, on the last $1000 earned, see Table A1). If income goes up from $50,000 to $51,000, the tax owed will again increase (by 25% for a single person, on that last $1,000). If the income goes up from $100,000 to $101,000, the tax owed will again increase (by 28%, for a single person, on that last $1,000 earned). The tax law, or the Tax Tables, are actually designed (by our politicians whom vote into office, or the so called lawmakers) in such a way that the marginal tax rate keeps on INCREASING as the income levels increase (these various income levels are called tax brackets). SURPRISE! This is actually true, see Table A1. Table A1: The US 2011 Income Tax Brackets and Income Tax rates Tax Single Married filing Married filing Head of rate jointly, or separately Household qualifying widow/widower
To $8,500 To $17,000 To $8,500 To $12,150 10% $8,501-$34,500 $17,501-$69,000 $8,501-$34,500 $12,151-$46,250 15% $34,501-$83,600 $69,001-$139,350 $34,501-$69,675 $46,251-$119,400 25% $83,601-$174,400 $139,351-$212,300 $69,676-$106,150 $119,401-193,350 28% 174,401-379,150 $212,301-$379,150 $106,151-$189,575 $193,351-$379,150 33% $379,151 or more $379,151 or more $189,576 or more $379,151 or more 35% Courtesy: http://www.bankrate.com/finance/taxes/tax-brackets.aspx see also http://www.irs.gov

Thus, the marginal tax rate is really the ratio h = y/x but one that involves first some simple subtraction to arrive at the numerator and the denominator and then followed by process of division. Thus, the tax law is really a series of straight lines with the equation y = hx + c where the constant h, the slope of the line, is the tax rate. This keeps increasing as we see from Table 1, as the income level x increases. The intercept c also keeps increasing and becomes more and more negative. This can be deduced as follows.

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For a single taxpayer A, with taxable income between $8,501 to $34,500, the applicable tax equation is y = hx + c = 0.15x 425 = 850+ 0.15(x 8500). This is the equation actually used by IRS to prepare the familiar tax tables (which is aimed at makes things simple. But, such tables actually serve the purpose of dumbing things down and do not lead to any better understanding of the tax laws, or how the tax code has been designed. This person A will pay 10% tax on the first $8500, hence the $850, and then pay 15% on any additional income, up to a maximum of $34,500. Hence, if we do the calculation, y = 0.15x + 850 1275 = 0.15x 425 = 0.15 (x 2833.33). Paying 10% on the first $8500 and then 15% on the remainder is equivalent to paying a 15% tax rate but only when income exceeds $2833.33. It is as if the person paid $0 in taxes until reaching this level and then pays the higher rate. One can now imagine how all the tax demagoguery begins about why the rich do not pay their fair taxes! Try doing the same for a single person with income of $379,151 or more, say $500,000, earning about half a million per year. Yes, there are such single persons, even very young ones! Who would NOT like to be that single person and just pay very HIGH taxes! Now, we know the reasons for why the tax laws are designed as they are by our lawmakers. One can argue, to some extent legitimately but really speaking foolishly so, that this person pays $0 in tax for some huge amount x = x0 which can be computed using the table above. Only after that does this person pay the 35% tax rate. The most important point is that the ratio y/x is NOT the same as the rate of change, or the slope h. It is the rate of change or slope that tells us about the immediate future. What will happen if income goes up by x? If a car is moving at a fixed speed v = x/t = 60 mph, can we tell where it will be (the x) after say 1 minute (a fixed t)? Or, if the fuel economy of the car is 30 mpg, how many additional miles x can we drive if the gallons of fuel left y = 1 gallon, exactly. As we learn in our elementary calculus courses, it is the rate of change that enables us make precise predictions, at least for the short term. The hard sciences such as physics and chemistry are successful in discovering new laws of nature since they rigorously apply this idea of a rate of change to understand various empirical
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observations. Unfortunately, outside of these two disciples, even the biological sciences, economics, finance, management sciences, social and political sciences; do not use the idea of a rate correctly. Indeed, they use simple ratios, think that they are rates and further confuse things by invoking all kinds of statistics. As shown here with the discussion of the teenage pregnancy rate, one must look beyond the misleading rate y/x and understand the nature of the relation between the variables x and y that enter into the calculation of such a rate of change. And, now it is worth emphasizing an important but surprisingly least understood MATHEMATICAL property of a straight line that our middle school teachers should have taught us a long long time ago. Very briefly, if y = hx + c, the ratio y/x = m = h + (c/x) can either increase of decrease as x increases because of the nonzero intercept c. The ratio y/x = m = h if and only if the intercept c = 0 and the straight line passes through the origin (0, 0). If c is nonzero, y either increases or decreases as x increases and the ratio y/x can either increase or decreases, even if all the (x, y) pairs fall PERFECTLY on a straight line. In the real world, when we consider various problem such as the pregnancy problem, the unemployment problem, the tax law, there are at least three important types of straight lines that we encounter depending on the numerical values of the constants h and c. This is the reason for the confusion created by the incorrect use of the ratio y/x = m when we wish to determine the rate of change h = y/x = dy/dx where dy/dx is the derivative of curve of line describing the x-y graph. Type I: Positive slope, negative intercept (h > 0, c < 0). Type II: Positive slope, positive intercept (h > 0, c > 0). Type III: Negative slope, positive intercept (h < 0, c > 0). We have encountered only Type I and Type III straight lines in the pregnancy problem. The same is true in the unemployment problem. All three types of straight lines are encountered when we consider the profits-revenues data for various companies. These points have been discussed in other articles, see bibliography.
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 6. Appendix II: Bibliography

Related Internet articles posted at this website Since the Facebook IPO on May 18, 2012
1. http://www.scribd.com/doc/95906902/Simple-Mathematical-Laws-GovernCorporate-Financial-Behavior-A-Brief-Compilation-of-Profits-RevenuesData Current article with all others above cited for completeness, Published June 4, 2012 with several revisions incorporating more examples. 2. http://www.scribd.com/doc/94647467/Three-Types-of-Companies-FromQuantum-Physics-to-Economics Basic discussion of three types of companies, Published May 24, 2012. Examples of Google, Facebook, ExxonMobil, Best Buy, Ford, Universal Insurance Holdings 3. http://www.scribd.com/doc/96228131/The-Perfect-Apple-How-it-can-bedestroyed Detailed discussion of Apple Inc. data. Published June 7, 2012. 4. http://www.scribd.com/doc/95140101/Ford-Motor-Company-Data-RevealsMount-Profit Ford Motor Company graph illustrating pronounced maximum point, Published May 29, 2012. 5. http://www.scribd.com/doc/95329905/Planck-s-Blackbody-Radiation-LawRederived-for-more-General-Case Generalization of Plancks law, Published May 30, 2012. 6. http://www.scribd.com/doc/94325593/The-Future-of-Facebook-I Facebook and Google data are compared here. Published May 21, 2012. 7. http://www.scribd.com/doc/94103265/The-FaceBook-Future Published May 19, 2012 (the day after IPO launch on Friday May 18, 2012). 8. http://www.scribd.com/doc/95728457/What-is-Entropy Discussion of the meaning of entropy (using example given by Boltzmann in 1877, later also used by Planck to develop quantum physics in 1900). The example here shows the concepts of entropy S and energy U (and the derivative T = dU/dS) can be extended beyond physics with energy = money, or any property of interest. Published June 3, 2012. 9. The Future of Southwest Airlines, Completed June 14, 2012 (to be published).
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10.The Air Tran Story: An Important Link to the Future of Southwest Airlines, Completed June 27, 2012 (to be published). 11.Annies Inc. A Single-Product Company Analyzed using a New Methodology, http://www.scribd.com/doc/98652561/Annie-s-Inc-A-SingleProduct-Company-Analyzed-Using-a-New-Methodology Published June 29, 2012 12.Google Inc. A Lovable One-Trick Pony Another Single-product Company Analyzed using the New Methodology. http://www.scribd.com/doc/98825141/Google-A-Lovable-One-Trick-PonyAnother-Single-Product-Company-Analyzed-Using-the-New-Methodology, Published July 1, 2012. 13.GT Advanced Technologies, Inc. Analysis of Recent Financial Data, Completed on July 4, 2012. (To be published). 14.Disappearing Brands: Research in Motion Limited. An Interesting type of Maximum Point on the Profits-Revenues Graph http://www.scribd.com/doc/99181402/Research-in-Motion-RIM-Limited-WillDisappear-in-2013 Published July 5, 2012. 15.Kia Motor Company: A Disappearing Brand http://www.scribd.com/doc/99333764/Kia-Motor-Company-A-DisppearingBrand, Published July 6, 2012. 16.The Perfect Apple-II: Taking A Second Bite: A Simple Methodology for Revenues Predictions (Completed July 8, 2012, To be Published) http://www.scribd.com/doc/101503988/The-Perfect-Apple-II, Published July 30, 2012. 17.http://www.scribd.com/doc/101062823/A-Fresh-Look-at-Microsoft-After-itsHistoric-Quarterly-Loss Microsoft after the quarterly loss, Published July 25, 2012. 18.http://www.scribd.com/doc/101518117/A-Second-Look-at-Microsoft-After-theHistoric-Quarterly-Loss , Published July 30, 2012. 19.http://www.scribd.com/doc/100984613/Further-Empirical-Evidence-for-theUniversal-Constant-h-and-the-Economic-Work-Function-Analysis-ofHistorical-Unemployment-data-for-Japan-1953-2011 Single universal value of h for US, Canada and Japan in the unemployment law y = hx + c, Published July 24, 2012. 20.http://www.scribd.com/doc/100939758/An-Economy-Under-StressPreliminary-Analysis-of-Historical-Unemployment-Data-for-Japan, Published July 24, 2012.
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21.http://www.scribd.com/doc/100910302/Further-Evidence-for-a-UniversalConstant-h-and-the-Economic-Work-Function-Analysis-of-US-1941-2011-andCanadian-1976-2011-Unemployment-Data Published July 24, 2012. 22.http://www.scribd.com/doc/100720086/A-Second-Look-at-Australian-2012Unemployment-Data, Published July 22, 2012. 23.http://www.scribd.com/doc/100500017/A-First-Look-at-AustralianUnemployment-Statistics-A-New-Methodology-for-Analyzing-UnemploymentData , Published July 19, 2012. 24.http://www.scribd.com/doc/99857981/The-Highest-US-Unemployment-RatesObama-years-compared-with-historic-highs-in-Unemployment-levels , Published July 12, 2012. 25.http://www.scribd.com/doc/99647215/The-US-Unemployment-Rate-Whathappened-in-the-Obama-years , Published July 10, 2012. 26.http://www.scribd.com/doc/102384514/A-Second-Look-at-the-US-TeenagePregnancy-Rates-Evidence-for-a-Predominant-Natural-Law, Published August 4, 2012.

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About the author V. Laxmanan, Sc. D.

The author obtained his Bachelors degree (B. E.) in Mechanical Engineering from the University of Poona and his Masters degree (M. E.), also in Mechanical Engineering, from the Indian Institute of Science, Bangalore, followed by a Masters (S. M.) and Doctoral (Sc. D.) degrees in Materials Engineering from the Massachusetts Institute of Technology, Cambridge, MA, USA. He then spent his entire professional career at leading US research institutions (MIT, Allied Chemical Corporate R & D, now part of Honeywell, NASA, Case Western Reserve University (CWRU), and General Motors Research and Development Center in Warren, MI). He holds four patents in materials processing, has co-authored two books and published several scientific papers in leading peer-reviewed international journals. His expertise includes developing simple mathematical models to explain the behavior of complex systems. While at NASA and CWRU, he was responsible for developing material processing experiments to be performed aboard the space shuttle and developed a simple mathematical model to explain the growth Christmas-tree, or snowflake, like structures (called dendrites) widely observed in many types of liquid-to-solid phase transformations (e.g., freezing of all commercial metals and alloys, freezing of water, and, yes, production of snowflakes!). This led to a simple model to explain the growth of dendritic structures in both the ground-based experiments and in the space shuttle experiments. More recently, he has been interested in the analysis of the large volumes of data from financial and economic systems and has developed what may be called the Quantum Business Model (QBM). This extends (to financial and economic systems) the mathematical arguments used by Max Planck to develop quantum physics using the analogy Energy = Money, i.e., energy in physics is like money in economics. Einstein applied Plancks ideas to describe the photoelectric effect (by treating light as being composed of particles called photons, each with the fixed quantum of energy conceived by Planck). The mathematical law deduced by
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Planck, referred to here as the generalized power-exponential law, might actually have many applications far beyond blackbody radiation studies where it was first conceived. Einsteins photoelectric law is a simple linear law, as we see here, and was deduced from Plancks non-linear law for describing blackbody radiation. It appears that financial and economic systems can be modeled using a similar approach. Finance, business, economics and management sciences now essentially seem to operate like astronomy and physics before the advent of Kepler and Newton.

Cover page of AirTran 2000 Annual Report

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