03 Oct 08 Bar Stool 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.
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 paid $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.
Tags: bar owner, curve, drinks, fair share, four men, six men, sixth man, tenth man, windfall
08 Jan 08 Don’t Stop The Music
On the one hand we have p2p networks and those that use those networks to gain free, illegal downloads of music; on the other hand we have the RIAA who win suits such as that against a Minnesota woman in October 2007, who was ordered to pay over $220,000 for downloading two dozen songs.
My take on it all is this.
I work. I expect to get paid. However much I enjoy the work I do, I need to get paid to be able to pay my way in the world. That’s how it works. Therefore I have no problem with an artist getting paid for the music they produce. I also have no problem with the company that distributes their work – usually a record label – getting paid to do so – after all the record label is employing people and paying them, and they in turn need to be paid. It’s how our economy works.
I don’t think it’s fair to expect to be able to freely download music without paying for it, but I am concerned that artist – that has produced the work – gets their fair share. If anyone is to get rich in the deal, it should be the artist.
Now, who gets rich in the court case above? Why, the lawyers of course. How much of that $220K went to the artists in compensation for the illegal downloads? I suspect very little.
The RIAA really only represents the major labels anyway. The major labels are not run by musicians, but by accountants who are only interested in the bottom line (which is important in any business) and not the work itself. This is why we end up with some artists churning out album after album of music of dubious quality. They’re simply used as a profit machine.
Well, there’s more. One tends to assume that buying a CD allows you to do what you wish with it – almost. We all know you’re not supposed to copy it for your friends, or post it online for filesharing.
Of course, before the digital age, copying still went on, but taping the mic to the radio speaker didn’t give a very good reproduction, and if we liked the music most of us would tend to go and buy the song anyway.
There was some talk a few years ago, that if you bought the vinyl album, you’d also really need to buy the cassette for use in the car. I would suspect very few people ever did that, and anyway, that idea went away.
It’s reappeared.
Sony have suggested that if you want the song on your ipod as well as the CD for the car or living room, you need to buy the CD AND a digital copy.
Over to the RIAA, and they duck the issue saying that “copyright law is too complex to make such sweeping statements.” Hang on one cotton picking minute. I thought the RIAA was the representative body for the American recording industry? Don’t they employ teams of lawyers to sue people for downloading songs illegally? Don’t these lawyers know the copyright laws inside and out? Enough to sue that woman for $220K for those 24 songs, but not enough to tell me or you if it’s ok to rip a CD to my hard drive to play on my own mp3 player when I’m out jogging or walking the dog.
If it did go that far I think most people would simply stop buying CDs. Actually myself I haven’t bought a CD for some time. I download, legal, digital copies of what I want these days. I play in the home on the computers, or on my mp3 player, which I can also use in the car. Why do I need to buy a CD at all, or burn music to CD anyway?
Tags: accountants, bottom line, court case, dozen songs, dubious quality, economy, fair share, filesharing, labels, lawyers, mic, minnesota woman, musicians, p2p networks, profit machine, radio speaker, record label, reproduction, riaa, suits
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