Bar stool economics

[Jimmy Buffett]

I don't think this has been on here before. My apologies if it has.

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 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.
>

 

[Jimmy Buffett]

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 were 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 friendlier.
> D.
>

 

[Jimmy Buffett]

David R. Kamerschen
> Professor of Economics, University of Georgia
> For those who understand, no explanation is needed.
> For those who do not understand, no explanation is possible

 

[mac]

Finally someone came up with a simple explanation of how our system works, or doesn't, for that matter.

 

[jfmoran]

The only problem I see with this example is that the guys who didn't pay anything should actually get paid to drink, in addition to drinking for free. I think that would be a little more accurate of our tax and welfare system.