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The discussion below based on the assumption that the budget is balanced, and the 10 men only drink what they can afford collectively as a group. The only question then is how to divide up the bill fairly among the people.

But what if the bar bill costs $120 each week, and the ten men agree they will pay $100 of it now and $20 in the following week.

The bartender says “OK – I’ll give you an IOU” but you’ll have to pay interest on it and that will decrease the amount of beer that you and your friends can buy in the future.

And if you don’t pay the IOU off – and the debt keeps getting larger – then your kids will have to assume the debt and it will be passed from generation to generation where it will impact their life. At some point, your kids won’t be able to buy any beer at all, because they are continuing to pay for the beer that you drank in years before. As well as the interest on the IOU. And at some point, I may just have to cut you all off as a group because you owe me too much.

So now the ninth and tenth richest men at the bar push for paying as little as possible – they want the tax cuts ! – and the benefits of the lower bill will go directly to them. They won’t ever pay the IOU – that is someone else’s problem – and they really don’t care about the next generation and their ability to buy beer.

The truth is – it was all about them. The ninth and tenth richest men were so focused on paying the bartender as little as possible each week, that they didn’t realize that their greediness and short-term thinking would eventually shut down the whole system and close the bar.

In the end, the bartender stopped accepting IOUs form the group and the credit dried up. He started by firing half of his waitresses since there were fewer customers to serve. In the end, he couldn’t pay his bills to the supplier and had to go out of business. And this left the nine and tenth richest men with no friends and no place to go out to each week.

And the ninth and tenth richest men looked at each other and said –

“How could this possibly have happened?”

“Could my selfish tax cuts and foolish spending policies over the past eight years have contributed to this?”

And they sat there as if they didn’t know the answer.
And they STILL asked for more tax cuts, because they couldn't think of anything that was be beneficial for the group.

Thanks for setting the record straight on Dr. Kamerschen, I've amended the original post to reflect that he is not the author of the article.

Also thanks for taking the time to write out your thoughts. As far as I can tell, we have some fundamentally different beliefs as it relates to the functioning of markets and the distribution of wealth. I take a strictly capitalist viewpoint, whereas you seem to be more populist.

I really do enjoy the conversation though – it's really the greatest wonder of the internet – bringing together people from across the globe to discuss issues.

Thanks, as always, for commenting.

- Bill

Thanks for setting the record straight on Dr. Kamerschen, I've amended the original post to reflect that he is not the author of the article.

Also thanks for taking the time to write out your thoughts. As far as I can tell, we have some fundamentally different beliefs as it relates to the functioning of markets and the distribution of wealth. I take a strictly capitalist viewpoint, whereas you seem to be more populist.

I really do enjoy the conversation though – it's really the greatest wonder of the internet – bringing together people from across the globe to discuss issues.

Thanks, as always, for commenting.

- Bill

I see your points and I appreciate your response. You have a better picture of the situation then the other guy. Ok here is my arguments:

a. “Your belief that participants in an economy should be rewarded based upon how hard they work is flawed…Participants in the economy are compensated not based on how much effort they put in, but based upon the output (or wealth) they produce.”
That is not true. Everyone gets paid based on supply and demand, not the output or how valuable the work he does really is. The value is determined by the market so it could be if we would not have enough ditch diggers that they would get paid even more then doctors. You see you give the example with doctors and high wages. The doctors do not get paid high because they do highly valuable work, but because there is just a shortage on doctors in US (high demand for doctors versus low supply of doctors). That is also why the government tries to balance it out by giving special immigration consideration to doctors (and nurses). Look at a doctor in Africa. He does the same job, same output, but gets paid 10 or 100 times less. So the output has nothing to do with it. It is the restrictions of the government that artificially keep wages high in one county at the expense of low wages in the other countries. Would we truly have a free economy without borders, then wages of doctors in Africa would rise while those in America would drop until every doctor on earth would be paid about the same. This is not the case and so a doctor in US who is paid more is actually literally taking money out of the pocket from the doctor in Africa because the African fellow can not for some reason relocate to US. The system in US (immigration or whatever other barrier there is) keeps the American doctor relative rich compared to the African. And that is what I mean when I say rich explode the system and are rich only because of some error (barrier) they set up, not because there work is so much valuable. That is what I mean the rich “trick” the system. These becomes even more obvious in the agriculture. Sure the wages of American farmers would drop if we open the borders. They should because they are getting unfair advantage and again literally take money from the pockets of poor farmers in 3rd world countries and so keep those countries poor. The poor farmer has the same product maybe even better and is wiling to sell it for much cheaper to Americans, but the freaking government of US protects the US farmer so the poor foreign farmer can not sell it and has not even enough pay the bills. Then US government fills sorry for those poor guys and sends humanitarian help which is a joke. If they really want to help they should remove the protectionism of the US farmers and let market decide the price. US farmers would have no chance and would have to change business and people would move in more productive areas (like high tech) and leave the food industry to poor countries which would now make 10 or 100 times more money and so the whole world would be better off. Instead of sending Africa humanitarian help, open the market so they can start growing, and have a fair chance on the market.

I see you point about the wages that would drop probably in all areas in US if we open up the borders, but I look at the global consequences not some minority group like Americans. And the global consequences would be that the poor countries would get more money while logically the rich will lose some. But since the food and services would be now available for much less also in US (at about the same price as anywhere else on Earth) the drop of income would not cause a drop in living standard, -the standard would in fact in long term even increase, because of more competition higher diversity of products and services and better mobility. So yes instead of a doctor making 150,000 USD a year in US he might end up be paid maybe 20,000 USD a year (and all other people would also end up being paid less), but the food would suddenly cost 5% of what you pay now, and prices of there item like cloths, housing etc will also drop significantly , because suddenly if would not matter anymore that you need to be physically in US to be making above overage money and people would move. So the standard would not fall, and at the same time the standard of living in all the poor countries around the world would increase to the same level then that of the US. Would that not be great?

b. ” Each and every time a company sells one if its products, the person that buys it from them willingly exchanges their money for the product – it is a voluntary exchange. If the consumer did not think the product was worth their money, they would simply not buy it.”
I see your point. But you have to know what you say work only in perfect competition (which is for now only a theory), not in real world that is far from that. This works only in a market that is completely open which unfortunately US is not and no market is, because we have borders, import export regulations, oligopoly, monopoly, etc. The government tries to fight the monopoles but , well not really. Just look the gas prices. Sure we have more then one gas company and you might argue that they compete, but if you look at the prices I would not say so. The prices in one area are just about the same maybe if you are lucky 2-3 cents apart. Since the price of crude Oil is just 60% of total gas price, then I am really surprised that the final price after considering all the different cost that the companies have comes only few cents a gallon apart (Check http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel… to see gas price structure.) That shows that companies are not pricing the gas based on the actual cost but form the price by some secret agreements among each other (monopoly). This is just one example. So it might look as a willing exchange of money for product (gas), but it's not because it’s a monopoly and you have no chance-you either buy or walk 20 miles to work which you cant.
I can also not agree that CEOs get paid gazillions$ just because they run a big company especially if they run a monopolistic company like described above. “CEOs” literally do not do anything, but just delegate work. They (The CEOs) have people who do job for them. The big multibillion companies with 100,000 people or more are to complex to be fully managed and understood by any CEO so the CEO uses more or less his guts taking decisions similar as a president uses his guts when choosing if go to Iraq or not. The big companies would NOT suddenly collapse if the CEO is removed. They would keep running for many years just as fine as it was with the CEO. Look I don’t say we do not need CEOs, but I say that there role in the success of a company and consequently their share in compensation is MUCH MUCH MUCH overrated. At best they should get 5 times the minimum wage not billions. Now they get paid millions even when they screw things up and are fired. Why?
And I know that many companies are public, but the fact is you need money to buy the stock and the current system of wealth distribution as I said is messed up which is why still only 5% of people own 95% of wealth and that includes the public stocks.

c. “Receiving more than you give is not wrong. In fact, it is the basis for a free market economy, and you engage in it every day.”
Well it is not so easy. The problem is not in taking more then you give or giving more then you take … what is more and what is less? That is a subjective measure. If you are in a desert dying of thirst but have a sack of diamonds, giving one diamond for a glass of water will make you fill you gain more then you gave so you will trade. This will be considered a rip of in a normal situation. “more” or “less” are subjective and it is right so or else nobody would ever engage in any trade. The point is in correctly valuing the time of a person (how much he gets for 1 hour of his life). Does a special model deserve t
o get pain 1 million for a commercial while another only 200 $? Or a football player paying football being paid 10,000,000 $ million, while a whole life of equal physical work in a factory somewhere china would pay only 10,000$? Again you see its not the output you create but supply and demand. If there are little people who can do what you do you get paid more no matter if this is cleaning the toiled to being a doctor. But if there are many people who can do it, then you get paid little. Is one hours of life of a person digging holes worth 9$ and an hour of a guy in a office at a certain bank 250$? It is, if we agree, and is not if we don’t.

But what really bothers me is if a person working job A gets paid 50% less/hour then another person doing the same job A in another country (or company) because there is a artificial barrier that prohibits free flow of workforce, then this is a system that creates

“The laws of supply and demand dictate that if the borders were opened, wages (especially for the poor) would fall”
Yes in US, but not for 5 billion poor people on Earth-there they would go up. And as I said even if the wages in US drop it will force people to move into more productive sectors (high tech) and we should not forget that even if wages drop the standard will not because we will get stuff much much cheaper.

About the author. I asked the author and he said he did not write the article so whoever came up with the story is using his name to spread his own stories. Here is his email reply:
From: davidk@terry.uga.edu
Hello Leo
Sorry, but I did not write the story and I do not know who did.
Best
David

I see your points and I appreciate your response. You have a better picture of the situation then the other guy. Ok here is my arguments:

a. “Your belief that participants in an economy should be rewarded based upon how hard they work is flawed…Participants in the economy are compensated not based on how much effort they put in, but based upon the output (or wealth) they produce.”
That is not true. Everyone gets paid based on supply and demand, not the output or how valuable the work he does really is. The value is determined by the market so it could be if we would not have enough ditch diggers that they would get paid even more then doctors. You see you give the example with doctors and high wages. The doctors do not get paid high because they do highly valuable work, but because there is just a shortage on doctors in US (high demand for doctors versus low supply of doctors). That is also why the government tries to balance it out by giving special immigration consideration to doctors (and nurses). Look at a doctor in Africa. He does the same job, same output, but gets paid 10 or 100 times less. So the output has nothing to do with it. It is the restrictions of the government that artificially keep wages high in one county at the expense of low wages in the other countries. Would we truly have a free economy without borders, then wages of doctors in Africa would rise while those in America would drop until every doctor on earth would be paid about the same. This is not the case and so a doctor in US who is paid more is actually literally taking money out of the pocket from the doctor in Africa because the African fellow can not for some reason relocate to US. The system in US (immigration or whatever other barrier there is) keeps the American doctor relative rich compared to the African. And that is what I mean when I say rich explode the system and are rich only because of some error (barrier) they set up, not because there work is so much valuable. That is what I mean the rich “trick” the system. These becomes even more obvious in the agriculture. Sure the wages of American farmers would drop if we open the borders. They should because they are getting unfair advantage and again literally take money from the pockets of poor farmers in 3rd world countries and so keep those countries poor. The poor farmer has the same product maybe even better and is wiling to sell it for much cheaper to Americans, but the freaking government of US protects the US farmer so the poor foreign farmer can not sell it and has not even enough pay the bills. Then US government fills sorry for those poor guys and sends humanitarian help which is a joke. If they really want to help they should remove the protectionism of the US farmers and let market decide the price. US farmers would have no chance and would have to change business and people would move in more productive areas (like high tech) and leave the food industry to poor countries which would now make 10 or 100 times more money and so the whole world would be better off. Instead of sending Africa humanitarian help, open the market so they can start growing, and have a fair chance on the market.

I see you point about the wages that would drop probably in all areas in US if we open up the borders, but I look at the global consequences not some minority group like Americans. And the global consequences would be that the poor countries would get more money while logically the rich will lose some. But since the food and services would be now available for much less also in US (at about the same price as anywhere else on Earth) the drop of income would not cause a drop in living standard, -the standard would in fact in long term even increase, because of more competition higher diversity of products and services and better mobility. So yes instead of a doctor making 150,000 USD a year in US he might end up be paid maybe 20,000 USD a year (and all other people would also end up being paid less), but the food would suddenly cost 5% of what you pay now, and prices of there item like cloths, housing etc will also drop significantly , because suddenly if would not matter anymore that you need to be physically in US to be making above overage money and people would move. So the standard would not fall, and at the same time the standard of living in all the poor countries around the world would increase to the same level then that of the US. Would that not be great?

b. ” Each and every time a company sells one if its products, the person that buys it from them willingly exchanges their money for the product – it is a voluntary exchange. If the consumer did not think the product was worth their money, they would simply not buy it.”
I see your point. But you have to know what you say work only in perfect competition (which is for now only a theory), not in real world that is far from that. This works only in a market that is completely open which unfortunately US is not and no market is, because we have borders, import export regulations, oligopoly, monopoly, etc. The government tries to fight the monopoles but , well not really. Just look the gas prices. Sure we have more then one gas company and you might argue that they compete, but if you look at the prices I would not say so. The prices in one area are just about the same maybe if you are lucky 2-3 cents apart. Since the price of crude Oil is just 60% of total gas price, then I am really surprised that the final price after considering all the different cost that the companies have comes only few cents a gallon apart (Check http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel… to see gas price structure.) That shows that companies are not pricing the gas based on the actual cost but form the price by some secret agreements among each other (monopoly). This is just one example. So it might look as a willing exchange of money for product (gas), but it's not because it’s a monopoly and you have no chance-you either buy or walk 20 miles to work which you cant.
I can also not agree that CEOs get paid gazillions$ just because they run a big company especially if they run a monopolistic company like described above. “CEOs” literally do not do anything, but just delegate work. They (The CEOs) have people who do job for them. The big multibillion companies with 100,000 people or more are to complex to be fully managed and understood by any CEO so the CEO uses more or less his guts taking decisions similar as a president uses his guts when choosing if go to Iraq or not. The big companies would NOT suddenly collapse if the CEO is removed. They would keep running for many years just as fine as it was with the CEO. Look I don’t say we do not need CEOs, but I say that there role in the success of a company and consequently their share in compensation is MUCH MUCH MUCH overrated. At best they should get 5 times the minimum wage not billions. Now they get paid millions even when they screw things up and are fired. Why?
And I know that many companies are public, but the fact is you need money to buy the stock and the current system of wealth distribution as I said is messed up which is why still only 5% of people own 95% of wealth and that includes the public stocks.

c. “Receiving more than you give is not wrong. In fact, it is the basis for a free market economy, and you engage in it every day.”
Well it is not so easy. The problem is not in taking more then you give or giving more then you take … what is more and what is less? That is a subjective measure. If you are in a desert dying of thirst but have a sack of diamonds, giving one diamond for a glass of water will make you fill you gain more then you gave so you will trade. This will be considered a rip of in a normal situation. “more” or “less” are subjective and it is right so or else nobody would ever engage in any trade. The point is in correctly valuing the time of a person (how much he gets for 1 hour of his life). Does a special model deserve t
o get pain 1 million for a commercial while another only 200 $? Or a football player paying football being paid 10,000,000 $ million, while a whole life of equal physical work in a factory somewhere china would pay only 10,000$? Again you see its not the output you create but supply and demand. If there are little people who can do what you do you get paid more no matter if this is cleaning the toiled to being a doctor. But if there are many people who can do it, then you get paid little. Is one hours of life of a person digging holes worth 9$ and an hour of a guy in a office at a certain bank 250$? It is, if we agree, and is not if we don’t.

But what really bothers me is if a person working job A gets paid 50% less/hour then another person doing the same job A in another country (or company) because there is a artificial barrier that prohibits free flow of workforce, then this is a system that creates

“The laws of supply and demand dictate that if the borders were opened, wages (especially for the poor) would fall”
Yes in US, but not for 5 billion poor people on Earth-there they would go up. And as I said even if the wages in US drop it will force people to move into more productive sectors (high tech) and we should not forget that even if wages drop the standard will not because we will get stuff much much cheaper.

About the author. I asked the author and he said he did not write the article so whoever came up with the story is using his name to spread his own stories. Here is his email reply:
From: davidk@terry.uga.edu
Hello Leo
Sorry, but I did not write the story and I do not know who did.
Best
David