Barstool 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.

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 four 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
Respond to this topic here on forum.oes.org  
I've received this from several people. Alas, I seriously doubt anyone in Congress ever took an economics class and surely none in the media.

The more government tries to regulate, the worse it becomes.
Superficially I understand the point. The problem is that we aren't talking about beer (which is an optional expense).

The poor man and the rich man alike have expenses for the very basics: healthcare, housing, transportation, food. The rich man has the benefit of not needing to worry if he has money "left" to cover those expenses. The poor man may lose his home or force his family to go without healthcare to pay his share of the "beer".

I guess I am a socialist at heart.
Tasker's Mom wrote:
Superficially I understand the point. The problem is that we aren't talking about beer (which is an optional expense).


Beer isn't an option for a lot of poor people. :twisted:

(I am about as far from being a socialist as anyone can possibly be.)
ButtersStotch wrote:
(I am about as far from being a socialist as anyone can possibly be.)


I'm afraid too many people will want socialism after we crawl out of this latest greed fest debacle.

Capitalism is not a bad thing.
Sheeps over Aces wrote:
ButtersStotch wrote:
(I am about as far from being a socialist as anyone can possibly be.)


I'm afraid too many people will want socialism after we crawl out of this latest greed fest debacle.

Capitalism is not a bad thing.


I think a lot of people want it now but they just don't recognize it as socialism!

No, capitalism is definitely not a bad thing. I hate the idea of someone being punished for having and making money because that's what it is: punishment. If I wanted dependents, I'd have my own kids!
So, in the spirit of capitalism, you think it is ok that the CEO's and Bank managers of Financial institutions that have gotten us INTO this mess are rewarded with millions of dollars of compensation and bennies? Because that is what Captialism basically boils down to in our society, all is fair in the name of earing the almighty buck.

Capitalism in itself is not a bad idea but what we do takes it far beyond the scope of capitalism. There will always be rich people and poor people. Both are necessary for a balanced society. But without the lower wage earners the rich people would be in a world of hurt (who would take away their garbage, clean their pools, serve meals at their favorite restaurant and work in the factories that provide them with the luxeries they love so well).

Even the middle class depends on multiple services provided by the low wage earner and in turn provide services for others above their socioeconimic level not everyone can be at the top of the heap.

Wealth is a privilage, and with that privilage comes the responsibility to help those below you. ANything otherwise would be to live in a world where only the wealthy "got the beer".
Tasker's Mom wrote:
But without the lower wage earners the rich people would be in a world of hurt (who would take away their garbage, clean their pools, serve meals at their favorite restaurant and work in the factories that provide them with the luxeries they love so well).
The rich would be able to afford to pay more for these services and the products produced -- the poor and the middle class would be the ones going without.

Do I think it is fair that CEOs are walking away "unscathed?" No, but life isn't fair.

Do I think it's fair that people who weren't gaming the system, who paid their mortgages for 20 or 30 years won't recieve direct benefit from the recent governmental largesse? No, but life isn't fair.

Do I think it's fair that people who were knowingly gaming the system and getting loans they knew they couldn't afford will be getting help from the taxpayers in the country? No, but life isn't fair.

Do I think it is fair that the very wealthy and the middle class will be paying for all of this (remember, the poor don't pay any Federal taxes in this country)? Yes! But only "in general" since some have benefitted and some haven't.

Remember, most homeowners (in general) gained from the increase in home values that went along with the relaxing of lending standards which was partially responsible for the housing bubble; so the $10,000 economic stabilization "bill" (taxpayer "investment") per homeowner is is a good deal -- if it stabilizes home prices. (Nothing drags down home prices like a foreclosed property or two in the nieghborhood.)
The whole bail out business is a problem I don't even want to touch. The real problem there was the loans that were given out in the first place. SNL did an excellent sketch that ind of sums it all up really well.

http://www.nbc.com/Saturday_Night_Live/ ... ut/727521/

Tasker's Mom wrote:
Wealth is a privilage, and with that privilage comes the responsibility to help those below you. ANything otherwise would be to live in a world where only the wealthy "got the beer".


No way. It is not a privilege- that implies that it's been granted upon the lucky few to have gotten it which is not always the case. Sure, some people are born into money but somewhere along the line, that money was earned and it is certainly not the right of someone who has worked hard to get to have to give it away. All you're doing then is penalizing success.

As rough as it sounds, only some people should get the "beer." Not everyone is entitled to it. Society does need low wage earners and higher wage earners to prosper but it doesn't mean that that can't work on a rotating cycle either. People don't have to be on the bottom of the food chain forever. In our current state, if you move your way up, you see benefits at every level of income.

On the other hand, if I'm wealthy and I am getting stuck giving more money away, I think I should have every say in what social programs my heart earned dollars go into. (And in my case, if I were wealthy, I'd give it all to animal welfare).

(Also, when I say wealthy, I mean people who have their own yachts with helicopters on them.)
I guess it's a huge difference in philosophy, I do believe that wealth is a privilege........ not just a reward for hard work. Many many people work hard and work smart but only a handful become "wealthy" (helicopter on the yacht wealthy). I don't just mean having a few luxeries or not worrying about the future.

I know many people who by their lifestyle, intelligence and work ethic should be wealthy but aren't. I know a handful who, don't deserve the cost of a bus ticket across town but have more money than they can ever spennd. Perhaps it's some sort of Karmic test and those who don't use it wisely come back as a garden slug.
Maybe you mean it is a "responsibility?"
Ah well, perhaps that is a better word. But remember, I'm a socialist at heart :twisted:
why is wealth either a responsibility or privilege? Yes some people work hard and smart and don't get wealthy - so perhaps serendipity is the missing ingredient.

and if beer is a necessity - of course everyone should get what they need - not necessarily what they want. wealth has always given people greater luxuries and greater responsibility.

glad I'm not wealthy :lol: :lol: :lol:
ButtersStotch wrote:
..The real problem there was the loans that were given out in the first place. SNL did an excellent sketch that ind of sums it all up really well.

http://www.nbc.com/Saturday_Night_Live/ ... ut/727521/



People wanted change, so the majority voted in all those Democrats last election. Boy, did we get "change"!!! How much more change can we afford?

I say its time to give the Rep's a chance to see if they can 'bail us out' of a Dem. mess......... jmop
8O surely you jest.

This is not a political thread, it is a philisophical one but if you want to get political about it, the current financial crisis has it's roots in the deregulation of the banking industry. On that economists whether Dem or Rep agree.

The most sweeping ban deregulation bill EVER was passed during the Clinton Administration, railroaded through by a REPUBLICAN CONGRESS. Your golden boy John McCain was a driving force.
Tasker's Mom wrote:
The most sweeping ban deregulation bill EVER was passed during the Clinton Administration, railroaded through by a REPUBLICAN CONGRESS. Your golden boy John McCain was a driving force.
Surely you jest... perhaps a 20 seat and a 5 seat majority with a President of the opposite party with a veto pen? By that reasoning we can blame the Democrats for everything else, since they've held the Congress for the vast majority of time since The Depression?

There is no need to lay blame on either party here... EVERYONE thought that increasing home ownership rates was a good thing. Nobody wanted to stand up and be responsible for preventing some constituents from getting mortgages they couldn't afford. Nobody wanted to be the prick that burst the housing bubble. So to speak.

((Clearly home ownership rates approaching 70% are problematic, so the solution would be for the government to own all housing and give it out on an as needed basis, right Ginny? ;) ))

One of the biggerest problems facing the US is the draining of cashola out of our economy via oil (and other) imports. When the trade balance is neutral or even unbalanced to a small degree the US can handle it in good or bad economic times, but when the price of oil skyrocketed to $80 a barrel, that was a very very bad thing, both for the root of the economy as well as for the trade deficit. It's an attack at the top and the bottom at the same time. At $140 a barrel the shock was too strong for an already weakened economy. We MUST start to provide our own energy, make our own electricity. Instead of another $150 billion economic stimulus package, how about $100 billion into producing solar electricity? How about $50 billion? OK, $10 billion? THAT would be an investment in our future.

((OK, nobody raise their hands, but how many of you haven't bought an "American Made" car in a couple of decades? I used to have a bumper sticker on my car back in the early 80's... it read "Buy American: The job you save may be your own"))

OK, time for me to go paint the house...
Well, I guess my point was that blame cannot be laid at the feet of an individual party, Democrats and Republicans alike had a hand it the creation of this mess.

And yes, part of me would like to see adequate housing handed out to all.
Ron wrote:
((OK, nobody raise their hands, but how many of you haven't bought an "American Made" car in a couple of decades? I used to have a bumper sticker on my car back in the early 80's... it read "Buy American: The job you save may be your own"))OK, time for me to go paint the house...


My Honda was actually made in Ohio. :)
ButtersStotch wrote:
Ron wrote:
((OK, nobody raise their hands, but how many of you haven't bought an "American Made" car in a couple of decades? I used to have a bumper sticker on my car back in the early 80's... it read "Buy American: The job you save may be your own"))OK, time for me to go paint the house...


My Honda was actually made in Ohio. :)
Well, things have changes since the early 80's but still, where did the profits go?
Ron wrote:
((OK, nobody raise their hands, but how many of you haven't bought an "American Made" car in a couple of decades? I used to have a bumper sticker on my car back in the early 80's... it read "Buy American: The job you save may be your own"))


Love my Jeep and Ford Ranger. But I must confess to one foriegn purchase, a Mini Cooper S. Snap, that baby is fast and fun!!! 8) Hubby refuses to accept a Japanese/Korean/Chinese car in the garage.

Our American made vehicles have served us well and get as good or better gas milage than the Japanese counterparts. However, they fall into specialized vehicles catagory. Beyond the specialized vehicles, the US car industry is a dinosaur in thinking and management.

I wish we had American manufacturing jobs left to save . :( Jobs have been the biggest export for the US the past 15 years. I say this as I get ready to participate in moving another manufacturing line into Mexico. :cry:
I am desperately trying to hold out for the Chevy Volt's debut.
is the issue jobs or profits? Ford makes cars in Mexico and Toyota builds cars in the US. In a global economy you have to have competitive business climates with a well trained work force. WHile the US used to lead the world in production, in 2006 Finland had the most productive hourly workforce and based on cost per unit we are probably not even in second place.
Ron wrote:
ButtersStotch wrote:
Ron wrote:
((OK, nobody raise their hands, but how many of you haven't bought an "American Made" car in a couple of decades? I used to have a bumper sticker on my car back in the early 80's... it read "Buy American: The job you save may be your own"))OK, time for me to go paint the house...


My Honda was actually made in Ohio. :)
Well, things have changes since the early 80's but still, where did the profits go?


My Camry was made in the U.S., as well.

So, is it about jobs? Cause the truth is that most auto manufacturers use parts made overseas--and parts made here in the U.S. So, wages paid to workers here are used to make purchases here which in turn employs more people, etc.

If it's about profits, I believe that Honda and Toyota are publicly traded.
If American cars weren't so horribly styled, they might actually sell more, too. Who wants an ugly car? The majority of American cars will never have a place with younger higher end car buyers because they plain and simple, don't fit in-- but that's another thread.

I've been holding out for the new Camaro but James and I keep waiting for GM to find a way to ugly it up before it's time to produce it. They'll do something it make it look cheap. Maybe put some plastic on it or something. I'm sure the guy who designed the HHR will get involved and find a way to make it look totally ridiculous.

I'm definitely not buying a car on principle of where it was made. It's too big of a purchase to not get exactly what I want. If American companies could provide that, I'd be glad to buy one.

(Sheeps Over Aces, I will also be buying a Mini Clubman if and when they ugly up the Camaro. I had the Cooper S already and would get another one in a second. Awesome car! I only sold it because of my humungo dogs!)
tgir wrote:
If it's about profits, I believe that Honda and Toyota are publicly traded.
The profits stay with the company and are re-invested; only a few pennies are given out as dividends to the shareholders.

Like I said b4, a lot has changed since the early 80's so it all becomes very complex. In 1988 I bought a Chevy Eurosport, believing of course that a Eurosport would have been made in America... it was -- North America... Toronto I think. :roll:
Ron wrote:
tgir wrote:
If it's about profits, I believe that Honda and Toyota are publicly traded.
The profits stay with the company and are re-invested; only a few pennies are given out as dividends to the shareholders.

Like I said b4, a lot has changed since the early 80's so it all becomes very complex. In 1988 I bought a Chevy Eurosport, believing of course that a Eurosport would have been made in America... it was -- North America... Toronto I think. :roll:


Silly, it would have been called a NorthAmeriSport then. :)
Ron wrote:
tgir wrote:
If it's about profits, I believe that Honda and Toyota are publicly traded.
The profits stay with the company and are re-invested; only a few pennies are given out as dividends to the shareholders.

Like I said b4, a lot has changed since the early 80's so it all becomes very complex. In 1988 I bought a Chevy Eurosport, believing of course that a Eurosport would have been made in America... it was -- North America... Toronto I think. :roll:


It is more complex than which country is home to the parent.

Profits which are re-invested in the company provides more jobs--some of which are here in the U.S.

My biggest criteria for buying a new car is fuel economy and reliability. For now, and for the next few years, I will have a long commute to work and so, even if fuel economy wasn't a value I held for environmental reasons, it would be for pocket book reasons. I prefer not ugly and definitely like safe. I'm happy with my Camry. But we use the van for hauling humongous hairy dogs. Hubby drives the (american) van but he drives far less than I do.

The Prius and other hybrids came out right after I bought my current car; I had assumed I'd go hybrid as soon as this one was paid for but the truth is I really am looking forward to no payment for a while (which really suits my budget right now) and frankly, I love my car. I think I will be waiting for a bit to buy again. I have too many miles on my current car to make it very valuable at trade in--it's worth more to me to drive. Nothing major has gone wrong yet, so I'm content enough.
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