dtucker300 Loc: Vista, CA

PragerU's Economics 101

https://www.prageru.com/pragerus-economics-101

What causes inflation? How is wealth created? Is socialism more fair than capitalism? How do we solve homelessness or fix America’s pending debt crisis?

Most Americans today lack the knowledge and understanding to answer these questions, or to even think about economics critically.

America’s biased media and education system have failed us and created a country of economically illiterate citizens.

Luckily, PragerU is here to change that.

PragerU’s Economics 101 is designed for smart and informed citizens like you who want to learn the ins and outs of economics without reading a 1,000-page textbook or sorting through an endless sea of false information online.

Weasel Loc: In the Great State Of Indiana!!

Excellent Post 2.5 minutes.

https://youtu.be/3dvYoCWJLUo?si=z6Fu3sUjCBkjjDWX

dtucker300 Loc: Vista, CA

https://www.grumpy-economist.com/p/inflation-confusion

Inflation Confusion

JOHN H. COCHRANE
APR 14, 2024
“Why Inflation Is Biden’s Most Stubborn Political Problem” by Andrew Restuccia and Sam Goldfarb at WSJ was one of those coffee-spilling articles that gave Grumpy his nickname. Not the article, which was well written, but the contents. In response to rising inflation,

Biden and his senior aides aren’t planning any major policy or rhetorical shifts. They plan to continue talking about the president’s proposals to lower the cost of housing and prescription drugs, while slashing student-loan debt and eliminating surcharges tacked on to everything from concert tickets to banking services.

The most simple and pleasurable lessons of economics show you how common ideas are precisely wrong. Econ 101: Don’t confuse relative prices — one price greater than another, and the forces that push one price up relative to others — with inflation, the rise in the average level of all prices. Inflation is really about a decline in the value of money. Trying to change individual prices is a classic game of whac-a-mole.

Econ 101 week 2. During inflation, many people’s wages don’t rise as fast as prices. Giving them borrowed or printed money to make up the loss, and buy things at higher prices is another common idea. In week 2 we learn it just makes inflation worse.

These basic points seem to have escaped an entire administration, though it has been facing inflation for four years and had plenty of time to think about it.

The White House … issuing a statement from the president that acknowledged the federal government has “more to do to lower costs for hardworking families.”

“Our agenda to lower costs on behalf of working families is as urgent today as it was yesterday,” said Jared Bernstein, the chair of the White House Council of Economic Advisers. “We’re just going to keep our heads down and continue fighting to lower costs.”

One might forgive a flailing White House political staff for deliberately spinning unrealities in an e******n year, but CEA chairs should understand the difference between inflation and relative prices, and that one does not “lower costs” in individual markets to fight inflation. CEA chairs are also supposed to do a little bit better than repeat spin from the political crowd in the White House.

And not just the CEA. The vast majority of American Economics Association members are Democrats. Surely the White House and CEA have somebody who vaguely understands what we expect the dimmest of undergraduates to get?

The president has called on grocery retailers and other companies to lower prices, citing their high profits. But he can’t compel companies to take action.

In the 1960s, this was called “jawboning,” fighting inflation by applying political pressure to companies not to raise prices. Relative prices, since of course their costs are no lower. Just where is the difference supposed to come from? One would think the state of the art had improved.

He can indeed compel companies to take action. Nixon, after trying lots of jawboning, imposed price controls. They follows from the same basic misunderstandings.

They want to “lower costs,” they say. But not the costs imposed by Trump-era tariffs, which they seem to like. Indeed, in a remarkable story, Treasury Secretary Janet Yellen just went to China to abjure her previous understanding of free trade, and threaten even more tariffs. Lower costs, yes, but not if that means buying $15,000 Chinese electric cars instead of $100,000 (including subsidies) US ones, made in the US, with US union labor, US parts, and a slew of federal mandates. Lower costs, yes, but not if that means buying Chinese solar panels. Lower costs, yes, but not if that means eliminating the mass of cost-raising regulations this administration has imposed, let alone the pre-existing morass.

Economists say trillions of dollars in spending approved by Trump and Biden cushioned the economy during the early months of the p******c, then sped its recovery. Still, when the economy began to reopen in 2021, that demand collided with labor shortages and supply-chain bottlenecks to fuel inflation.

I’m glad “economists” are catching up to the obvious.

there isn’t a whole lot the White House can do to fix it.

Behind the scenes, administration officials said there was no magic bullet to slow rising prices immediately,...

Most economists don’t believe Biden can do much at this point to bring down inflation, absent major tax increases or spending cuts that could curtail consumer spending. Even those policies, which aren’t being seriously considered in Washington, would take time to work their way through the economy.

Nothing one can do? We have, now admittedly, a deficit fueled inflation. One could start by not pouring more gas on the fire. Such as cancelling billions of student loan debt, never mind the Supreme Court and the quaint idea that Congress v**es spending. The CBO reports “The deficit totals $1.6 trillion in fiscal year 2024, grows to $1.8 trillion in 2025, …” with a 3.8% unemployment rate. Even in the simpleminded Keynesian economics that dominates left-of center Washington, there is no excuse for such stimulus.

There’s nothing we can do except the one thing that we all know would work. So we’ll rearrange the teacups on the side tables of the deck chairs of the Titanic instead. Which means nothing we want to do.

The quote here reflects the standard Keynesian view, deficit = aggregate demand = inflation with a lag. But we’re pretty clearly now in the situation that expected systemic deficits are the problem. Germany stopped a hyperinflation in a month. A credible announcement of spending, tax, and growth reforms that put the budget on a sustainable track would do the job. Scaling back the IRA, Chips, student debt river in recognition of inflation would help a lot more than complaining about how many potato chips are in a bag. Even just saying we recognize that’s needed would help.

Biden’s advisers have reviewed polling that shows criticism of Republicans for cutting taxes on wealthy Americans and corporations resonates with v**ers, and they intend to step up such an attack in the coming days and weeks.

Aha, now we see the central problem. Economic policy is being driven by what polling suggests “resonates with v**ers.” Not, for example, what basic economics suggests might actually work.

“We’re better-situated than we were when we took office, when inflation was skyrocketing, and we have a plan to deal with it,” Biden said during a press conference at the White House. “They have no plan. Our plan is one that I think is still sustainable.”

Three Pinocchios:


For all of the excess stimulus under Trump, the fact is that inflation broke out precisely in February 2021, and not a minute beforehand. If you want an event, the Feb 2021 “American Rescue” act, with a few trillions more stimulus though the p******c was clearly over, made clear that this administration was not going back to standard fiscal policy.

Whether Trump has a “plan” is a good question. But if Biden the “plan” is more jawboning and complaining about junk fees, I doubt that’s going to convince anyone.

This dishonesty, this pandering to polls with no principles, this constant vacillation, this willingness to say utterly silly things as if we’re all small children, might have something to do with the Administration’s terrible poll numbers. Maybe honest, consistent leadership might poll better than telling fairly tales and handing out candy.

elledee

If you want to get a good understanding of basic economics in a short read try Henry Hazlets economics in one lesson.

dtucker300 Loc: Vista, CA

https://www.prageru.com/video/why-the-gilded-age-was-golden

Episode 2
Why the Gilded Age Was Golden
Amity Shlaes
5-Minute Videos
Jan 08, 2024

The years 1880 to 1900—coined the Gilded Age—was a period of tremendous growth for American industry and technology. Many also criticize it as a time of greed, corruption, and exploitation of the lower and middle classes by the wealthy. Are we living in a second Gilded Age? Renowned historian Amity Shlaes answers this important question.

We are living in a second Gilded Age.

That’s the argument of many commentators, especially those who would like to increase taxes on the rich.

Or marshal squadrons of lawyers to mount an antitrust battle against monopolists like Google or Amazon.

The reason the commentators cite the Gilded Age is that that period, 1880 to 1900, had its own Elon Musk, Sergey Brin, and Jeff Bezos. These were the titans who built up big steel or the railroads.

Our textbooks tell us that those men were robber barons who captured all the wealth.

The robber barons locked in their monopolies, and barred the door to advancement for everybody else. The poor stayed poor, with no opportunity for their children. As economist Henry George wrote at the time, the tendency was for “[...]the rich to become very much richer, the poor to become more helpless and hopeless, and the middle class to be swept away.” The HAVES had everything over the HAVE NOTS. Only antitrust assaults on big companies or new taxes, could make America fairer.

Or so say those textbooks.

But the reality was different. In fact the Gilded Age was a good time for many Americans. Even poor Americans.

The claim that the rich were richer was true: Jay Gould made a fortune in railroads, John D. Rockefeller built the stunningly successful Standard Oil, and Andrew Carnegie’s steel company gave him a net worth as big as a whole country. These men did build giant mansions. And sailed around in yachts.

That the poor were poor is also accurate. But that poverty was not permanent for most. The years 1880 to 1900 were bumpy ones. But many poor Americans saw life improve. Food prices for example dropped sharply.

Meanwhile, wages rose––and dramatically. Real wages for workers in factories climbed by 45%.

In these hopeful years, illiteracy dropped by more than a third. Fewer babies died. Life expectancy rose by 21%. And the quality of life improved. In the olden days, especially before the Civil War, it was hard to get away from your home town. Now the expanding network of rails meant anyone tired of the plow could ride a train to the city. Americans enjoyed a new freedom to live where they wanted––riding on rails supplied by one robber baron in a train built by another.

Most important of all: the door of opportunity was open. The single most important tool for advancement is education. And education exploded. High schools were the engines of education. In the four decades after 1870, the number of high schools in America climbed to 10,000 from 500. Immigrants bet that if they did not escape the sweatshop, their children would. And that was a bet they won.

And what about those permanent monopolies? It turned out they were not so permanent. And that wasn’t because of antitrust action. It was because of competition. The best example was the almighty railroads. Even as Congress passed laws to try to curb big profits, the railroads’ power to dominate was already doomed. On the horizon stood the new trucking industry, ready to roll in.

Of course politicians ignored these realities. It was more fun to go after the rich with antitrust suits. President Theodore Roosevelt claimed that bringing down trusts would give the worker a “Square Deal”. Some say TR’s trustbusting caused a financial panic, the Panic of 1907. As it happened that Panic hurt the very workers Roosevelt aimed to protect, driving up joblessness to eight percent from 3 percent. Hardly a “Square Deal”.

Congress crafted a new institution to punish the rich: the income tax. This tax likewise failed to get the result its advocates advertised. Lawmakers insisted on high rates. They made the same arguments we hear today: higher rates reduce ine******y and squeeze money out of the top 1%. In response however, companies simply curtailed business. At least one in ten men was unemployed. In the 1920s, Congress responded by lowering taxes for top earners. Companies grew, and workers got what mattered more to them: jobs. And along the way came new innovations, such as electricity, even better than kerosene.

Given this record, it’s surprising that we vilify the Gilded Age. One problem is that most books portray this period as a kind of anti-wealth cartoon. Another problem is our politicians. The story of HAVE and HAVE NOTS is a story that evokes envy. And politicians enjoy playing on our envy.

That doesn’t mean we have to be played. The years 1880 to 1900 may have been gilded for some. But for many, they were golden.

I’m Amity Shlaes, author of Coolidge, for Prager University.

dtucker300 Loc: Vista, CA

https://www.prageru.com/video/the-market-will-set-you-free

Day 3: The Market Will Set You Free

Welcome to Day 3 of PragerU’s Economics 101!

It’s fashionable today in the media, academia, and l*****t circles to bash the concept of capitalism.
Socialists and many progressives claim that capitalism creates poverty. But what does the data show?
Former Hardee’s & Carl’s Jr. CEO Andy Puzder tackles this question, while explaining 2,000 years of economic history, in just 5 minutes.

Take a close look at this…Jonathan Haidt, the noted New York University psychologist, calls it "the most important graph in the world."

Why does he say that?

Because he knows this graph reveals a simple, inescapable fact: there is no substitute for free market capitalism as a promoter of human prosperity.


Let it be noted that Haidt is no one’s idea of a conservative. But when hard evidence stares him in the face, he’s not going to look away.

The graph is based on the research conducted by the late British economist, Angus Maddison. The numbers along the X-axis are years—two thousand of them. The numbers on the Y-axis are dollars—all of them, divided by the number of people on the planet. It’s what’s called GDP per capita, which is the world’s economic output divided by its population. GDP is considered the best measurement of a country's standard of living. And, in this case, the world’s standard of living.

Often when I show this graph to students, I get this comment: “That’s not capitalism; it’s just the impact of the Industrial Revolution.”

So I show them another chart by the Maddison Project. This one breaks the GDP hockey stick into regions. As you can see, there are a number of hockey sticks. But note that they don’t rise at the same time. The United States surged first.

Why?


Well, in a very fortuitous coincidence, the year 1776 witnessed both the signing of our Declaration of Independence and the publication of a book called The Wealth of Nations by the Scottish economist and philosopher, Adam Smith. In his book, Smith explained how to create a modern free market capitalist economy and the benefits of doing so.


America’s wise founders took Smith’s principles to heart, and within a mere 100 years—the blink of an eye historically—capitalism turned the United States from thirteen backwoods colonies into the world’s largest economy. And it has held that position ever since.

Western Europe shot up as well, but later. It rose steadily during the Industrial Revolution and then experienced a sharp rise after World War II when, between the end of the war and the mid-1960s, it fully embraced the free market.


Japan, too, shot up after World War II—surpassing Western Europe for the first time after the US helped the Japanese t***sition to a democracy and a free market capitalist economy.


Eastern Europe took off after it was released from the Soviet Union and socialism in 1991.


China did likewise after the Chinese moved away from strict socialism and implemented some limited free market policies. One can only imagine where China would be now if its leaders had fully unleashed the forces of the free market.

Yes—during this period of economic expansion, the wealthy got wealthier. That always happens when new wealth is created. But the middle class and the poor also greatly benefited.

Here’s another telling chart. This one is from the World Bank. In 1820, 94% of people lived in extreme poverty. Thanks to capitalism, by 2015 that number had declined to 9.6%—single digits for the first time in human history. Now, it’s still too many, but if we are going to reduce the number even more, we need to understand what caused the decline: free market capitalism.


If we combine the Angus Maddison hockey stick chart and the World Bank data on extreme poverty, what we get is something quite amazing: unprecedented global prosperity and an unprecedented decline in poverty across the globe over the past 200 years. That’s capitalism in a nutshell.

One more chart: Johan Norberg, a Swedish economic historian, shows us how well ordinary people do when they work in a free market economy.

Since 1990, hunger, poverty, illiteracy and child mortality have all declined significantly with the decline of socialism. This all happened while we added two billion more people to the world. Far more people; far less poverty. Better health outcomes; fewer babies dying. That’s what economic freedom—capitalism—can do.


President John Kennedy, a Democrat, said it best while making his case for significant tax cuts in 1963. He said, “A rising tide lifts all boats.” Kennedy didn’t believe that the poor only get richer when the rich get poorer. He believed everyone could get richer with economic growth. History has shown that he was right.


This whole capitalism vs. socialism debate is backwards:

It’s not those who advocate for free market capitalism who need to justify their actions. Rather, it’s those advocating for socialism—or any form of it—who have a lot of explaining to do.

I’m Andy Puzder for Prager University.

dtucker300 Loc: Vista, CA

Episode 4

https://www.prageru.com/video/as-the-rich-get-richer-the-poor-get-richer

As the Rich Get Richer, the Poor Get Richer
Daniel Hannan
5-Minute Videos
Apr 08, 2018

The rich are getting richer, and the poor are... also getting richer. What's driving this wealth creation process? In this video, Daniel Hannan explains why it is capitalism — and capitalism alone — that has led to the unprecedented enrichment that is the central fact of Western life.

“The rich are getting richer and the poor are getting poorer.”

“The top one per cent of people on the planet have half the wealth.”

“Western corporations are plundering developing countries.”

“Capitalism is on its last legs.”

Really?

The t***h is that global ine******y is tumbling. Yes, the rich are getting richer—but the poor are getting richer faster. And what’s driving that process? The market.

Look at the most basic measures: Literacy. Longevity. Infant mortality. Calorie intake. Height. More and more people are being lifted out of poverty.

I think of the changes just in my lifetime.

When I was born, in 1971, an American worker had to earn a month’s salary to be able to afford a TV set. Now, it’s two days.

In 1971, fewer than half of girls worldwide completed at least primary education. Now, it’s more than 90 percent.

In 1971, a stationary car emitted more pollution than a car moving at full speed today.

Go a little further back. In the seventeenth century, the most powerful man in the world was Louis XIV of France. Every night, he’d have 40 dishes prepared for his dinner, and he’d pick the one he felt like. Think about it: A receptionist today can stop off at a store on her way home and have not only a wider choice than that king, but a fresher one and a healthier one. We all live better than Louis XIV.​

What has caused that miracle? Not any UN development program. Not any government aid scheme.

What caused it was the market.

The most rapid falls in poverty are happening in countries that are joining the global trading system. Compare growth rates in free-trading Colombia and protectionist Venezuela; or in free-trading Vietnam and protectionist Laos; or in free-trading Bangladesh and protectionist Pakistan.

It’s the same story every time.

China after 1979, India after 1991. You remove barriers to trade. Prices fall. Your people no longer have to work every hour just to afford food and basic commodities. They have time to invent and make and buy and sell other things. The whole economy is stimulated. Poverty falls.

OK, you might say, so maybe capitalism works; maybe people are better off. But isn’t there a cost? Doesn’t it make us more materialistic? Doesn’t it make us greedier?

If by “greed” you mean a desire for material wealth, that’s part of the human condition. It’s in our DNA or, if you prefer, it’s in our fallen nature. Under any system—socialism, c*******m, f*****m, absolute monarchy, theocracy—people want more stuff.

The unique quality of capitalism is that it structures the incentives so that the way to succeed—the way to be “greedy,” if you insist on using that vocabulary—is to offer a service to the people around you.

Under every other system, you get on by sucking up to those in power: commissars, or kings, or dictators.

But under a free market system, you get on by offering consumers something they want.

As the economist Joseph Schumpeter put it, the achievement of capitalism is not to provide more silk stockings for princesses, but to bring them within the reach of the shop girl.

So, why can’t we see it? Why do well-intentioned, idealistic young people oppose free trade and market liberalization, thinking that they’re standing up for the poorest people on the planet, when in fact they’re doing the opposite?

A big part of the answer is aesthetic. As the Victorian novelist, Anthony Trollope, wrote, "Poverty, to be scenic, should be rural."

I grew up in Lima, Peru which, in those days, was surrounded by shantytowns known as las barriadas.

Western visitors would come, and they’d visit Machu Picchu, and then they’d ask in bewilderment why people would migrate from the Andes to the slums.

Why did they swap the clean air and the mountain scenery for open sewers and traffic fumes?

It’s a very first world question. No Peruvian ever needed to ask why you’d leave a place with no electricity, no school, no clinic, and no jobs.

Those shantytowns, those barriadas, for most of their residents, are t***sitional. They’re busy places, humming with enterprise, and the people in them sense that they’re on their way up. If we want to help those people, the best thing we can do is let them sell us their stuff.

Capitalism has achieved things which earlier ages ascribed to gods and magicians. It’s abolishing hunger and disease and want.

It’s led to an unprecedented enrichment that is the central fact of your life. The fact that you’re watching this video is enough to tell me that.

Now let it work its magic in the rest of the world.

I’m Daniel Hannan for Prager University.

dtucker300 Loc: Vista, CA

Day 5: Seven Economic T***hs

It’s Day 5 of PragerU’s Economics 101 and we have another amazing 5-Minute Video lined up just for you! 🙌

https://www.prageru.com/video/seven-economic-t***hs

David Bahnsen was one of America’s top financial advisors and in today’s 5-Minute Video, David explains the “seven economic t***hs" that you need to know.

You can learn a lot about basic economics from great quotes.

Here are seven.

1. “…Capitalism is a system that begins not with taking but with giving to others.” — George Gilder

This sounds counter-intuitive, but Gilder is right. The underlying motivation of the entrepreneur is to satisfy not his need, but his customers. That’s his only path to success and profitability.

And once profitable, the entrepreneur invariably puts his new capital to work expanding his business, which in turn creates better products, more jobs, and more wealth for more people.

2. “Nothing contributes so much to the prosperity and happiness of a country as high profits.” — David Ricardo

To judge profits achieved in a free economy without understanding what they mean to the nation at large is a failure to understand economics.

Countries where citizens are generating healthy profits by their individual efforts are countries with a higher tax base, higher research and development, better public services, more robust charity and philanthropy, and ultimately greater happiness and quality of life.

3. “Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone.” — Frédéric Bastiat

Our conversations about government spending would be so dramatically different if we first realized that the government has no money to spend that it does not first take from someone else.

Whether it be confiscation (taxation) or debt (future confiscation), government spending, legitimate to the extent that it funds the necessities of government, is always an extraction of wealth from the private sector.

Government needs revenues to function. Everyone agrees on that. But beyond a certain point, who will spend the money more effectively: bureaucrats or the people who worked to earn it?

4. “Differences in habits and attitudes are differences in human capital, just as much as differences in knowledge and sk**ls—and such differences create differences in economic outcomes.” — Thomas Sowell

No attempt to manufacture an equal economic outcome can ever succeed. This quote explains why: differences among people—such as their habits, abilities, attitudes, and goals—always lead to ine******y.

No matter how hard governments may try, they can’t force people to be the same. This is called reality.

5. “If history could teach us anything, it would be that private property is inextricably linked with civilization.” — Ludwig Von Mises

Without property rights freedom can’t exist. If individuals don’t have control over their property, then the state does. If the state owns your property, the state owns you.

One of the notable achievements of the Left has been to correlate private property with greed. This often puts defenders of private property on their heels.

It shouldn’t.

Owning property gives people dignity. And people who own property will be far better stewards of that property than any disinterested third party.

All lovers of freedom should be staunch defenders of private property. Without it, a productive and free society is impossible.

6. “The free market is not a system… It is not something that Washington implements. It does not exist in any legislation, law, bill, regulation, or book. It is what you get when people act on their own, entirely without central direction, and with their own property…” — Jeffrey Tucker

Nobody invented capitalism. It’s what free people do naturally—exchange goods and services for their own benefit.

Before there are interventions, regulations, stipulations, and controls–there are humans acting, associating, cooperating, building, and creating. That economic freedom is what we call capitalism.

When people are free to do what they want—within the bounds of the law, of course—they do their best work. Simple—and wonderful—as that.

7. “Under capitalism, man oppresses man. But under socialism, it’s the other way around.” — Russ Roberts

Human beings are flawed creatures. They will make bad choices no matter what kind of economy they’re operating in.

The Left thinks we can avoid the dark side of human nature if we just get rid of capitalism. But all the Left does is replace one flawed actor, the individual, with another flawed, but more powerful actor: government bureaucracy at best and a totalitarian monster at worst.

Bottom line:

If you want to live a productive, fulfilling, and meaningful life the free market is your best chance. Really, it’s your only chance.

I’m David Bahnsen, author of There’s No Free Lunch: 250 Economic T***hs, for Prager University.

dtucker300 Loc: Vista, CA

Day 6: Lower Taxes, Higher Revenue

Welcome to Day 6 of PragerU’s Economics 101. You’re almost one week in!

https://www.prageru.com/video/lower-taxes-higher-revenue



Let’s keep the momentum going with today’s 5-Minute Video on taxes.

The question of what to do with taxes is widely debated.

Do higher taxes create a better society or lead to undesirable outcomes?

Is there a certain point at which higher tax rates actually reduce the amount of revenue the government collects? Tim Groseslose, a prominent economist and professor from George Mason University, has done a lot of research on this topic.

Learn the surprising facts about taxes that he discovered in today’s 5-Minute Video.

Lower Taxes, Higher Revenue
Tim Groseclose
5-Minute Videos
Feb 03, 2014

Should Taxes Be Higher? It's the million dollar question! Up? Down? No change? Where in the world should taxes go? In e******n years, the question of tax rates fills the airwaves. In non-e******n years, the question of tax rates, again, fills the airwaves. So what's the answer? George Mason University Professor of Economics Tim Groseclose explains his research on the topic. Basically, there's a certain point at which higher tax rates actually reduce the amount of revenue the government collects. What's that point? When are tax rates too high? Learn a valuable lesson in economics, and public policy.

Let’s discuss an important concept from economics, the Laffer Curve.

This concept is named after the man who developed it, Arthur Laffer, a major American economist who has taught at the University of Chicago, University of Southern California, and elsewhere.

The Laffer Curve illustrates the two most important things we need to know about taxes: how much money the government can raise from taxes and at what level of taxation the government might start getting less, not more, revenue.

The Laffer Curve is illustrated here by a two-dimensional graph. The horizontal line is the tax rate that the government chooses, and the vertical line is the revenue that the government receives from that tax rate.

First, because zero times any number is zero, if the tax rate is zero, then the government receives zero revenue. Accordingly, zero-zero is our first point on the curve. Now suppose the government chooses a very small tax rate, say 1 percent. The government will then begin to receive some revenue from citizens. This means that another point on the curve must be something like this. Now suppose the government charges a 2 percent tax rate, then everyone would agree that it will receive even more revenue -- which means that another point on the graph must be something like this. And if the government keeps raising the rate, then revenue will continue to go up. at least when we’re in the low-tax-rate part of the graph.

This means that if we fill in the curve, it has an upward slope -- at least when we’re in the low-tax-rate-part of the graph.

Now suppose the government charges a 100% tax rate. If this happens, then no one would work. That is, why would anyone work when the government is going to take all the money that they make? And if no one works, the national income would be zero. This means that government revenue would be 100% of zero, or zero. This means that another point on the curve must be here.

Now let’s complete the curve. When we do, we see that the curve must have a hump. That is, it could look like this, or this, or this, but it has to have a hump. This is simply because the revenue line has to go up in the low tax-rate part of the graph and has to start going down to reach the point we drew at the 100% tax rate.

But if the curve slopes downward it implies something remarkable -- something that few of those who push for higher and higher taxes want to admit. It means that when tax rates are high, if you make them higher, you’ll actually bring in less revenue to the government.

This has in fact occurred in practice. For instance, during the Great Depression, when Congress passed the Hawley-Smoot tariff bill, although the bill raised taxes on imported goods, the revenue that came from those taxes actually decreased. A more recent example occurred in the early 1980s. After President Reagan and Congress drastically reduced the tax rates on the rich, the tax revenue that came from the rich actually increased.

All economists -- even the most leftwing ones -- agree that the true Laffer Curve, the one that reflects real life, has a hump, and that therefore the curve has a downward sloping part, meaning at some point tax revenues start going down when you increase rates. So where, then, do economists disagree? They disagree about exactly where the hump occurs.

When I took my first economics class, in 1984 at Stanford University, the textbook said that the hump occurs somewhere around the 70% tax rate. But apparently was I taught something wrong! New evidence from an unexpected source suggests that the hump occurs at a much lower tax rate, something around 33 percent.

That source is a study by Christina Romer and her husband David Romer. Both are economics professors at the University of California Berkeley. Christina Romer was the chairman of President Barack Obama’s Council of Economic advisors. In other words, the study was written by one of the most influential liberal economists in the United States. And it was published in the American Economic Review, the most widely respected economics journal in the world.

The study examined how national income responds to tax rates. But as far what concerns us here, they key point is, that if you do the math, the results imply that the hump on the Laffer Curve occurs where the tax rate is around 33 percent -- much lower than economists previously thought.

Let’s now put these findings into political terms. They suggest that, no matter what your politics, you should not want tax rates to be above 33 percent. Obviously, conservatives and many moderates think rates should be lower than that. But even if you are an extreme leftwinger and your only goal is to make government as big as possible -- you should still oppose a tax rate higher than 33 percent. The reason is that, as the Romer and Romer study suggests, when taxes go higher than that, the government actually gets less money.

Everyone of every political persuasion should pay attention to the Romer and Romer Study and its important implications. They suggest that if we decrease tax rates, government revenues might actually rise.

I’m Tim Groseclose, professor of political science and economics at UCLA for Prager University.

dtucker300 Loc: Vista, CA

Day 7: No Free Lunch

Welcome to Day 7 and congratulations on finishing your first week of PragerU’s Economics 101!

Milton Friedman: No Free Lunch
Johan Norberg

Jun 20, 2022
Few people have had as profound an impact on modern economics as economist Milton Friedman. His Nobel Prize-winning ideas on free enterprise resonated throughout the world and continue to do so. Johan Norberg, Senior Fellow at the Cato Institute, tells Friedman’s fascinating story.

“There is no such thing as a free lunch.”

That’s basically all you need to know about economics—or for that matter, about life.

Everything comes with a price and there are no perfect solutions, only trade-offs.

If you think you’re getting something for “free,” you’re fooling yourself. One way or another somebody has to pay for it—and that “somebody” usually includes you!

This bit of priceless wisdom was popularized in the 1970s by University of Chicago economist, Milton Friedman. And it made him, along with his many other penetrating insights, the most influential economist of his time.

Born in Brooklyn in 1912, the son of two poor Jewish immigrants from what is now Ukraine, Friedman never took the opportunities America offered him for granted. He dev**ed his life to making the case for free enterprise. No one has ever made it more persuasively.

His scholarly work centered on monetary theory, the idea that the growth or contraction of the money supply has a profound impact on a nation’s economy. The Great Depression of the 1930s, which had caused so much suffering, and which Friedman had lived through personally, made his case.

Friedman showed that the Depression was not a failure of an out-of-control free market, but an out-of-control Federal Reserve—the Fed—the central bank of the United States.

Instead of keeping the money supply stable in a recession, the Fed choked it off. This started a series of “bank runs”—people literally running to get their money out of their bank before their bank ran out of money.

But that, according to Friedman, was not the Fed’s biggest mistake. The biggest mistake was that the Fed existed at all. No Fed, Friedman believed, no Great Depression. The free market would have figured things out on its own just as it had in previous economic upheavals.

But the Fed’s members had no confidence in the market. Their confidence was in their own ability to fine-tune America’s incredibly complex economy.

This confidence was misplaced. The Fed, and the President who dominated the decade, Franklin Roosevelt, made one bad decision after another, and the Depression d**gged on.

Friedman saw another grave mistake being done in the early 1970s. He made the bold prediction that the Fed’s efforts to print money to keep the country out of a recession would lead to something worse: stagflation, the combination of high inflation and high unemployment.

And that’s exactly what happened. Many economists who had previously dismissed Friedman now acknowledged that he was right. In 1976, he received the Nobel Prize in Economics, yet another vindication of his work.

But as perceptive as his economic theories were, his special gift was his ability to explain his theories to the public and his willingness, indeed eagerness, to do so.

He wrote best-selling books and had a column in Newsweek for 18 years. In 1980 he hosted the popular ten-part TV series Free to Choose for PBS.

The theme of the show was pure Friedman: while others trusted the government to make good decisions, Friedman trusted people and the market.

Excessive government control, regulation, and taxation, he persuasively argued, distorted incentives and put money in the hands of politicians and bureaucrats who had not earned it and suffered no consequences if their policies failed.

There were other ways government intervention distorted the free market, Friedman said: protectionism, for example, increased prices for consumers and discouraged innovation; overregulation allowed big business with its lawyers and lobbyists to drive out small competitors; minimum wage laws led to fewer jobs for those who needed them most.

It all followed from Friedman’s basic idea that millions of people working for their own purposes could make better decisions than a bunch of unelected bureaucrats who had no stake in the outcome.

But Friedman didn’t just complain about the problem. He had solutions ready when and where they were needed.

When c*******m collapsed in Eastern Europe in the late 1980s, economists in places like Estonia, Poland, and Czechia who had read Friedman in secret, sometimes by candlelight, now embraced his low tax, light regulation model to great effect.

And when my own country, Sweden, faced a welfare state-induced crisis in the early 1990s, it was Friedman’s ideas that guided the Swedish reformers. They opened up markets, tightened social security benefits, and in 1992, Sweden implemented Friedman’s idea about a national school voucher system.

Friedman’s influence spanned the globe. Israel, Chile, New Zealand, the UK, and of course, the United States put his ideas into practice. They worked.

The Economist magazine appropriately (and cleverly) titled its obituary of the great economist in 2006, “How Milton Freed Man.”

As his fame spread, Friedman always held fast to his guiding principle: that freedom is not the rule but the exception. “The typical state of mankind,” he wrote, “is tyranny, servitude, and misery.”

So, the price of liberty is eternal vigilance—and knowing Milton Friedman.

I’m Johan Norberg, Senior Fellow at the Cato Institute, for Prager University.

dtucker300 Loc: Vista, CA

Day 8: Minimum Wage Cost Me My Job

Minimum Wage Cost Me My Job
Simone Barron

Jul 13, 2020
What happens when politicians decide they are in a better position than business owners to know how much workers should be paid? We don't have to guess. Cities like Seattle and New York have already done so with their $15/hour minimum wage mandates. Simone Barron, a lifelong restaurant worker, recounts how "helping" her impacted her wallet, her career, and her life.

Like the fair-minded Progressive that I was, I thought a $15 minimum wage was an absolute good.

Then, I had a head-on collision with reality.

It’s a funny thing about reality. It just is. You can’t wish it away.

So, here is my cautionary tale.

For over three decades I had a good job working as a server. I have worked in some amazing, award-winning restaurants in Seattle.

I enjoyed the work. Met wonderful people. And I was making really good money.

I wasn’t making much, per hour—that’s true—but in my business, the magic is in tips. On a typical night, I would make on average $25 to $50 an hour.

Believe me, I earned it. I took p***e in my work. I wanted every dining experience to be a memorable one for my guests.

I also loved my job for THIS reason: I had flexibility. I could plan my work schedule. That was very important to me because I had a growing son. It was a good life.

Then, in 2015, the Seattle City Council raised the minimum wage from $9.47 to $15 an hour—a 58 percent hike!

Great for the working stiff, right?

Well, hang on, because here comes Mr. Reality.

The business owner, the person who signs the checks, has to find a way to pay for this massive new expense. For Walmart or Microsoft or a large restaurant chain, this might not be a problem. For a local restaurant owner, it’s a nightmare.

Contrary to popular opinion, most restaurants don’t have big profit margins. In fact, most are razor thin.

Seattle restaurant owners, faced with this shock to their bottom line, raised prices, reworked their menus and created new compensation models.

Some did away with tips altogether, substituting a flat service charge as a way of navigating the climbing wage. That change in the tipping model caused a dent in my pocketbook. The rise in the wage did not cover the loss of the tips.

And, of course, they cut back on employee hours and support staff, too.

But for many establishments, none of these cost-saving measures worked. Restaurants, some that had been in business for decades, many family-owned, closed — including the ones I worked for.

Good servers don’t grow on trees. I was able to score an interview at another amazing restaurant.

Then, before I could even confirm the interview, that one closed, too. Same reason. The $15 minimum wage cut their profits down to nothing.

So, let me add this up for you.

I make a lot less money now than I did before Seattle decided to do what was supposedly in my best interest.

I used to be able to pay my bills as they came due.

Now it’s a juggling act.

I used to have enough money to support my son’s extra-curricular activities.

Now I often just say no.

Before the minimum wage increase, I had one job and worked four days a week.

After the wage hike, I had two jobs and worked six.

With my sk**ls and a tipping culture, I used to average 18 to 20 percent or more on any check. Now, instead of tips, I get a flat 14 percent, part of the 20 percent service charge the restaurant owner tacks on the bill. I still p***e myself in providing good service, but the incentive to go the extra mile is gone. There is no way to maximize my income.

And what’s Seattle’s answer to my problem? To raise the minimum wage again!

The progressive idea is that you should be able to make a "fair wage". But if you have no job or are working more for less, how is that fair?

How is it fair to my friend, who worked his way up from busboy to sommelier (the fancy name for the person who manages a restaurant’s wine list)? He lost his job when his restaurant closed due to the minimum wage increase. Or, my former boss, who went from a cook to an owner, and couldn’t survive the double blow of the minimum wage law and the c****av***s?

And it’s not just a “Seattle problem.”

In New York City, raising the minimum wage to $15 an hour pushed the restaurant industry into a recession. To stay afloat, seventy-five percent of owners reduced employee hours, and forty-seven percent eliminated jobs. San Francisco is in the same boat.

Mandating minimum wage laws might be a winner for progressive politicians and ivory tower economists, but it's a loser for those of us who have to live with the consequences.

Unless fair-minded people speak out, those consequences only figure to get worse as more states, and maybe even the federal government, succumb to the false promise of raising the minimum wage.

I’m Simone Barron, with The Full Service Workers Alliance, for Prager University.

dtucker300 Loc: Vista, CA

Day 9: Is C*******m Moral?

Dennis Prager
5-Minute Videos
Apr 12, 2021

Capitalism has produced freedom and crushed poverty. C*******m has produced poverty and crushed freedom. So why is there still a debate as to which system is more moral? Dennis Prager explains.

Motives are much less important than behavior. We all know this: If someone has good intentions, but treats people badly, those good intentions mean nothing.

As it is with individuals, so it is with governments. Capitalism might sound less noble than c*******m—the individual pursues success to the best of his abilities (that’s capitalism) versus everyone shares everything equally (that’s c*******m). But it is capitalism that has produced freedom and it alone has lifted millions from poverty while c*******m has kept millions impoverished and without exception crushed freedom.

Capitalism for all its imperfections enables a decent society. C*******m, wh**ever its stated intentions, leads to evil. Yet, increasingly, people either ignore or deny the evil of this ideology, which, within a period of only 60 years, created modern totalitarianism and deprived more people of human rights, and tortured and k**led more people than any ideology in history.

How can we explain this? There are two ways.

One is ignorance: People just don't know the t***h about c*******m.

The second is willful blindness: People know the t***h, but choose to ignore it because the t***h about c*******m's horrors is too painful to confront.

Given the sad state of our educational system, we can assume most people fall into the first category. They just don't know. So let me offer some facts.

But before I do, I need to address another question: Why is it important that everyone know what c*******m did?

Here are three reasons:

First, we have a moral obligation to the victims of c*******m not to forget them. Just as Americans have a moral obligation to remember the victims of s***ery, we have the same obligation to the billion victims of c*******m, especially the hundred million who were murdered.

Second, the best way to prevent an evil from reoccurring is to confront it in all its horror. The fact that many people today, especially young people, mention c*******m as a viable option for modern society, proves they don’t know c*******m's moral record. Therefore, they do not properly fear c*******m — which means this evil could happen again.

And why could it happen again? That brings us to reason number three. The leaders of c*******t regimes and the vast number of people who helped those leaders torture, ens***e, and murder were nearly all normal people. Of course, some were psychopaths; but most were not. Which means that any society — including free ones — can devolve into c*******m or some analogous evil.

Now some facts: Based on the authoritative Black Book of C*******m, written by six French scholars and published in the United States by Harvard University Press, here are the numbers of people murdered by c*******t regimes—not soldiers; ordinary civilians.

Vietnam: 1 million. Eastern Europe: 1 million. Ethiopia: 1.5 million. North Korea: 2 million. Cambodia: 2 million. The Soviet Union: 20 million. China: 65 million.

And the numbers are conservative.

And, of course, these numbers do not describe the suffering endured by hundreds of millions of people who were not murdered: the systematic stripping people of their right to speak freely, to worship freely, to start a business, or even to travel without party permission; no non-c*******t judiciary or media; the poverty of nearly all c*******t countries; the imprisonment of vast numbers of people; and, of course, the trauma suffered by the hundreds of millions of friends and relatives of the murdered and imprisoned.

These numbers don't tell you about the frozen millions in the vast Soviet Siberian prison camp system known as the Gulag Archipelago; or the Vietnamese c*******ts' routine practice of burying peasants alive to terrorize other peasants into supporting the c*******ts; or Mao Zedong's regular use of hideous tortures to punish opponents and intimidate peasants.

People associate evil with darkness. That’s not accurate: It is easy to look into the dark; it is very hard to stare into bright light. One should therefore associate evil with extreme brightness, given that people rarely look at real evil. And those who do not confront real evil often make up evils like "s******c r****m" in 21st-century America, or "toxic masculinity," or "patriarchy" that are much easier to confront.

The Book of Psalms states: "Those of you who love God must h**e evil."

If you don't believe in God, here's another way of putting it: "Those of you who love people must h**e evil."

If you don't h**e c*******m, you don't care about, much less love, people.

I'm Dennis Prager.

dtucker300 Loc: Vista, CA

Day 10 Capitalism or Socialism: Which One Is More Democratic?

https://www.prageru.com/video/capitalism-or-socialism-which-one-is-more-democratic

Why is socialism so popular?

Less than ten years ago you couldn’t refer to “socialism” in a positive way and hope to have a career in American politics.

Socialism was referred to as the “s” word.

Now it is affirmed, either explicitly or implicitly, by just about everyone on the Left.

And, amazingly, given socialism’s record of failure, the socialists seem to be gaining ground.

Why? What makes socialism so attractive to so many?

Socialism, according to its proponents, is more democratic and therefore more moral than capitalism.

L*****t filmmaker Michael Moore explains it for us.

“Democratic socialism means everyone has a seat at the table and everybody gets a slice of the pie.”

The famed socialist writer Irving Howe wrote something similar in his 1982 autobiography, “We believe that the democracy…in our political life should also be extended deeply into economic life.”

The basic idea here is that socialism is vindicated through its roots in popular consent. If a majority of people, working through their elected representatives, declares something to be a public entitlement—say free college or free healthcare—then they are justified in extracting resources from those who create wealth to pay for it.

As Nathan Robinson argues in his book Why You Should Be a Socialist, the moral imperative is to place the economy under the control of “the people.”

Sounds good, at least superficially… until you dig a bit below the surface.

First, what direct control do “the people” really have over any government institution? What control do the British people have over the National Health Service? What control do Americans have over the Department of Motor Vehicles or the U.S. Post Office? The answer of course is none. Given its practical impossibility, genuine popular control over government institutions is a mirage.

Second, what if 51 percent of Americans v**e to confiscate the resources of a single person, say Bill Gates? Does that make it right?

Under an authoritarian socialist government, a single dictator seizes the fruits of your labor. Everyone is against that. Under democratic socialism, a majority does. The end result is the same––you’ve been robbed.

The fundamental problem with democratic socialism, however, is its assumption that in a free-market system, the economy is not under the control of the people. This is exactly the opposite of how things work.

Let me explain.

Each of us are not only citizens; we are also consumers. These are overlapping categories: every citizen is a consumer, and every consumer is also a citizen. The consumer, like the citizen, is a v**er. As citizens, we v**e once every two or four years; as consumers, we v**e many times a day.

The citizen v**es with a b****t which costs him nothing, except the inconvenience of going to the polls. The consumer v**es with his money which costs him a lot—all the time and effort he put in to earn that money.

Only a fraction of citizens are eligible to v**e at the b****t box, but every consumer v**es in the marketplace—even felons, even children. I*****l a***ns cannot v**e for political candidates, but they too v**e with their money. Moreover, citizens participate in a system of representative democracy -- their views are filtered through the politicians who represent them. Consumers, by contrast, v**e in a system of direct democracy.

If you prefer an Audi to a Lexus or the Apple iPhone to the Samsung Galaxy, you don’t have to elect some other guy to exercise these preferences; you do it directly yourself, by paying for them. Here we see the secret of how those billionaires like Jeff Bezos got so rich. We made them rich! The ine******y that socialists complain about is the result of popular mandate. Want fewer billionaires? Stop buying their stuff!

Free markets work not through “greed” or “exploitation” but by satisfying our wants, and the most successful entrepreneurs are those who anticipate our wants even before we have them. No one wrote Steve Jobs asking him to make a phone that took pictures, allowed people to text messages, and listen to music. He conceived it and built it before we knew we couldn’t live without it.

Market economies involve a level of popular participation and democratic consent that politics can only envy. We don’t need to extend democracy from the political to the economic sphere; we already have it.

And the moral grounding of free markets, just like that of our political system, is in the will of the people—in the latter case, a will expressed only on E******n Day; in the former case, a will expressed deliberately, emphatically, constantly.

We don’t need socialism.

Because we already have something more moral and more democratic.

It’s called capitalism.

I’m Dinesh D’Souza for Prager University.

dtucker300 Loc: Vista, CA

Day 11: Is Denmark Socialist?

https://www.prageru.com/video/is-denmark-socialist

I am a citizen of Denmark, the Disneyland of socialism, where everybody is happy and healthy.
Forget the Soviet Union, Cuba, Venezuela and all those power-mad Marxists who got it wrong. Denmark is the model to follow.

There's just one problem. It's a fantasy.

For it to be true, Denmark would have to be a socialist country. But it's not. If it were, it would have gone "Venezuela" a long time ago. Sorry to bring all the new fans of socialism the bad news. But that's the reality.

Yes, it's true that Denmark has high taxes and a high level of government spending – key features of a socialist mentality. But in almost every other respect, Denmark is a full-on free market capitalist country.

And it has some of the strongest protections of individual property rights in the world.

And it's a particularly easy place to open a business. According to the World Bank, there is less bureaucratic red tape in Denmark than in any other country, except for New Zealand and Singapore.

And the labor market is less regulated than in most countries. Here's something you probably didn't know: there are no minimum wage laws in Denmark.

It's not surprising then – or maybe it is surprising, given all the misinformation out there – that Denmark ranks consistently as one of the top-ranked free market economies in the world by The Fraser Institute in Canada and The Heritage Foundation.

So, if Denmark is not a socialist country, what is it?

The answer is pretty straightforward: it's a small capitalist country (about the size and population of Maryland) whose citizens pay oodles in taxes in exchange for oodles in benefits.

Well, what's wrong with that? you might ask.

Only this: for the government to pay out such benefits, you need citizens to make enough money to pay the necessary taxes.

And that's only possible through a free market economy.

Let me explain – with some Danish history.

Denmark, like its Scandinavian neighbors, Sweden and Norway, made a remarkable economic recovery after the Second World War. The combination of a highly productive work force and – get this – low taxes created a lot of wealth.

So like every other wealthy welfare state, Denmark became wealthy before it created the welfare state.

Relative to Europe, Denmark's economic high-water mark was in the 1950s; relative to the US, it was the early '70s. It was then, in the late '60s and early '70s, that the country's ruling elite became preoccupied with wealth redistribution. But the price paid for this social experiment was steep and swift.

The expansion of public spending led to a severe economic crisis. The national debt skyrocketed. It took decades of consolidation, structural reforms and curtailing of welfare schemes to straighten out this mess.

This is the stuff you never hear about from the "Danish model" crowd.

The sharp tax hikes and spending also sparked a widespread popular revolt and led to the emergence of the "tax protestors" party, Fremskridtspartiet. Even though the party no longer exists, the widespread desire to cut taxes remains.

It's worth noting that the welfare state originally began with government pension payments to the elderly. These social security-like payments are now in the process of being overtaken by private pension savings plans – the Danish equivalent to a 401K. That's right – in reality, Denmark is gradually moving away from US-style social security. It can't afford it. Denmark, the so-called socialist model, is returning the responsibility for retirement savings back to its citizens.

And what about health care...free – right?

Nothing is free. Danes pay for their health care through high taxes. Private health insurance is available, however. It's becoming more and more popular as long wait times associated with government-run medical care becomes less and less popular.

But in a welfare state, education is free – right?

Well, that's another thing about "free": it doesn't mean ideal. Almost one in five parents in Denmark chooses to send his or her children to private schools, paying part of the bill themselves.

Yes, college is free, and even includes a living allowance, but there is a growing problem of getting students to graduate. Many wish to stay students and be supported by the state – one of those welfare-state problems socialists don't like to talk about.

And, again, all this "free stuff" comes with a price. The average Dane pays 50% of his income in consumption and income taxes – that's right, I said 50% – while earning 15% less than the average American. After taxes, an average American has a 27% higher disposable income than a Dane.

Don't get me wrong – grey winters aside, Denmark has much to recommend it.

It's just that being a socialist paradise isn't one of them.

I'm Otto Brøns-Petersen, economist for The Center of Political Studies in Copenhagen, Denmark, for Prager University.

dtucker300 Loc: Vista, CA

Day 12: The Progressive Income Tax: A Tale of Three Brothers

https://www.prageru.com/video/the-progressive-income-tax-a-tale-of-three-brothers

Once upon a time, there were three brothers, triplets, named Tom, Dick, and Harry Class. They were raised in the same home, with the same parents, had the same IQ, same sk**ls and same opportunities. Each was married and had two children. They were all carpenters making $25 per hour.

While they were very similar in all these respects, they had different priorities.

For example, Tom, chose to work 20 hours per week, while his brother, Dick worked 40 hours and Harry 60.

It should also be noted that Harry's wife worked full time as an office manager for a salary of $50,000. Dick's wife sold real estate part time 10 hours a week and made $25,000 per year. Tom's wife did not work.

Tom and Dick spent all of their family income. Since they paid into Social Security they figured, they didn't need to save for retirement. Harry and his wife, on the other hand, had, over many years, put away money each month and invested it in stocks and bonds.

Here's how it worked out: Tom made $25,000 a year, Dick and his wife made $75,000 and Harry and his wife, $150,000.

When a new housing development opened up in their community, the brothers decided to buy equally-priced homes on the same private street.

One day the brothers decided to pool their funds for the purpose of improving their street. Concerned about crime and safety, and wanting a more attractive setting for their homes, the three families decided to install a security gate at the street's entrance; repave the street's surface; and enhance the lighting and landscaping. The work was done for a total cost of $30,000.

Harry assumed they would divide the bill three ways, each brother paying $10,000. But Tom and Dick objected. "Why should we pay the same as you?" they said. "You make much more money than we do." Harry was puzzled. "What does that have to do with anything?" he asked. "My family makes more money because my wife and I work long hours, and because we have saved some of the money we've earned to make additional money from investments. Why should we be penalized for that?"

"Harry, you can work and save all you like" Tom countered. "But my wife and I want to enjoy ourselves now, not 25 years from now."

"Fine, Tom. Do what you want. It's a free country. But why should I have to pay for that?

"I can't believe you're being so... unbrotherly," Tom argued. "You have a lot of money and I don't. I thought you'd be more generous."

At this point, Dick, the peacemaker in the family, entered the conversation. "I've got an idea," Dick said. "Our combined income is $250,000, and $30,000 is 12 percent of that amount. Why don't we each pay that percentage of our income? Under that formula, Tom would pay $3,000, I would pay $9,000, and Harry would pay $18,000."

"I have a much better idea," said Tom. "And one that's fairer than what you're proposing."

Dick and Harry turned to Tom.

"Harry should pay $23,450; Dick, you should pay $6,550; and I will pay nothing."

To Dick this sounded completely arbitrary, and not really fair. But it did have one big plus. His share would be $2,450 less under Tom's formula than under his own. So, he decided to be silent.

Harry, however, was stunned. "You want me to pay almost 80% of the bill despite the fact that each of us is receiving the exact same benefits? Where did you get such a crazy idea?"

"From no less an authority than the U.S. government," Tom responded, as he pulled out a gray booklet.

"It's all right here in the IRS tax tables. This is the progressive income tax system all U.S. taxpayers live under, and I don't see we should be any different. In fact, I believe all future improvements should be paid in this way."

"Works for me," said Dick. So, by a v**e of two to one, the cost of the street improvements was divided as Tom had proposed, even though they benefited equally, and even though the reason Harry had more money was that he and his wife had worked many more hours than his brothers and their wives, and saved some of what they had earned instead of spending it all.

Tom and Dick lived happily ever after with their new arrangement. Harry grumbled a lot, but whenever he complained his brothers called him greedy and selfish.

The end.