The Four Box Matrix
By Alex Saitta
January 19, 2017
Milton Friedman talked about this, and I call it the four-box matrix. It shows the innate flaw in our government system when it provides a product or service.
Think about this… If you spend your own money on something you will use, you will try to get the highest quality for the lowest price -- value.
If you spend your money on something someone else will use, you won't seek the highest quality because you will not use the product or service, and not want to spend a lot of money on the item because you are paying for it — low quality.
If you spend someone else's money on something you will use yourself, you will spend unlimited money to get the highest quality product or service — high price.
If you spend someone else's money on something for someone else, you won't care how much is spent or what the quality is — low quality at a high price.
For the most part, the first box is the private sector — spending your own money on a product or service you will use yourself. The last box is the government — spending someone else’s money on a good or service you will not be the one using.
This is why the school board borrowed $6.1 million, and spent that money to renovate a couple of schools, and then after three years closed the schools, even though it has to continue to make payments on the loan until 2032 — the trustees are spending someone else’s money.
The US is moving away from a private system toward a government system and that inefficiency in spending and investment slows economic growth.
Using this four-box matrix you can see why Concerned Citizens of Pickens County (CCPC) advocates more and more spending. They fall into the box of spending other people's money on themselves directly (their children mainly). In this box you find those who want to spend every dime of new revenue that comes in. When that is spent, they want to spend all the savings. Then when that is spent, and they've borrowed all they can, they want to raise tax rates.
From the beginning of 2014 to the middle of 2016, CCPC advocated 7 different tax increases. That is a typical occurrence when other people's money is being spent on them or their children in this case.
While such parents have a valid point of view and their viewpoint should be part of the mix, there is also another view that is just as important that CCPC is missing, CCPC doesn't understand or simply does not care about. That is, those who are paying for all of it. If you put them in too much debt or raise their taxes too high, those consumers will not spend as much and businesses will invest less. That will sink the local economy, and job creation and those children that we all care about, when they graduate will have less job opportunities waiting for them.