‘If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.‘ So said economist Milton Friedman (1912 – 2006), one of the most colorful and controversial characters in the history of American economics.
I don’t pretend to know a lot about how the economy works, but I have been listening to analysts and economists for years, so I grasp a little. Lately I have been listening to the Dan Bongino Show podcasts on danbongino.com and he introduced his listeners to a theory from Milton Friedman, that I find to be a very simple analysis of how things work. So here it is, pretty much in my own words and I hope I can do it justice. It’s basically a commentary on human nature.
If you take YOUR money to purchase something for YOURSELF, you will be interested in price and quality of a product. You will make decisions based on those aspects. You will want the best quality you can get for the best price.
If you take YOUR money and purchase something for SOMEONE ELSE, you will be interested in price (because it’s still your money), but quality may take a nosedive, as quality for someone else will not be quite as important.
Now take SOMEONE ELSE’S money to spend on YOURSELF, and all bets are off. You won’t be concerned about the price, and you will want the highest quality. “How much is that hotel room? $20,000? Great, we’ll take it.” Because someone else is PAYING FOR IT. How many times do you go out to eat and, as soon as you find out someone else will pay for it, you start looking at more expensive meals? It’s normal, folks!
Now, here is our government. Take SOMEONE ELSE’S money to buy things for SOMEONE ELSE. Price and quality both go out the window. No one cares what the price is because it’s not their money and no one cares what the quality is, because it’s for someone else.
This is what’s wrong with our elected officials.
Did Friedman nail it or what? Let me know what you think.
Happy New Year!