The Finance Blogger


Economics 101

This came to us as an email. We are not sure who wrote it but thought it was worth passing along: economics 101. You might not agree with this story and its outcome, but take a few minutes to really think about it and what it means to you on your job and on your co-workers. More importantly what impact will it have on the long term wealth of your family and your grand kids if this sort of thought process were to continue for any length of time.

Economics 101 – Government Programs

When the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. This statement was so profound that we really thought we needed to pass it along  for our readers. It was based on a test that an economics professor ran in his classes that he was teaching.

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, “OK, we will have an experiment in this class on Socialist’s plan”. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy.

When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

These are possibly the 5 best sentences you’ll ever read and all applicable to this experiment:

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Can you think of a reason for not sharing this? Neither could I.

Many people who read this will not believe it and many people will simply not care. They are either too busy making a living and trying to survive independent of the government hand outs or they are too busy trying to figure out were the next handout is going to come from. In a socialist country were all costs are covered for medical treatment, you soon find that people go to the doctor for even a simple cold which drives up the cost for everyone substantially.

Can we afford to pay for this miss use of funds for medical treatment? I do not think so.

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