Economics 101

A popular analogy to explain economics involves ten men going to a pub. They share a £100 bill for beer, illustrating how taxes are distributed among different income levels.

• First Four Men (Poorest): Pay nothing.
• Fifth Man: Pays £1.
• Sixth Man: Pays £3.
• Seventh Man: Pays £7.
• Eighth Man: Pays £12.
• Ninth Man: Pays £18.
• Tenth Man (Richest): Pays £59.

This setup shows how the wealthiest contribute the most to the total bill, similar to how taxes are structured in society.

The Impact of Tax Cuts

When the pub owner reduces the bill by £20, the men decide to distribute the savings based on their previous contributions. The new amounts they pay are:

While everyone benefits from the reduction, the wealthiest man saves the most, leading to feelings of unfairness among the others.

While everyone benefits from the reduction, the wealthiest man saves the most, leading to feelings of unfairness among the others.

Consequences of Perception

After discussing their savings, the men feel the system is unfair. The poorer men believe the rich benefit disproportionately. This leads to resentment, and when the richest man stops coming to the pub, the others realize they cannot cover the bill without him.