While studying tax policy, I began to contemplate a question about what people would prefer in life. If you wouldn’t mind, leave a comment telling what you think (and why). There is, obviously, not a "right" or "wrong" answer.
Imagine two worlds. You could choose to live in either one, and the two worlds are completely identical except for the salaries. Now, which would you rather live in:
World A: In this world, you have income of $50,000 a year and everyone else in the world gets $25,000 a year.
World B: In this world, you have income of $100,000 a year and everyone else in the world gets $250,000 a year.
Assume that the value of a dollar is exactly the same in both worlds.
So, which world would you rather live in?
5 comments:
I guess world B ,because 100,000. a year is more than enough for anyone. After all you can't take it with you. I have never been too concerned with keeping up with the Joneses. :) Scrabble
If you accept the fact we live in a supply and demand economy, then the purchasing power of the dollar should flucuate in proportion to average salaries. Therefore, if everyone in the world (except myself) had a salary of $25,000, costs of goods and services should reflect this level of income. If everyone in the world (except myself) had a 10 fold increase in income to $250,000, then costs of goods and services should increase by 10 fold also.
I think the only individual impacted by the two (2) scenarios would be me, since my income would be immaterial to the total economy and my purchasing power would be the only one impacted.
Therefore, on the surface it may seem selfish or greedy, but I would elect the scenario of World A, since I would be the only one impacted.
Hopefully, my logic and rationale makes sense.
Husband's Father
While your basic rationale makes sense, you are neglecting the basic assumption of the problem: the value of the dollar is the same in both worlds. You are correct that if we add the supply and demand curve prices will be impacted; however, the premise that the value of the dollar remains the same in both worlds calls for us to completely ignore economic principals that would violate that assumption (this is a very simplistic model).
The question is, simply, what would make you happier: 1) having more buying power but less money than those around you; or 2) having more money than everyone around you but less purchasing power.
Would you rather have a 2,000 square foot house when everyone around you has a 5,000 foot mansion. Or would you be happier with a 1000 foot house when the people all have 500 foot shacks?
I would still elect World A, then I can share my additional wealth with my children.
Father
I would choose World B. People being what they are, living in World A would be dangerous.
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