Thursday, April 1, 2010

Milton Friedman Explains Spending

I stumbled across a simple but illuminating article at BigGovernment.com from Nov. 2009.

Thomas Del Beccaro does a great job explaining why any large organization inevitably has more bureaucratic inefficiencies. He notes that large companies struggle with bureaucracy too but because of the profit motive do the hard work to keep waste in check. Then he explains how large government programs have neither the motive nor the ability to minimize fraud and waste. And he quotes the great Milton Friedman giving this crystal-clear explanation:

“There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government.”