The four ways to spend money according to Milton Friedman

The four ways to spend money

• by Milton Friedman

There are four ways in which you can spend money.

You can spend your money on yourself and when you spend your own money on yourself, you are very careful of what you spend it on and you make sure that you get the most for your dollar.

You can spend your own money on somebody else. You give gifts to other people; you take people out to dinner. And when you spend your own money on somebody else, you are very careful that you don’t spend too much. You try to keep down the amount you spend, but you don’t worry very much about what the other fellow’s getting from it. You don’t pay anything like as much attention to the gifts you buy for other people as to the things you buy for yourself.

You can spend somebody else’s money as when you are spending the government’s money. It is the taxpayer’s money, which the government has control of. Now you are spending somebody else’s money. Lets say you are spending your boss’s money. You are out to lunch on a expense accout but you are spending it on yourself. You are very careful that you get good things for your money, you try to have a good lunch and pick the right things, but you are not very much worried about whether you get the cheapest. You spend all you want, you will be careless.

What happens when you spend somebody else’s money on somebody else? You are a distributer of welfare funds. Well, you are interested in making your own life as good as you can, and most people have humane instincts and want to do the best they can. But you are not going to be anything like as careful in spending somebody else’s money on somebody else.