$4 million to sponsor a driver in Formula One next year. Eszther at CrookedTimber.org offers the full story. This example may seem extreme, but it reflects the real rationale for much of what government does. People simply like the idea of their government providing some good or service. The fact of government provision enters their utility function above and beyond the effectiveness of the policy at procuring stated ends. In other words, we want a government that we can be proud of and feel good about. Unfortunately we often seek this end without proper regard for the associated social costs, in this case alternative uses of the $4 million. Hungary is not a rich country.
Other times we simply favor the process of a government taking some course of action. So much of life is about favoring a certain kind of process, for its own sake, regardless of the outcome. Talking with friends is fun no matter what does or does not come of it. We all daydream for similar reasons. This same attitude, applied to government policy, often leads to wasteful and disastrous outcomes. We like the idea of “the government promoting national reputation,” again without much regard for whether the ends are effectively achieved. Once again, behavior that is rational for the individual can be very costly for the collective.