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.
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
Putting it to work
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.
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