In June, I blogged about the incentives facing our elected representatives and how those incentives lead to bigger government. Recent events in my life have considerably widened my gaze on the incentive issue. When reading the public choice literature in economics, it is easy to demonize politicians and feel like government in general will always lead toward gross public expenditures at the expense of the private sector. It is important to remember, however, that private citizens play a large role in the growth of government spending as well.

The fact of the matter is that people, regardless of their political beliefs, are loathe to turn down government programs that put money in their pockets. It is one thing to oppose the creation of some new government program, but it is another thing entirely to turn down money from that same program once it already exists.

 Ideology aside, people acting in their own best interest (as we economists assume they must) will almost always take a "free lunch" when offered.  Thanks to Milton Friedman, we know of course that there is no such thing as a "free lunch." The problem is that the costs associated with government payouts exist whether or not a given citizen takes advantage of them. In other words, from the standpoint of any given citizen, the marginal cost of accepting government aid is zero; the social cost is a fixed factor.

I ran into this conundrum myself recently. I entirely avoided the sticky issues surrounding government funding of education during my undergraduate years because I attended one of the only schools in the country that accepts no federal money whatsoever. Graduate school? Not so. I recently enrolled in a graduate program at the University of Montana, a public university. I am here thanks to Federal Student Loans, I am writing this blog in a graduate office most likely paid for by Uncle Sam, and-worst of all-I am enthusiastically hoping that loads of federal grant money comes through next semester so that I can receive funding via an assistantship.

Everything I just listed flies in the face of my political beliefs; I want government to be as small as possible and I believe that the government (the federal government in particular) should have very little to do with education. Yet here I sit, fingers crossed for those NSF grants to start pouring in. How can that be? I'll confess I feel like something of a sell-out for relying on government money, but the ugly truth is that if I don't take that money, one of the other six students in my program will. Ignoring for the moment questions of the "crowding out" theory, I probably wouldn't be able to afford this program if it weren't for the government.

Of course, there is pretty sweet irony in the fact that Uncle Sam is helping fund my economics degree-a degree that will better equip me to fight intervention and the growth of government. My personal qualms aside, this is an important issue for conservatives and advocates of down-sizing government to recognize. Regardless of what they believe, most people face incentives that will leave them on the dole from the government. USA Today recently pointed out that 1 in 6 Americans are now on welfare. Solving our spending crisis is about much more than balancing the books; it will require a fundamental shift in who pays for what and how in our society. We would do well to remember that.