Ferrari Mailing List: Re: Barstool Economics (was RE: Are Ferraris Losing Their Good Looks? )

[Hans E. Hansen (FList]

Now I'm pissed because all my friends were drinking beer and
I wasn't invited.

Hans.

On Wed, Nov 12, 2008 at 12:20 PM, Steve Cook <stevec [at] cheatcodes.com> wrote:
>
> 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 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 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
> --------------------------------------------------------------------------------------------------
>
> (And by not showing up, it only takes moving things to off-shore accounts - 
> which is entirely legal BTW). I'll put my money to work somewhere where it's 
> appreciated and not stolen.
>
> -steve
>
> ---------------------------------------------------------------
>
>