What is Concentrated Benefits vs Dispersed Costs And Why Is It Still Here?

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Paul Huang
Published at : 06 Dec 2020
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Public Choice economics understands that there are varying government inefficiencies due to self-interested individuals and a delusional public that has led to government failure. One such inefficiency is the "Concentrated Benefits vs Dispersed Costs" concept, caused by governments funding specialized groups with taxpayer dollars1. These specialized groups can range from powerful politicians, to small minorities, to subsidized businesses, to independent organizations with their own agenda. For simplicity, this video will use the latter, independent organizations, as an example. These special interest groups receive relatively minor funds from the government, in the ten thousand dollars range. However, the benefits from this funding is concentrated in the minority interest group, having little positive impact on the general populace. Meanwhile, these costs are dispersed amongst the taxpayer population. The sheer quantity of such cases accumulate, adding to millions of dollars being donated by the government to a small number of beneficiaries. The burden of all this money is placed upon the taxpayers, and drains money that could have been used more effectively. Utilitarianism is the idea that the best course of action is the one that benefits the most people2. Concentrated Benefits vs Dispersed Costs takes on a utilitarian perspective when managing government spending and criticizes minority interest groups for "wasting" government budgets.

The inefficiency of Public Choice, and specifically Concentrated Benefits, is rarely addressed due to two major reasons. The first is the lack of importance on public servant agendas. The other reason is the aggressive lobbying of special interest groups.

So firstly, politicians in a democratic system are voted in. Citizens decide their vote based on the policies and objectives of a candidate. Voters who support gay marriage would vote for a politician who also supports it. Such heavy topics can make or break an election. Politicians would focus on these big topics instead of smaller topics that no one really knows about. For example, funding the local heritage site. So since voters and public servants rarely address these smaller issues, they continue to drain money from the government, causing vast public sector inefficiency3.

Finally, special interest groups aggressively lobby for their own interests. Whether or not a cause is "good" is debatable and varies for each group. However, the overall attitude of any group is self preservation. In order to continue its activities, it requires funding. So for the purpose of self preservation, special interest groups will aggressively lobby for more government funding, more public sympathy and more external support. Ignoring the complexity of "good" vs "bad", "useful " vs "useless", Public Choice sees that in the end, the benefits of government funding is concentrated in a small number of beneficiaries while having costs burdened upon the entire population. From a utilitarian perspective, these very real and continuous Public Sector flaws create huge government inefficiencies that benefits few people and is therefore a failure.

Source:
1 http://tirelessagorist.blogspot.ca/2012/03/concentrated-benefits-dispersed-costs.html
2 http://en.wikipedia.org/wiki/Utilitarianism
3 http://howestreet.com/2011/02/concentrated-benefits-dispersed-costs/
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