Few months back, I wrote a post 'GI vs Joe' and labelled it 'Rational Irrationality',where the belief 'experts are always better than the average minds' was scrutinized. Precisely, we saw three things - 1) this belief is not true in real world, 2) why many are smarter than the few, and 3) how making decisions that involve large group of people, taking independency, diversity, and decentralization into consideration, most likely go right. The fact that the post was lengthy, referring to terminologies that were pedantic (which I couldn't comprehend either) had left my friends and readers disapponited. And asking did you understand it to my close friend became a life threatning situation considering the manner he showcased the sweet half part of the victory symbol to me when in fact I was expecting a full one. The other fatso friend of mine, while reading it, slowly digressed away to day dreaming about being slim which was soon interrupted by the sound of his own munching. So this time I'm cautious enough to demonstrate it with a bar story for the fact that, well, everyone likes a bar story!
Mustering enough confidence that I won't face such insult from my friends like last time, I'm getting into the crux of the post now. One fine morning of a seemingly ordinary day, after the daily fills of Lolcats, 'Forward this to 15 people or you will die', and a generous gift of $500,000,000,000,000,000 from a Nigerian princess in exchange of helping her to transfer funds, my gmail inbox had an interesting story. It is probably the only forward e-mail that I've read in my life. So here it goes...
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.
If they paid the bill the way we paid 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. He said, “Since you are all such good customers, 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 every body’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 $2 ? 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!
This, exactly, is the reason why taxing the rich is not the optimal solution. Just as seen in this post, the rich corporate businesses (like the tenth man) will relocate in a business friendly environment thereby causing the economy to further extenuate. Job losses will be inevitable and the poor, middle class, and soon to be rich (like the other nine men) will be left with nothing at all. The next time you start castigating the government for not taxing the rich, think about this bar story. Let us all accept the fact that we wanted capitalism and so we have to bear getting the taste of our own medicine at some point. As much as I'm tempted to relate this to Karl Marx's philosophy and mind numbing economic theories, I'm conscious that I want the other part of victory symbol from the readers as well, and thus bid adeu with this.
Cheers,
G'tam.
Mustering enough confidence that I won't face such insult from my friends like last time, I'm getting into the crux of the post now. One fine morning of a seemingly ordinary day, after the daily fills of Lolcats, 'Forward this to 15 people or you will die', and a generous gift of $500,000,000,000,000,000 from a Nigerian princess in exchange of helping her to transfer funds, my gmail inbox had an interesting story. It is probably the only forward e-mail that I've read in my life. So here it goes...
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.
If they paid the bill the way we paid 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. He said, “Since you are all such good customers, 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 every body’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 $2 ? 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!
This, exactly, is the reason why taxing the rich is not the optimal solution. Just as seen in this post, the rich corporate businesses (like the tenth man) will relocate in a business friendly environment thereby causing the economy to further extenuate. Job losses will be inevitable and the poor, middle class, and soon to be rich (like the other nine men) will be left with nothing at all. The next time you start castigating the government for not taxing the rich, think about this bar story. Let us all accept the fact that we wanted capitalism and so we have to bear getting the taste of our own medicine at some point. As much as I'm tempted to relate this to Karl Marx's philosophy and mind numbing economic theories, I'm conscious that I want the other part of victory symbol from the readers as well, and thus bid adeu with this.
Cheers,
G'tam.
