Econ 101 Applied to Food Stamps

Florida and a few other states are considering additional restrictions on food stamp and welfare payments to the poor, such as prohibiting the purchases of snacks and sweets with food stamps and prohibiting withdrawals of welfare cash at casinos and strip clubs.

But there is hardly any difference between giving somebody $20 to buy beer and giving that same person $20 earmarked for food, because the earmarked funds allow her to spend $20 less of her own money on food, leaving $20 left to buy beer, if she wants. Earmarked funds can be as good as unrestricted money.

More from Casey Mulligan at the New York Times economics blog.

Comments (2)

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  1. Devon Herrick says:

    I’m not really a fan of Food Stamps. Food assistance is fungible — paying for a family’s necessities frees up money that would otherwise have been used for necessities to be used instead on luxuries or vices. Benefactors would prefer to think the money freed up by not having to buy food would instead go towards rent or children’s clothing. Or, better yet, that Food Stamps would feed a hungry family that otherwise would not have enough to eat. Throughout much of human history, people had to spend a significant portion of their day scavenging for enough calories for their family to subsist on. The notion that hunger is something that plagues the poor is ingrained in our culture and probably every culture around the world. However, obesity is a bigger problem for the poor than hunger in this country.

  2. Paul H. says:

    Nice analysis. It is Economics 101.