Gillard’s profligacy

Four ways of spending money
The French writer Frederique Bastiat, observed in the first half of the 19th century, “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

Thus, according to the good economists and most conservative commentators, there is general consternation at the inability of the Gillard/Swan team to reign in their compulsive spending. More than that; there is incredulity and dismay. Still, when listening to the usual suspects in the media there is clearly little understanding or ability to understand the unforeseen effects. 

Many will have read the famous Four Ways of spending money as outlined by Milton Friedman, but it bares repeating as a cogent way of understanding why government spending — especially of those with Gillard’s reckless disposition — is so dangerous.

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.


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