Ross Geller Wants To Win a Grant (Economic Lessons from Friends)
We see public choice theory and government failures in action
Ross Geller is applying for grant. What could go wrong? Lots, naturally.
In this video, we examine the bad incentives that this grant process creates, with a focus on two key issues. First, when prizes are available, there is an opportunity for rent-seeking behavior, which is when people spend energy trying to win a prize instead of doing other things that are productive. We see this with Ross, who attempts to wine-and-dine the person giving the award.
Second, the grant coordinator should be simply issuing the award to the most qualified applicant. But the incentives for the grant coordinator and for the granting agency aren’t perfectly aligned, and we see complications. This is an example of the principal-agent problem. The granting coordinator isn't looking out for the public good - but to maximize his own happiness. More generally, Public Choice Theory is the process of using economic analysis to study government decision making. These examples are subsets of failures that can happen based on government incentives.
Learn more and watch the clips in this video: