Have you heard of Bar Stool Economics?
BAR STOOL ECONOMICS
>>
>> Suppose that every day, ten men go out for beer and the bill for all
>> ten comes to 0.
>>
>> 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 .
>>
>> The sixth would pay .
>>
>> The seventh would pay .
>>
>> The eighth would pay .
>>
>> The ninth would pay .
>>
>> T he tenth man (the richest) would pay .
>>
>> 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 .
>>
>> Drinks for the ten now cost just .
>>
>> 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 windfall so that everyone would get his ‘fair
share?’
>>
>> They realized that divided by six is .33. But if they
>> subtracted that from everybody’s share, then the fifth man and the
>> sixth man w ould 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 instead of (33%savings).
>>
>> The seventh now pay instead of (28%savings).
>>
>> The eighth now paid instead of (25% savings).
>>
>> The ninth now paid instead of (22% savings).
>>
>> The tenth now paid instead of (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 , ‘declared the sixth man. He
>> pointed to the tenth man, ‘but he got !’
>>
>> ‘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 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
Tagged with: bar owner • bar stool • curve • drinks • economics • fair share • four men • six men • sixth man • tenth man • windfall
Filed under: Your Community Center
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Anthony D 
some drunk a$$hole sits at the bar gettin hammered spouting off about how the economy should be fixed when he didnt even graduate high school?
and so in conclusion, we should bow to the rich as they own everything. and we’re against big government but for people who are so big if they do leave, we collapse. inevitably, if the rich man doesnt leave, theres no room for patron number 1234 to move into 5-6′s spot and same for 5-6 to move to 10′s spot. 10 keeps being rich and sitting back and calling 1234 lazy good for nothing’s.
god i love america.(sarcasm)
interesting, i think that’s a little exaggerated though
Sure I can already see Bill Gates packing his bags from Europe already.
And the situation you’re describing is exactly why we’re losing jobs to foreign countries. Companies that export jobs and rich that want to leave the country because of measly 3% increase on their income above $250,000 should get out and stay out as far as I’m concerned.
Drink to that, professor. Love the story.
That is an excellent analogy
Who really drives the economy?
Who buys the cars that Ford makes? who buys clothes at
Macy’s and JC Penney? who eats at McDonald’s? who shops at Wal-Mart? Who hires lawyers? visits doctors? buys medication? travels?
So, small business owners and big business owners and self-made professionals, you try selling something to people who have no money (or credit) and see how far your business go
See how far your business goes when you have under-educated, over-worked underpaid and unhealthy workers
People will survive, they do in many many countries on less than a dollar a day. Will business?
Yea! it would be will and all BUT! do you think the Reps are going to give a strait tax cut like that? It would be the one who paid $59 would pay nothing and the sixth, seventh, and eighth would pay the balk!
you’re assuming too much about the stupidity of American people. the drunk men obviously didn’t realize that the reduced cost wasn’t a direct payment to them at all. your little article didn’t say if any of the men had ever taken calculus or even any advanced math classes…also, the men were alienating their jobs from the equation and using the bar as their sole source of profit, which is just silly. the real profit they were getting was from their jobs, but not one decided to see how well his account at the bank was doing (providing he was prudent and didn’t spend it all on some other frivolity).
i hope every bar owner reads this…and remembers that drunk people are not the philosophers or mathematicians of today.
I have seen this and it’s a completely accurate analogy. This is not just talking about businesses but people who make more money. I am a middle class American but I also understand that while I pay a couple thousand dollars in taxes there are people who pay millions of dollars in taxes. After you add in payroll taxes those people are giving the government MORE money than they get to keep for their families. Talk about unfair! But as the professor said… "For those who do not understand, no explanation is possible"
Well, first I’d say stop drinking beer and get into a twelve step program.
But if you say beer represents the roads, schools, police, courts, prisons, military and our Representatives, then I don’t have a problem with this structure. The corollary is let’s give more tax breaks to the rich and less to the poor so the rich will not try to hide their money and/or jobs overseas.
The basis of this argument is the Reagan era economics Trickle Down theory. Which works wells when the economy is on the rise and tax revenues rise even with a tax cut for the wealthy. But as the last eight years has shown, it does not work when the GNP is anemic or in a recession. (We can set aside for now that we have spend trillions more than we have in revenues – current count is that we are $53T in debt. Something the following generations will curse us for.)
As someone who makes more than $250K/yr (which is the new definition of rich), I want to pay my fair share of taxes and support making our government more efficient (not bigger or smaller, just make it work better) like Michelle Rhee is doing now with the DC School District (one of the worst in the nation) or the efforts of California Performance Review ( http://cpr.ca.gov/CPR_Report/ ) which identified improvements that would save $32B over the next five years.
So I’d like to challenge the "Professor of Economics, University of Georgia" to stop playing drinking games and offer some real suggestions for our current economic and social issues.