Matt has passed the biggest obstacle to obtaining his Ph.D. in economics at George Mason University. Matt is a fellow of the Institute for Humane Studies. He has begun inquiry into the efficiency effects of the generality of rules. Does it help when the government grants tax favors or subsidies to preferred groups (the emphasis of the Richardson Administration)? Or, is it better from an economic prosperity standpoint (not to mention fairness) to make everybody play by the same rules?
Here’s another example of Matt’s case, whereby voting doesn’t result in optimality.
As is well known, the state gets about $3 from the federal government for every dollar it spends on Medicaid. This has prompted Medicaid lobbyists to claim that this is a great deal for New Mexico.
But as Matt points out in his TV example, the distribution of benefits may differ from the distribution of costs. That is, the New Mexican taxpayers who pay the extra dollar are not, for the most part, the New Mexicans who get the $3 of Medicaid benefits.
In other words, is it really a good deal to pay a dollar for federal benefits that someone else gets?
(And of course the situation will explode when the federal government changes from a three-for-one subsidy to a straight block grant. But that’s another story.)