Four Ways to Spend Money

Attached graphic is a modified illustration from Milton Friedman's famous book Free to Choose, in which the author explains the four ways of spending money. Depending on whether the spender spends one's own or someone else's money, and whether this individual spends it on oneself or on someone else, it all greatly affects his or her criteria in terms of savings and the value of that on which the money is being spent. Most careless and thus the most inefficient way of spending occurs when other people's money is being spent on someone else, as the person spending it does not care about the price nor about the value of that which is being bought. Neither did the spender earn the money which he or she is to spend, nor is he or she spending it on oneself.  And that's one of the main reasons why welfare state doesn't work.