A major criticism of socialism is that it is inefficient. Milton Friedman taught us this when he described the four different ways in which money can spent. We assume that money can be spent by either us, individuals, or by the others (namely, the government). Money can be spent on ourselves, again the individuals, or others, the citizens of our country. These four possibilities are depicted on this chart:
The top boxes are when we are free to choose how we spend our money. When it is for ourselves, we are careful about how much we spend and what we spend it on. The result is spiffy, but not ostentatious outfits. The top right is like when you have to get your neighbor a Christmas present, but you are strapped for cash so you pick up the first thing you find at the flea market. It’s ugly, but at least it didn’t set you back to much. The bottom left is when the people in power have complete control over the treasury to fulfill their every extravagant desire at the expense of everyone else. At least the King is happy. The bottom right is… the government. There is less personal accountability thus more waste. This is the rule of governments like gravity is a law of nature. The only way to overcome the rule of waste it is by decentralizing government and limiting its size.
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