Beer-o-nomics

[Rick]

I found this on another website.


Bar Stool Economics

Ten men go out for beer and the bill for all ten comes to $100. They decided to pay their bill the way we pay our taxes. It went 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.

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 you 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 based on how much they paid in, 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. 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 among all of them for even half of the bill!

And that, ladies and gentlemen, 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.

[Adam Andrea]

What if the first 9 worked at the brewery? When they didn't like their new tax plan (whether or not it was reasonable for them to object to it), they left for Germany, where they got paid better and got three months' vacation every year. The next day, when Guy #10 showed up, there was no beer.

I don't necessarily agree w/ either extreme. The situation is a compromise, and there's room to lean on either side before either starts fleeing the country.

[pmpnuss]

The government is going to get their money some how. If the tenth person doesn't show up they will just tax the other nine more. so INstead of threee people getting of tax free their would be only 1 to make up for the money.

[peterjank]

Ah, but this example is unrealistic. We know in the real world that the objection about fairness would have been raised before the owner decided how to divide the $20 cost reduction. The tenth man would have gotten nothing, the four who had been drinking beer for free would each now be paid $5 each for drinking and would complain about the quality of the beer.

[Martin Lenick]

What if the first 9 worked at the brewery? When they didn't like their new tax plan (whether or not it was reasonable for them to object to it), they left for Germany, where they got paid better and got three months' vacation every year. The next day, when Guy #10 showed up, there was no beer.

I don't necessarily agree w/ either extreme. The situation is a compromise, and there's room to lean on either side before either starts fleeing the country.The spirit of that comical analogy had the richest drinking in another country, i.e. moving his business outside the U.S., not himself moving to another country. But, let's continue with your version of the analogy:
Those same nine would be exchanging equal value for higher wages in Europe. You claim that the first nine guys will make more money, but make no mention of their disposable income. You neglect to mention that the "10th guy" in your analogy makes far less than the "10th guy" in the U.S. Their #10 has been taxed to the extreme to which we are headed; he no longer has the ability to build businesses and hire employees to the extent that #10 has here. Their brewery employee is nearer in pay to their doctors. We are expected to "improve" our system, attempting to achieve their level of fairness. Meanwhile, they continue to "improve" their system, and we continue to follow their so-called progress. The natural extension of this is a day when we all earn the same, pay the same, and are taxed the same. The equal exchange of value for value will cease to exist - so, too, will innovation, entrepreneurial risk, quality of service in the service sectors, and even less money to spend on beer since so much more is going to the oversight of keeping everything "fair".

"The next day, when Guy #10 showed up, there was no beer." That's doubtful, but if so, the following "day" guy #10 began producing far better beer with the efforts of entrepreneurial non-union brewers, each of whom compete for increased wages in exchange for additional value.

Alas, it appears we are all domed to fairness - and raising alpacas for the state.

[JAYKAY]

The natural extension of this is a day when we all earn the same, pay the same, and are taxed the same. The equal exchange of value for value will cease to exist - so, too, will innovation, entrepreneurial risk, quality of service in the service sectors, and even less money to spend on beer since so much more is going to the oversight of keeping everything "fair".


Correct Comrade...

So the question that we can all ponder then is "Was Karl Marx correct?" Though everybody cheered the fall of the USSR as the end of communism and the triumph of capitalism, Marx held that there were four stages to social development:

Tribalism
Rough Communism
Capitalism
Perfect Communism

So is he right? Are we all headed to his vision of "Perfect Communism?"

Jim

[Martin Lenick]

Ah, but this example is unrealistic. We know in the real world that the objection about fairness would have been raised before the owner decided how to divide the $20 cost reduction. The tenth man would have gotten nothing, the four who had been drinking beer for free would each now be paid $5 each for drinking and would complain about the quality of the beer.
:):frown:Funny, but true.
And under federally-mandated universal health care we will get tired of paying for the ailments of drunks, and beer will be banned - just like trans-fats in restaurants, vending machines in public schools, permits for construction of new "fast-food" restaurants in L.A. county and, if the currently proposed legislation passes, restaurants serving obese people. Heck, if I'm paying toward your health insurance I damn well will not allow you to race.

[Patrick Gettings]

Why ask useless questions? How deep is the ocean? How high is the sky? Who is John Galt?

[Martin Lenick]

Why ask useless questions? How deep is the ocean? How high is the sky? Who is John Galt?
I'm too thick to get your reply. If it's serious, well, then we have a argument, public or private as you see fit. If it's facetious, or in the spirit of the author's narrative, John Galt cannot be defined in any less than Ayn's thousand-or-so pages. A wise man (and accomplished racer) recently told me those pages should be required reading. I agree. Sort of. I think every school should require it, but that ain't gonna happen - so, it returns to the hearth, the cornerstone of education.

[Patrick Gettings]

I believe making it required reading goes against the spirit of the book.

[Martin Lenick]

I believe making it required reading goes against the spirit of the book.
Come on, Patrick, let's not intermingle arguments: should any book be required reading? Don't let the book exclude itself. Speak out against the books that are required reading, or, speak out against required reading. Lots of books are required reading. Few of them are as worthy of reading as are many of those that are banned.

[Martin Lenick]

Correct Comrade...

So the question that we can all ponder then is "Was Karl Marx correct?" Though everybody cheered the fall of the USSR as the end of communism and the triumph of capitalism, Marx held that there were four stages to social development:

Tribalism
Rough Communism
Capitalism
Perfect Communism

So is he right? Are we all headed to his vision of "Perfect Communism?"

JimSorry, Jim, while we were all typing, the order of posts belies the order of our thoughts.

What was that you're saying about communism and/or marxism?

Do you regard Marx as a philosopher? How about Jung as a politician?

Where do you stand on the fall of communism?

Gee, whiz, I'm very confused. This may need to be divided into separate threads.

edit: "are we all headed..." No, we're not all headed anywhere. Many or most of us may be, but, an influential minority just might be the thorn.

[Patrick Gettings]

Come on, Patrick, let's not intermingle arguments: should any book be required reading? Don't let the book exclude itself. Speak out against the books that are required reading, or, speak out against required reading. Lots of books are required reading. Few of them are as worthy of reading as are many of those that are banned.

Good point.

[Adam Andrea]

We are expected to "improve" our system, attempting to achieve their level of fairness. Meanwhile, they continue to "improve" their system, and we continue to follow their so-called progress. The natural extension of this is a day when we all earn the same, pay the same, and are taxed the same.
I have to completely disagree with this argument. It's like arguing against driving West by saying you'll end up in the Pacific Ocean. The true natural extension is equilibrium, whatever that may be. Maybe it would put more burden on the rich and less on the poor. Maybe the optimum tax would put more burden on the poor and less on the rich. The argument I was trying to make was that the hypothetical doesn't make any effective arguments for which direction we should go in.

Let me ask you this: What does the beer-o-nomics example really demonstrate? Guy #10 wasn't driven away because the taxes were too high. He wasn't driven out because the tax break was unfair to him compared to the others. He was driven out because he was beaten up by people who didn't understand percentages. As far as we can tell, he was perfectly OK with staying in the country with a tax cut that redistributed his money disproportionately to lower earners. So the real moral of the story, as I see it, is - There's room to tax the entrepreneurs more, just don't beat them up.

[Martin Lenick]

...Let me ask you this: What does the beer-o-nomics example really demonstrate? Guy #10 wasn't driven away because the taxes were too high. He wasn't driven out because the tax break was unfair to him compared to the others. He was driven out because he was beaten up by people who didn't understand percentages. As far as we can tell, he was perfectly OK with staying in the country with a tax cut that redistributed his money disproportionately to lower earners. So the real moral of the story, as I see it, is - There's room to tax the entrepreneurs more, just don't beat them up.As Jules Winnfield (Samuel Jackson) said in Pulp Fiction, "Well, allow me to retort." Your "...just don't beat them up" clause was pretty funny.:)

Working back through your argument, you presented no reason why there is room to tax the entrepreneurs more. As strong as any law of nature, if you subsidize something you get more of it, if you tax something you get less of it.

You forgot to ask the question after you said, "Let me ask you this" unless that was as rhetorical as the only interrogative in your post.:)

[JAYKAY]

I am not big on Marx in any way. His basic theory was that communism would be tried by "central committee," fall to capitalism, and that then through taxation and tension between the haves/have nots Communism would re-emerge by the ultimate subjugation of the rich.

I think he is correct, but I am not happy about it. While I would identify myself as a Republican (fiscally conservative all the way), I am the most socially liberal person I know which I guess makes me a libertarian. So basically people can do whatever the hell they want as long as I don't have to pay for it. That pretty much cuts against the grain of communism.

Jim

[Adam Andrea]

Working back through your argument, you presented no reason why there is room to tax the entrepreneurs more. As strong as any law of nature, if you subsidize something you get more of it, if you tax something you get less of it.
You're right - if you subsidize something, you get more of it. If you tax something, you get less of it. But, I don't think any of us operate outside the assumption that the government needs to levy taxes to operate. So the taxes have to fall somewhere. Either you tax the lower earners more, and get less labor workers; or you tax the higher earners more, and get less innovation. Like I said before, there's an equilibrium that needs to be maintained.

In summation, "This is a tasty burger!"
- Jules Winnfield

[JAYKAY]

So what is the solution?

"What ain't no country I ever heard of. Do they speak English in What?"
-Jules

[Patrick Gettings]

Start with eliminating the income tax
http://politifact.com/truth-o-meter/statements/256/

[Rick]

That could happen if Ron Paul or Huckabee wins the presidential election.