Bar Stool Economics

[Goofball]

Hot off my email. I like it:

Bar Stool Economics

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 s 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 o f $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside t he 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 friendlier.

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.

[CrossLOPER]

...University of Georgia...

I stopped right there.

[Strike For The South]

I stopped right there.

So you read the whole thing?

[InsaneApache]

Mine's a pint of Becks please.

[CrossLOPER]

So you read the whole thing?

yeah

[LittleGrizzly]

I pretty much stopped reading when i got to goofballs signature...

So if i understand it theres a rich alcoholic who needs some poor buddys to drink with... count me in!

[Sasaki Kojiro]

Well actually, the ninth man is the bar owner and is making bank while the tenth man owns the credit card company that allows the first 4 men to borrow money to buy beer since they can't afford it.

[Oleander Ardens]

A remarkable succint, beautifully constucted story about the inherent injustice of the taxsystem - with no resemblance in the Amercian reality.

[Xiahou]

Good parable. I had thought about posting it myself, but never got around to it. Glad someone did.

[Louis VI the Fat]

Ten men show up for work one day in their car mafufactering plant. Like their fathers had done before them. And their fathers before them. In fact, they were once the manufacturing powerhouse of the world. They were proud of it.

One of the men was the leader of the pack.
As a reward for his responsible position, he made 5 times as much as the others combined.

Then, one day, he discovered that he could produce cheaper if foreigners did the manual work abroad. He laid five men off.

The top man, as a reward, now was paid 137 times as much as the others combined.

He then re-hired these five fired men to be salesmen in his car dealership, to sell more cars to the four remaining workers, to keep consumption up.

Then, the top men discovered that it was also cheaper if he outsourced the higher qualified personnel too. He laid off the remaining four workers.

For a reward, he was now paid 514 times as much as the others combined.

He then re-hired these four fired men to work in his credit card company, selling loans to all his nine former employees to keep consumption up. The foreigners who now produced and developed his cars lend him the money. What he couldn't borrow, he conjured up instead.

For a reward, he was now paid 734 times as much as the others combined.

Then the whole system came crashing down.

For a reward, he got to keep his 734 salaries. The silly nine work oxes who had to borrow to make ends meet were taxed for a rescue plan for the company.

Even this plan didn't seem to work. Now the top man got scared. A plan by the codename 'change' threatened to lower his income from 734 to 731 times as much as the others combined. He started writing alarmist mails to all his friends that those filthy thieving beggars were after his wealth.
He even demanded they'd be stripped of their vote. After all, his wealth was ample evidence that only men in charge like him know how to run a business responsibly.


Biff R. Miller III, Professor of Bollocks.

[Strike For The South]

Louis I taught you well. Although trying to simplify the tax code into a parable of 20 lines isnt going to work.

[Koga No Goshi]

This little anecdote left the part out about how the 10th man has the majority of his money tied up in non-profits, overseas bank accounts and tax-deferred investments.

[Goofball]

This little anecdote left the part out about how the 10th man has the majority of his money tied up in non-profits, overseas bank accounts and tax-deferred investments.

No, it didn't.

From the original post:

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 friendlier.

[Koga No Goshi]

So the moral of the story is, don't look for a society that affords any benefit whatsoever that might require taxing the rich, because they'll run away.

[Koga No Goshi]

P.S., I love the idea that we all each get the same bottle of beer.

Iraq is a limitless keg party, if you're a contractor or Halliburton. Where's my beer? Or oil?

[Alexander the Pretty Good]

I'm surprised you're posting this Goofball - you shifted some while I wasn't paying attention or is my memory shot?

[Proletariat]

Pretty sure as long as I've been here, Goof takes a hard right on economics and a hard left on social issues. Makes for a combo too reasonable to be found much in US politics.

[spmetla]

So the moral of the story is, don't look for a society that affords any benefit whatsoever that might require taxing the rich, because they'll run away.

I think the 'moral' is that the rich don't mind be taxed more than everyone else but not to excess.

[ICantSpellDawg]

I think the 'moral' is that the rich don't mind be taxed more than everyone else but not to excess.

Right. Most people that I talk to think it is their tax dollars that keep everything afloat and that the wealthy get away with paying nothing to the government.

Nothing could be further from the truth.

[Fragony]

Might as well put it here, found a great site, this is a lot of free content so grab.

http://www.campaignforliberty.com/edu/economics.php

Always found the broken window theory a bit silly, but alas.

[Husar]

I support a mix of what Goofball and Louis posted.
You have this and you have that.
If I shouldn't be upset that promises by certain rich people are not kept because "we need the money" and a month later it is discovered that the management raised it's own salaries considerably then you can go throw your money to the rich without me but I do understand that always saying bad things about Bill Gates just because he is a successful businessman is wrong as well.

Do my conclusion is something like: meh.

[Louis VI the Fat]

I support a mix of what Goofball and Louis posted.
You have this and you have that.

I just wrote a quick anti-narrative. Thought I'd indulge myself in a simplified counter economic allegory.

The US faces the prospect of taxation for the top 5% incomes being returned to the level of ten years ago. This, apparently, has unleashed a plethora of alarmist omgendoftheworldcommiebastards outrage acros North America. Some of which emerges as chain mails, urban legends, 'true stories' and simplified economic allegories. I think I saw some fifteen to twenty of the kind in that single election thread alone.

America, it has oft been noted, is a paranoid society. Somebody, somewhere, is always out to come and take it all away. Witches, communists, terrorists, and, currently, tax collectors.

[Fragony]

Of course, there is something so fundamentally wrong about making rich people pay more taxes, no extra service is provided, these people work hard, and work hard at the expense of the time they could spend being with their family, that is a price high enough to pay but the government actually wants to grow fat on that? There is a huge difference between a secure 40 hour job with plenty of free time and a job you always have even if you are on a holiday, time is money, if you have no time you have no money because you don't have the time to spend it. The state has no right on that cash.

[gaelic cowboy]

10 men went to a bar to drink each friday each man paid for his drink from wages paid by the last man who owned a car company.

One day the man decided to sack all the men and hire 20 in China now 4 guys were on welfare paid for by the the others the other 6 luckily changed jobs.

The new company cuts cost because of the competition from china so one more guy is sacked.

By now his 20 workers in china work harder and longer and cheaper than old his workers at home the market loves it.

In order to keep consuption up people are told to adapt through education etc half his old workforce get new jobs in his new services sector company which he bought with the profit from cutting cost.

The man sees an opportunity to cut more cost he hire twenty Indians to answer phones again profit soars.

The other ten men are not able to continually adapt as quickly as the eleventh man can spot an oppurtunity.

The ten men try to elect people who will change this fact but it is too late the market has decided their fate.

Foolishly the men thought they were working for the man that he might have some loyalty to them but the man works for the shareholders who are this market.

This market is made up of peoples pension money being gambled on stocks in order to continue to grow all the unemployed men are given loans they cannot payback.

The market loves it because the risk is spread after this debt is sold

It all goes tits up and the man gets a bailout paid for by everyone else.

The newly elected people are unable to return the jobs to home and generally make things worse the unemployed men fear for there childrens future they will be paying back their parents pension which was gambled on bad debt forever.

The whloe affair gets blamed on unemployed people on welfare not paying back there loans so people attempt to remove welfare and gamble more on stock.

This gambling continues until the Chinese and Indians land men on the moon and assume global leadership at which point they start sacking workers and relocate to africa.

[rory_20_uk]

Of course, there is something so fundamentally wrong about making rich people pay more taxes, no extra service is provided, these people work hard, and work hard at the expense of the time they could spend being with their family, that is a price high enough to pay but the government actually wants to grow fat on that? There is a huge difference between a secure 40 hour job with plenty of free time and a job you always have even if you are on a holiday, time is money, if you have no time you have no money because you don't have the time to spend it. The state has no right on that cash.

Yes, that is capitalism at its finest: reward for work and insecurity.

here in the UK individuals who work for institutions such as Hedge funds often pay about 5% tax as it is the rate for company capital gains - less than their cleaner.

Secure?

I'm definitely unemployed next year. I get no severance package or anything like that.
A city worker will often get a salary up to an indeed in cases plus bonus ten times my salary.

Look at this person: low tax, massive salary and as long as they work 1 year in 10 they're making a mint. They're not gambling with their money, so their risk is minimal. If they get laid off they'll often get multiples of my salary as a goodbye gift.

I'm actively trying to change career. Surprised?

[Husar]

Yes, if all those lowly idiots were managers in banks, we wouldn't have to deal with their petty problems.
I say let's make everybody a rich manager and forget about farming, cleaning or manufacturing, 6 billion managers on earth and all our problems are solved forever.