Slightly Against The "Other People's Money" Argument Against Aid

In the comments to last year’s USAID post, Fabian said:

While i am happy for the existence of charity organisations, i don't get why people instead of giving to charity are so eager to force their co-citizens to give. If one charity org is not worth getting your personal money, find another one which is. But don't use the tax machine to forcefully extract money for charity. There are purposes where you need the tax machine, preventing freerider induced tragedy of the commons.

But for charity? There are no freeriders. If you neither give nor receive, you are just neutral. The receivers are not meant to give anyways.

This is a good question. I’m more sympathetic to this argument than I am to the usual strategy of blatantly lying about the efficacy of USAID; I’m a sucker for virtuous libertarianism when applied consistently.

But I also want to gently push back against this exact explanation as a causal story for what’s happening when people support foreign aid.

The “Other People’s Money” Argument

IIUC, the argument is that people who would not donate to charity themselves find it more congenial to vote to tax other people and give their money to charity.

A simple problem with this argument is that actually, each voter’s money will also be taxed. So for example, if there’s a vote on whether to tax everyone an extra $100 and spend the money on foreign aid, then voting in favor of the law costs you $100, the same as if you donated the money yourself voluntarily.

There are two simple ways to rescue the argument (we’ll discuss complicated ways later):

First, you could argue that supporters are using the government as a force multiplier. That is, suppose that 51% of people support spending $100 of their own money on foreign aid. If, instead of donating personally, they vote for a law that taxes everyone $100, they can make their “donation” go twice as far by “matching” it with $100 checks from the 49% of unwilling voters. This doesn’t have quite the same oomph as the accusation of “spending other people’s money because you don’t want to sacrifice your own”, but at least it sort of makes rational sense from a public choice theory perspective.

Second, you could argue that supporters are disproportionately poor people who pay low taxes, and who suffer no personal downside in forcing ...