I'm reading the Armchair Economist, just for fun, and at one point, the author describes a very simple model. In short, both Jack and Jill share a well, and both draw water from it. Jack earns £10,000 a year, and pays 10% of that, £1000, towards the upkeep of the well. Jill earns £100,000 a year, and pays 5%, £5000 of that, towards the upkeep of the well. In which direction is this model unfair?
My first instinct is to say that it's unfair to Jill. In effect, she's paying five times as much as Jack for the same water. In theory, she could just buy the well, pay £6000, or 6% of her income towards the upkeep, and charge Jack the same £1000 a year for his water. No one gains anything, no one loses anything. If she felt cruel, she could charge Jack even more than £1000. I believe that's called capitalism, and it's probably why she has that income in the first place.
I suppose they could each pay £3000 each, but that's a much higher proportion of Jack's wages. After all, on on the one hand, it seems to me slightly ridiculous that Jill should be forced to subsidise Jack just because she can. On the other hand, that's how the NHS, for example, works. Rather than everyone purchasing health insurance for the same price, the rich subsidise the poor by paying a higher amount towards the upkeep, even though that's a lower proportion of their wages (or sometimes a higher proportion). Of course, people in the UK do have the option of private medical treatment, but their taxes still go towards the upkeep of the NHS.
I'm very attached to the NHS, but I do need to wonder if that's just habit. It's like a safety net. Would our society be better off if everyone were simply in charge of choosing how much to pay for their medical care? Well, really, it depends how you measure 'better off'. If Jack and Jill each paid half towards the upkeep of the well, Jill only gives 3% of her wages while Jack gives 30%. He may well decide that, rather than drink that much water, he'll simply go with homemade moonshine. That loss leaves Jill paying the full £6000 towards the upkeep of the well without the recompense of Jack paying her £1000 to use it. He has no water, she's spending more. They're both worse off.
The other option is for each of them to pay around 5.5%. Jill pays £5500, and Jack pays £550, with the extra £50 going...somewhere? I did try to work out the exact amount, but got bored. It's something past 5.455. Of course, that doesn't illeviate the initial problem of Jill paying more than Jack, and working out the exact amount wouldn't be practical in a larger society (it's annoying with just two people to consider).
...and this is why economists don't go into politics.
I'm a mathematician really, economics is just my idea of fun.XD
fiat_knox .