Economics 101

Rebel Herfer

Adiskide honekin, orduak labur!
Joined
Apr 14, 2007
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2,714
This came to me today by way of our Secondary EVP. Enjoy.
Economics 101
Something to think about (especially if you are either very poor or very rich)…
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 then would just cost $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 -
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 what if they
subtracted that from everybody’s share, and 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 of 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.
David R. Kamerschen, Ph.D​
Professor of Economics, University of Georgia​
 

Niko

Well-Known Member
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Oct 29, 2007
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2,153
haha, makes sense. Thanks for the insight Jeff.
 

Kosmo

New Member
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Nov 3, 2007
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Awesome way for people to understand the basics of economics and taxes. However, just as a quick side note, the attribution at the end is incorrect. The original author is unknown.
 

AVB

Jesus of Cool, I'm bad, I'm nationwide
Joined
Nov 14, 2003
Messages
22,500
Quoted from the good doctor's website.

"Contrary to Internet folklore, Dr. Kamerschen is NOT the author of "Tax Cuts: A Simple Lesson in Economics." Additionally, he does NOT know who wrote it."
 

BigJake6904

Fat Texan
Joined
Dec 31, 2007
Messages
4,407
Being an econ major, this kinda brought things into light.

I love it when course material is related to one's hobbies!

hah, thanks for brightening my late night studying.
 

tone-ny

I smoke therefore I am!
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Nov 24, 2004
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I never got any free beer! What's up with that?
 

JimiHendrix

Typcast Unemployed
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Mar 8, 2007
Messages
234
As an actor I could not relate in the least or understand this concept but it makes sense because I plan on being wealthy so thanks for sticking up for me... in the future.

-Mike
 

5 O'Clock Somewhere

New Member
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Jan 23, 2008
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My managerial economics professor referenced this exact thing today. He stated it was quoted from the same guy I believe. I don't remember the name but it was a professor from Georgia, that much I remember. Shows how good of a student I am.

Heck yes for Bradley! My parents went there and my grandparents are just outside of Peoria in Princeville.


I'm an econ major and this makes sense to me. I have another one that's similar. Keep in mind, forget the fact that this says "republican" and replace it with "conservative." Really it's inaccurate and just a funny joke, but w/e i'm postin it

Father - Daughter Talk
A young woman was about to finish her first year of college. Like so many others
her age, she considered herself to be very liberal, and among other
liberal ideals, was very much in favor of higher taxes to support more
government programs, in other words,
redistribution of wealth.
She was deeply ashamed that her father was a rather staunch conservative, a
feeling she openly expressed. Based on the lectures that she had participated
in, and the occasional chat with a professor, she felt that her father had for
years harbored an evil, selfish desire to keep what he thought should be his.

One day she was challenging her father on his opposition to higher taxes on the
rich and the need for more government programs. The self-professed objectivity
proclaimed by her professors had to be the truth and she indicated so to her
father. He responded by asking how she was doing in school.
Taken aback, she answered rather haughtily that she had a 4.0 GPA, and let him
know that it was tough to maintain, insisting that she was taking a very
difficult course load and was constantly studying, which left her no time to go
out and party like other people she knew. She didn't even have time for a
boyfriend, and didn't really have many college friends because she spent all
her time studying.

Her father listened then asked, "How is your friend Audrey doing?" She
replied, "Audrey is barely getting by. All she takes are easy classes, she
never studies, and she barely has a 2.0 GPA. She is so popular on campus;
college for her is a blast. She's always invited to all the parties, and lots
of times she doesn't even show up for classes because she's too hung over."

Her father asked her, "Why don't you go to the Dean's office and ask him to
deduct a 1.0 off your GPA and give it to your friend Audrey, who only has a
2.0. That way you will both have a 3.0 GPA and certainly that would be a fair
and equal distribution of GPA.

"The daughter, visibly shocked by her father's suggestion, angrily fired
back, "That's a crazy idea. How would that be fair? I've worked really
hard for my grades! I've invested a lot of time, and a lot of hard work. Audrey
has done next to nothing toward her degree. She played while I worked my tail
off!"

The father slowly smiled, winked and said gently, "Welcome to the Republican
Party."
 
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