Bar Stool Economics

Discussion in 'The Club House' started by dunerunner, Dec 8, 2008.

  1. dunerunner

    dunerunner New Member

    Suppose that every day, ten men go out for 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 paid $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.
    He pointed to the tenth man,' but he 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, boys and girls, 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

    David R. Kamerschen, Ph.D.
    Professor of Economics, University of Georgia

    For those who understand, no explanation is needed.
    For those who do not understand, no explanation is possible.
  2. sgtdeath66

    sgtdeath66 New Member

    interesting approach to economics.- i think thats the right term

  3. bkt

    bkt New Member

    I'm gathering short stories and allegories to help people of all ages understand some of what we're going through right now, and why their "soak the rich" attitudes won't fly. This is helpful, thanks!
  4. Dillinger

    Dillinger New Member

    Very nice. Should be required reading in school, like by the 6th grade...

  5. Benning Boy

    Benning Boy New Member

    While I've always understood the principle, I don't think I've ever heard it stated with that much clarity.