Question

6. Suppose you regularly turn down dessert and an extra drink when you’re having lunch alone, because these two items would add $4 to the cost of your $6 lunch. (c) Based on the idea you obtained from the above story, explain why Congress so often appropriates money for local projects whose expected benefits fall far short of their expected monetary costs?

Answer 1

The story says that when a person is eating alone, he always prefers to order for the least expensive dish as he has to bear the cost alone. But on the other hand, when a person is eating in group where the total bill is shared by all the members, the person generally orders for the most expensive item, as the amount is going to be shared and borne by all the members.

As the local projects , expected benefits fall far short of their expected monetary costs, but the cost is borne and shared by several various entities involved, so it is justifiable to appropriate money for such projects. In this way, the work is going to be done and the cost is also shared by various entities involved. This would not result in the betterment of the society but of course is receiving the personal benefits.