What does it mean to be a generous person? Does it only mean to sacrifice your time or valuables for another person without an expectation of return? Is living prudently so your children may live more comfortable lives being generous? Does the motive for the act of generosity diminish or enhance the outcome? Or is the method of generosity a larger factor of the outcome?
There are many reasons why a person would be motivated to help another without direct compensation. Some examples include: religious beliefs, tax incentives, a hope that someone would do the same for you if you were in the same situation, a belief in an ideology or simply for the emotional benefit one receives from knowing they helped someone.
While there are many reasons why someone would be generous, there are only two methods: voluntarily or forcibly. Voluntary generosity is called charity. Charity can be done directly, such as volunteering at a nursing home, or buying a meal for the homeless; or it can be done indirectly, through donations to a church or charity of a person’s choice that acts on their behalf. If the organization does not perform their services efficiently or effectively enough then contributors will donate their money somewhere else.
Welfare is the well intended act of governments to take resources forcibly from certain individuals to help another group of individuals that is selected by politicians. I see four major problems with welfare.
1) The moral problem with taking a person’s money and spending it on someone else against their will.
2) Unlike charity, welfare does not face competition and the efficiency and effectiveness degrade as the organization faces less incentive to perform their assigned task.
3) Beneficiaries of welfare are more inclined to consider their benefits as a privilege and the moral hazard is created to become dependent on the welfare services.
4) With welfare, there is less satisfaction than charity for the person whose assets were seized. The chance of there being a human connection between the contributor and the recipient is almost eliminated.
Milton Friedman said there are four ways you can spend money.
1) You can spend your money on yourself, which you will guarantee will be to your satisfaction.
2) You can spend your money on someone else, which you will also ensure that you spend it properly.
3) You can spend someone else’s money on yourself, which you will also spend wisely.
4) You can spend someone else’s money on someone else, which case you have little incentive to ensure the outcome pleases either the contributor or the recipient. This is how government spends money.
Charitable spending would fit into number two category, and welfare would fit into category number four. Politicians make the argument that without the government, the poor and needy would not be cared for at all so they expand the role and size of government. The more welfare the government produces, the more taxes have to be raised. The more taxes are raised, the less charity there is since the expendable income that people donate to charity is crowded out by having to pay higher taxes. Even if the intention is good, the outcome of welfare is bad.