Pathologies of the Public Grants Economy

Abstract

There are two basic economic relationships between economic parties: exchange, in which there is a mutual transfer of economic goods from each party to the other; and the grant or transfer which is a one-way transfer of economic goods from one party to another, without equivalent economic goods passing in exchange, although there may be non-economic goods passing. Neither of these are clear concepts, nor should they be. They lie toward opposite ends of a continuum of possible relationships, with a penumbra of related concepts around them. There are, for instance, accounting concepts which revolve around the transfer of net worth. In a simple accounting exchange, the things exchanged are assumed to have equal values, so that assets are rearranged among owners by the exchange, but the net worth of neither party changes. The decline in asset value of the thing given up is equal to the increase in asset value of the thing received for both parties. The pure grant transaction, from the accounting point of view, is one in which net worth is redistributed, the net worth of the grantor declining and that of the recipient increasing by an equal number.