If you wanted the best economic outcome for Michigan, wouldn't he get your vote?
Today’s economists aren’t.
I mean they aren’t around anymore. Not since November 2006 anyhow. That was when Milton Friedman took his last breath.
No one understood markets based on how people respond to incentive like Milton Friedman. While sympathetic to our desire to do good for others, he recognized the nature of how we prioritize (en mass) when making spending decisions.
The first time I heard the “four ways to spend money” was not Friedman however. It was during a presentation on health care options for Michigan by Pat Colbeck. He wasn’t a candidate for Governor at that time, but he was clearly advocating a sensible approach on how we pay for our health care needs. Part of it is returning the incentive to those who will watch more closely how well the money is spent to achieve the best results and at lowest cost.
A recent newsletter from the Mackinac center reminded me of this, which is the way Colbeck had put it a year and a half ago.
There only four ways to spend money.
- You can spend your own money on yourself.
- You can spend your own money on someone else.
- Your can spend someone else’s money on you.
- And you can spend someone else’s money on someone else.
When you spend your money on yourself, you care about how much you spend and the quality of goods purchased.
When spending you money on someone else, you care about the cost but not as much about the quality.
If you spend someone else’s money on you, you care less about the cost but you still care about the quality.
And, finally, when you spend someone else’s money on someone else, you have the weakest incentives to care about both the amount you spend and the quality of what you’re purchasing.
All government spending is the fourth kind – spending someone else’s money on someone else. Which explain why government so often spends a great deal for very little of value.
There is no question the origin of these simple, yet well reasoned axioms was the last real economist, Milton Friedman. If we could clone him, we would probably have the best possible options for elected officials in all areas.
If he was running for governor, he would have my vote. If only for recognizing that government is the least best way in which to purchase services and goods.
Perhaps its worth the time to look at the closest possible alternative?