If another consumes a good and this gives you happiness, this good is said to be one with “interdependent utility.” Happiness comes not only to the one consuming the good but also to others who see or know that another also has that good.
In my lectures, I’ve made a good with interdependent utility with a positive effect a “merit good.” If the effect on another’s happiness is negative, it is a “sin” good, or a “demerit” good. Broadly, a merit good involves a concept of justice, which is not amenable to plain-vanilla free-market economics.
In countries where many people starve, food itself becomes a merit good. In support of this idea, the European Union has even donated funds to the Philippines. But I’ve been skeptical of some “do good” programs because of Okun’s Leaky Bucket Law. See my earlier post.
(Of course, if the food such as a high-fat food makes you sick, it becomes a sin good.)
My question: How would we know that the funds so donated are wisely spent?