Why Giving Money Away Costs More Than You Think

Tyler Durden's picture

As the government continues its ongoing scheme of handouts for everyone, it is worth perhaps reflecting on this behavior as non-optimal. Of course, printing money and handing it out for various grants, subsidies, and handouts was really wealth creating, the rent-seeking behavior would continue forever and everyone would be rich. However, as Professor Michael Munger points out, sometimes more money will be spent in total trying to compete for a grant or handout than the amount of money being given away. These costs are rarely considered in policymaking, but perhaps they should be. Of course, what really happens is the government awards money to organizations with the best lobbyists - not necessarily those that need it most or offer the best services. Perhaps its time for all of us to learn that you can't just (costlessly) keep giving money away.