Milton Friedman’s four ways to spend money

“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.”

transcript:
Well, you know, you can spend your own money on yourself, and when you spend your own money on yourself, you’re 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’re 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 yourselves.

Or you can spend somebody else’s money, as when you’re spending the government’s money. I say the government’s money, the taxpayers’ money, which the government has control of. Now you’re spending somebody else’s money. Let’s say you’re spending your boss’s money; you’re out to lunch on an expense account, but you’re spending it on yourselves. 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’re not very much worried about whether you get the cheapest. You spend all you want, you’ll be careless.

Now what happens when you spend somebody else’s money on somebody else? You’re a distributor 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’re not going to be anything like as careful in spending somebody else’s money on somebody else.