Barstool Economics

[Lee Borgersen]

> For those who understand, no explanation is needed.  For those who do not
> understand, no explanation is possible.
>
> Suppose that every day, ten men go out for a beer and the bill for all
ten
> comes to $100. If they paid their bill the way we pay our taxes, it would
> go something like this:
>
> The first four men (the poorest) would pay nothing.
> The fifth would pay $1.
> The sixth would pay $3.
> The seventh would pay $7.
> The eighth would pay $12.
> The ninth would pay $18.
> The tenth man (the richest) would pay $59.
>
> So, that's what they decided to do. The ten men drank in the bar every
day
> and seemed quite happy with the arrangement, until one day, the owner
> threw
> them a curve. 'Since you
> are  all such good customers,' he said, 'I'm going to reduce the cost of
> your daily beer by $20.' 
>
> Drinks for the ten now cost just $80. The group still wanted to pay their
> bill the way we pay our taxes so the  first four men were unaffected. 
They
> would still drink for free.
> But what about the other six men - the paying customers? How could they
> divide the $20 windfall so that everyone would get his 'fair share ?'
> They realized that $20 divided by six is $3.33. But if they subtracted
> that
> from everybody's share, then the fifth man and the sixth man would each
> end
> up being paid to drink his beer. So, the bar owner suggested that it
would
> be fair to reduce each man's bill by roughly the same amount, and he
> proceeded to work out the amounts each should pay.
>
> And so:
> The fifth man, like the first four, now paid nothing (100% savings).
> The sixth now paid $2 instead of $3 (33%savings)
> The seventh now pay $5 instead of $7 (28%savings) .
> The eighth now paid $9 instead of $12 (25% savings).
> The ninth now paid $14 instead of $18 (22% savings).
> The tenth now paid $49 instead of $59 (16% savings).
> Each of the six was better off than before, and the first four continued
> to
> drink for free.
>
> But once outside the restaurant, the men began to compare their savings.
>
> 'I only got a dollar out of the $20,'declared the sixth man. "but he",
> pointing to the tenth man,"got $10!'
> Yeah, that's right,'exclaimed the fifth man. 'I only saved a dollar, too.
> It's unfair that he got ten times more than I!'
> 'That's true!!' shouted the seventh man. 'Why should he get $10 back when

> I
> got only two? The wealthy get all the breaks!'
> 'Wait a minute,' yelled the first four men in unison. 'We didn't get
> anything at all. The system exploits the poor!'
>
> The nine men surrounded the tenth and beat him up. 
> The next night the tenth man didn't show up for drinks, so the nine sat
> down and had beers without him. But when it came time to pay the bill,
> they
> discovered something important. They didn't have enough money between all
> of them for even half of the bill! 
>
> And that, ladies and gentlemen, journalists and college professors, is
how
> our tax system works. The people who pay the highest taxes get the most
> benefit from a tax reduction. Tax them too much, attack them for being
> wealthy, and they just may not show up anymore. In fact, they might start
> drinking overseas where the atmosphere is somewhat friendlier.
>
>  David R. Kamerschen, Ph.D.
>  Professor of Economics
>  University of Georgia

[Ryan]

That was a very good read.

[HUNTER2]

Cool, I'll be one of the ones that drink for free!