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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. And that's close to 40% of our national income.

Milton Friedman#21

PoliticsEconomicsSpendingBehavior

About this quote

What does it mean?
Friedman outlines four spending scenarios to show how incentives shift based on who pays and who benefits, concluding that government spending lacks both cost and value consciousness.
In plain terms
People are careful with their own money but careless with other people's money.
What can you take from it?
Incentives depend on ownership and accountability.

Where it applies

  • policy analysis
  • budgeting discussions
  • tax debates

Putting it to work

  • evaluate public spending
  • analyze budget decisions
  • discuss fiscal responsibility

Questions to consider

  • How do incentives shape your own spending?
  • Where do you see these patterns in public policy?

Another view

It oversimplifies complex government functions into a single behavioral model.

More from Milton Friedman

  1. I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible. The reason I am is because I believe the big…

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  2. I am a libertarian with a small l and a Republican with a capital R. And I am a Republican with a capital R on grounds of expediency, not on principle.

    Permalink to quote #22
  3. The use of quantity of money as a target has not been a success. I'm not sure that I would as of today push it as hard as I once did.

    Permalink to quote #19

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