Are there goods that only government can produce? The belief that there are is what distinguishes the classical liberal from the market anarchist.
The textbook definition of a public good is one that is “non-excludable” and “non-rivalrous”. Non-excludable means that the good cannot be provided for some without being provided for all. Non-rivalrous means that additional users do not reduce the amount available for current users. Examples of public goods include roads, ‘national defense’ and firework displays.
The “public goods problem” is twofold. From the ‘for-profit’ or entrepreneur’s point of view, producing a good that you cannot prevent people from using regardless of whether they pay you for it, is suicidal. From the community (or ‘not-for-profit’) point of view, though it is good if all of us, as a group, contribute to the production of a public good, it is best for each of us, as individuals, to free ride on the contributions of others (opening the door to the dreaded “prisoner’s dilemma”). In each case, conventional theory tells us that the public good will not be produced voluntarily. Hence the need for government.
Should this give us pause? Maybe. After all, acording to the standard definition, government must be classified as a public good. Government is non-excludable: if you and I live in the same geographical area, you cannot have a government without my having that government, too; I cannot be excluded from whatever benefits the government brings to those who live alongside me, and neither can you. Government is likewise non-rivalrous: your being governed does not mean I am governed any less, there is always enough government to go around; there is no danger of running out of government if, say, a few more children are born. Which is to say that, if governments are necessary if we are to have public goods at all, then we are in the unenviable position of having to posit a series of government-creating governments stretching back throughout all eternity.
But perhaps this is just playing with words. It isn’t “being a government” per se that enables the creation of public goods, rather it is the specific quality of “being able to coerce” that does. So we don’t require an infinite regress, merely that government be sui generis.
It seems unlikely that many, or indeed any, of those who think we need a government, think they themselves need to be governed. Other people, and other people alone, need to be kept on the straight and narrow. Importantly, this is perfectly rational.
Assume self-interested actors in the state of nature seeking to generate a public goods creating government. Further assume that each self-interested actor prefers having public goods to not having them. Each actor will best of all prefer having a government without having contributed to its creation; next, having a government while having contributed to its creation; then, not having a government without having contributed to its creation; finally, the worst outcome, not having a government whilst having contributed to its creation.
If we wanted to use the language of game theory, we would say that the preference ordering of rational self-interested players is: defect when opponent cooperates; cooperate when opponent cooperates; defect when opponent defects; cooperate when opponent defects.
In other words, we are faced in our government creating game, with a “prisoner’s dilemma” – as might be expected since government is a public good. Although the “cooperate, cooperate” solution is an equilibrium, it is not a stable one, as either player can unilaterally assign to the other the role of “sucker” (i.e., move the game from the North West corner to either the South West or North East corner). The stable equilibrium solution to a prisoner’s dilemma is for each player to play “defect”. That is, the public good ‘government’ will not be created unless coercion is employed.
And yet governments do exist.
Here, then, is the real dilemma for the classical liberal. Either governments are inevitably involuntary institutions, resting on nothing other than coercion; or they, and other public goods such as roads, ‘national defense’ and firework displays, can, somehow, and in defiance of conventional political theory, be produced voluntarily. But then, clearly it must be possible to produce public goods in an anarchy. And if an anarchy can bring forth public goods, there is no need for government.