A Funny Chutukla …

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Let me tell you a short ‘chutukla’ a dear friend once told me.


Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. 

If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing. 
The fifth would pay $1. 
The sixth would pay $3. 
The seventh would pay $7.
The eighth would pay $12. 
The ninth would pay $18. 
The tenth man (the richest) would pay $59. 

So, that’s what they decided to do.. 

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner offered “Since you are all such good customers, I’m will reduce the charge of your daily beer by $20″. Drinks for the ten men would now cost just $80. 

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? How could they divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by 6 is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
And so the fifth man, like the first four, now paid nothing (100% saving). 
The sixth now paid $2 instead of $3 (33% saving). 
The seventh now paid $5 instead of $7 (28% saving). 
The eighth now paid $9 instead of $12 (25% saving). 
The ninth now paid $14 instead of $18 (22% saving). 
The tenth now paid $49 instead of $59 (16% saving). 

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.
”I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man,”but he got $10!” 

”Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more benefit than me!” 

”That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!” 

”Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”

The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill! 

(Never mind all the math, the gist of the chutukla is that rich are overburdened with taxation in our taxation system which suffers from a ‘socialist’ mindset.)

And that is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is friendlier.

But does this tell us the complete story when applied to the real life? Let me tell you another chutukla…


To save the argument of the chutukla, let me reframe it. Let 1 beer every day be essential for a man to survive. Now obviously poor are poor. They can’t afford even 1 beer. Let us now add weight to the argument of the chutukla. Lets say there is only 1 rich man, 2 middle class men and rest 7 are poor. The rich man has the money to pay for 10 beers, middle class to pay for 1 beer each and the poor have zero money.

Lets say richest man goes in a bar alone and drinks his beer there from his own money. Now when he comes out, our other 7 poor guys and the 2 middle class men ask him to go back in and pay for their beer as well. Now in this second visit the richest man doesn’t drink, only the 7 poor and 2 middle class drink and the rich man pays the entire bill (for all 9) happily. Let this be our initial taxation system (even more unfair to the rich man than the initial chutukla, ain’t it?).

Now enter the real life. In real life, the rich man is never happy paying the bill for the other 9 men’s beers. So he goes and tells the government, “I ll pay you 1 beer (for your election spending or whatever purposes) so that you give me an exemption from paying for say 2 beers.” Now both the middle class men will have to buy their own beers (in best case)… less equity but still acceptable. But it doesn’t stop here. Our rich man now goes and tells the government, “I ll pay you 2 beers so that u exempt me from paying for 4 beers.”… Now what? In the best possible case also, 2 poor men will have to die (or be deprived of ‘minimum needed’ economic resources).


In real life, it is obvious that the rich man has all the incentive in the world (except should he be otherwise persuaded by a dissenting conscience) to bribe the government to save his taxes… and the government will have all the incentives in the world to accept the bribe since its overriding objective is to win elections. So in all likelihood the second chutukla is going to prevail. At least 2 poor are going to die, the rich man will invest the saved beer in a say beer refinery and produce 5 more beers tomorrow. GDP will grow and we will call this development. Funny…

The poor are worse off in the system. But they are in majority. So how does the system survive in a democracy like ours? Consider this…

Lets multiply everything by 2 now and let us assume that 1 beer is essential for physical survival and 1 for other basic needs like education, health, environment etc. which are otherwise essential to lead a minimum “meaningful” life. Now lets eliminate the middle class and club them with poor so that there are 9 poor. Say our rich fellow now bribes the government 4.5 beers so as to save on 9 beers in tax. Now every poor will have his 1 beer of physical survival but thats it. Election time comes and government distributes the 4 beers among the poor (read “populist” fiscal sops or alcohol, cash, mixers etc.), the poor are happy and vote for the government.

The rich are happy (they got to save 4.5 beers), the government is happy (it got reelected and also saved 0.5 beers), the poor are happy (they got election time sops). But the poor are still the losers for now they have been condemned to poverty in perpetuity. The poor – they never knew they had a chance of a better life… think of that child who has no future in our society now and yet he finds unparalleled joy in laying his hands upon a kite or playing with dustbin in a park riding it as if it were a horse….

The question we must then ask ourselves is whether in a civilized society (which we claim to be) can we condemn the unfortunate to live lives in perpetual “unfreedoms” (borrowing the term from Sen) given that they may find joy in small things (but which in no way can enable them to overcome their unfreedoms)? Lets not forget that men (and of course women) are human beings and not just a factor called labor used in the process of producing economic goods and services and its only the “accident of birth” which determines whether a man will be poor or rich in an overwhelming majority of cases in a real world society like India. (If you are considering of negating this then I implore you to impartially consider the probability of you being what you are today had you suffered from the “accident” of taking birth in any poor household. In fact at the risk of diverging from the current discussion, I would go to the extent of saying that the only difference between a feudal society and what we have today is that while in a feudal society there was legal sanction to the discrimination based on the accident of birth whereas now we have no such legal sanction but in 90-95% cases, our social and economic construct ensures such a discrimination prevails.)

So what can we do? The most compelling way I think is to “awaken” and “empower” people. Think of this… for 60 years since our independence the state had been providing all social goods to the poor (at least that was the declared aim). I am sure 450 years ago, Akbar would have been doing the same and some 2300 years ago, Asoka would have tried the same… yet none of it worked (or let me claim “could have” worked)… this is because the truth of all such efforts, however praiseworthy was that they were “acts of generosity by the state”. If you are a poor and the state is providing you with food, health and education, it was state’s “generosity”. It wasn’t your right… So if you happened to get nothing there was nothing which you could possibly do to redress the situation. However, if we are to really eliminate deprivation, it should be a matter of “right” for the poor to claim such benefits. Just because they happen to exist, they should have the right to have proper food, proper education and proper health… and if they don’t get it they could take action against the state…

MGNREGA (the national employment guarantee scheme) was implemented on this philosophy by making employment a right and not an act of generosity and dare I say it has been one of the most meaningful and successful schemes ever (true, there are defects but dude, we don’t live in a bookish world. In real world everything has defects).

P.S. A good read on MGNREGS here… http://www.indiawaterportal.org/sites/indiawaterportal.org/files/mgnrega_sameeksha.pdf

13 thoughts on “A Funny Chutukla …”

  1. In all such articles you forget mentioning the biggest factor – Corruption. What if the state collects money from the rich and siphons off 70%? Even in MGNREGA, what has been the output of the work the recipients are supposed to be working on? If there is no tangible output it amounts to the govt paying them for 4 beers to win votes. Unfortunately for India the opposition’s philosophy is even more extreme – profile the 9 poor, make 6 beat the remaining 3 and let them rejoice that they won

    1. Sir… State siphoning off 70% would simply increase the corrupt government’s saving from 0.5 beers to about 3 beers. Would that change the gist of the argument? And if you are implying that rich dont like to pay taxes because they think their taxes would be siphoned off by the corrupt in the state… Well, rich never like to pay taxes in the first place whatever be the excuse. For a scientific analysis of mgnregs, i ve edited the post and put up a link of mgnregs sameeksha atthe end. Pls see it.

  2. Gauaji – a society led completely by ‘accident of birth’ and a society led by ‘complete equality’ are two opposite poles. I believe a society working completely on merit is at the equator. And it seems you tend to favor the one more leaning towards complete equality, a concept which I find a little intriguing.

    Here’s a quote a find interesting –

    “If some people had wings and others didn’t, and the government wanted to enforce ‘fairness,’ soon no one would have wings. Because wings cannot be redistributed, they can only be broken.

    Likewise, a government edict cannot make people smarter or more capable, but it can impede the growth of those with the potential. Wouldn’t it be fair if, in the name of equality, we scar the beautiful, cripple the athletes, lobotomize the scientists, blind the artists, and sever the hands of the musicians? Why not?”

    A society which wants to ensure fairness by giving everyone rights to employment must then take the next step – everyone must be given equal kind of employment, and then equal wages. The concept of fairness and equality is easy to extrapolate and go out of hand. And this artificial fairness breaks the wings of the truly talented.

    I lean towards a society which is at the equator (slightly bending towards north as well) – one where merit rules and accident of birth is accommodated. The government cannot take away the wealth of an individual after he dies – his heir has a right to inherit his wealth and the accident of birth always remains.

    The only place for equality in my ideal country is the right to a fair fight. If you were born with potential – you must be able to realize that. If you were born a stupid twat (and even poor at that), you’re out of luck buddy.

    In today’s society, how do you get an employment? One of these gets you there – education or special skills. In a country where the government ensures that you survive and have right of education has more or less delivered on its promise of a merit based society.

    So yeah, coming to beers. In my ideal country – the rich men will pay for half a beer required for survival of the poor. And another half a beer to the government to make sure these poor get educated. NOT for their employment, that these free beer drinkers will have to find for themselves.

    1. Beautifully written lathi ji and such a pleasure to have your comment here.

      Trust me when i say that your liking for equator is a shared one. I too hate both the poles. I think complete equality is dysfunctional. But the equator i believe in, everybody must have ‘freedom’. And such freedom – to realise his or her’s worth – must not be impeded by the accident of birth. While we may differ on the degrees of entitlements to the poor, i think both of us agree that the government must remove the obstacles which prevent poor from achieving freedom. Going one step further i daresay poverty itself means unfreedom and hence a state guarantee against poverty is a must for our equatorial society to be realized.

      And ofcourse we must somehow also make sure that the the ultra rich like ambanis don’t rule the country as they currently do for that will again destroy freedom.

  3. Hi there, the following passage of yours is making me respond…

    “The only place for equality in my ideal country is the right to a fair fight. If you were born with potential – you must be able to realize that. If you were born a stupid twat (and even poor at that), you’re out of luck buddy.” I am assuming when you said “you’re out of luck buddy”…you meant…”you are out of luck, so you and your dependents please kindly perish”.

    Anyways, hypothetically, if we agree with your above para, the next step would be defining ‘potentials’/’merits’. What is the basis of acknowledging certain talents as potentials. This acknowledgement would in turn dictate what we end up calling legal and illegal and what we outlaw. Should physical strength be considered a ‘potential/merit’ just like we consider mental acuity. And if mental acuity as a merit be considered a valid justification of amassing disproportionately more wealth or ‘freedoms’, can physical strength be considered a justification too? In other words, if a smart/intelligent man using his smartness can amass a lot of property than the remaining, can a strong and fearless man loot and plunder others property? And if disagree with the latter, what is the rational justification for the former?

  4. hey supermanreturns ,
    to put in simple words , mnrega says , a propertyless and not highly skilled person in india , can’t get a job

    (because of over supply of labor) thus he has no money, we need a scheme from government to employ such people ,

    giving them money,, thus somehow ending their misery in short term , but do you think if they were not employed

    by private sector , who is far better in finding jobs for them , can government really do anything worthwhile

    with them , answer is big no ,,,,,,,

    typical mnrega scheme , jobs are ,, dig a hole fill a hole ,, direct money transfer is far better than mnrega but

    with no information technology support its prone to corruption ,, channels eat up the money ,,

    Anyways from jan, government will close mnrega , directly pass money to person with help of UID’s .

    so problem of passing the money to poor in corrupt free way is solved ,,, now he can fulfill his needs , thus not

    prone to exploitation or will not enter into crime thus becoming threat to law & order .

    1) now comes , the big question from where the money will come.
    –> tax more ,,,, as you said
    philosophy , behind this is if someone has the money its only because some one else bought his service ,, you

    may be the greatest mind of the world or producer of most mind blowing product of the century ,,, if only people

    show interest to enter in trade with you, then only you will end up having any money ,,, if china has awesome

    foreign reserves its only because America has incredibly awesome debt ,,,,,
    if you are earning more and not spending in same proportion then you are causing hinderance in money circulation

    ,,, thus bringing the system to halt ,,, either you spend in same proportion or get taxed ,, seems fair enough.

    other argument will be ::
    2) some people will object whats the point of passing the money ,,, people want goods not money ,, how will

    government ensure people finally get the food and cloth and health services that they are suppose to buy with that

    money ,,,
    because people who currently own food supply ( land lords for raw food) , big corporate ( for processed food) ,,,

    big or small corporate ( for cloths) ,,, to say in simple words goods generator and resource holders will simply

    jack up the price thus successfully,, once again creating a artificial supply demand gap ,,, poverty remains as it

    –> adhoc solution will be fix the price of everyting ,,, starting from primary sector goods ( agriculture and

    mining sector) to secondary sector goods ( manufacturing and constrution ) to service industry items ( room rents

    , government servant salries or in general service class salaries etc.) ,,,
    so that money will in turn materialise into some final good, rather than existing goods prices being jacked up .

    but we know both will fail , becuase in both cases people feel cheated ,, one thinks he is penalised for being the

    best and other case ,, participants think that their freedom to get best for their work is being restricted.

    problem lies with money system, though its better than barter but ,, it has its own flaws.

    lets discuss this ,, can you in simple words explain the money creation ,,,
    i mean lets suppose all money got wiped off,, all man made things suddenly disappear ,, and all we are left with natural resource ,
    people , and the knowledge they have gathered about nature ,,, ( a fresh start)

    now with this starting condition ,,,
    please establish a monetary/financial system, i.e , central banking system.

    personally who gives the fuck about money ,, all one want is to work on awesome things with awesome people ,,,

    once one has a high quality education ,, and can get hold of bigger picture all money related arguments look pale ,,,

    but till we hit the critical mass of people with high quality education ,,, money shit will not go away.

  5. The only problem I seem to have with MGNREGA is that it is not properly planned and is with distorted vision and objective . The MGNREGA works quite well( assuming zero friction ) but does not improve the situation apart from providing survival money . I think the poor deserve more than that and MGNREGA is not designed to create a impact which then should in turn increases the probability of people coming out of MGNREGA survival mode.

  6. quite amusing description of the serious matters which we always analyse wid stereotyped mindset…a lucid elucidation and informative post..i m impressed very much!

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