Government: a public good and a problem

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.

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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.

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5 thoughts on “Government: a public good and a problem

  1. Roads were not invented by government, nor have all roads been built or maintained by government. Electric utilities, streetlights, and yes, fireworks, all created privately.

    Tom DiLorenzo tells of a publication by the Association of Municipalities that details all the services provided by local governments. There is no service provided by all of them, meaning that every “government” service, somewhere, even manywhere, is provided privately.

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    1. Thanks for leaving a comment, Bob.

      Yes, the line between public and private goods is one we (I say “we”) draw ourselves.

      I particularly like the firework display example, because it’s the pictured “public good” on the wikipedia public goods entry; which then goes on to inform the reader that public goods can only be produced by governments!

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  2. Roads are not a public good… see ‘turnpike’ or ‘toll-road’.

    Government is not a public good either, it is not tangible in the first place, it is a monopoly for which we are forced to pay and whose effects we are forced to suffer.

    It is no more a public good than the Mafia which it resembles in every way.

    What defines a Government? A border. Take away borders and there could be no governments.

    There can be competing governments in an area. This entails each government drawing up rules and benefits and citizens choosing which one to sign up to and pay for.

    Some towns in Europe have national borders running through them, so in fact people living on one side of the street are under a different government from people on the other, with different rules and benefits.

    This is to be observed in London with different local authority boundaries bisecting streets and localities, providing different services at different costs.

    So mixed government communities would be easy enough to organise… not unlike different religions in a particular community.

    The notion that there can be no commercial possibility to provide public goods is flawed, as exemplified by your fireworks reference: many of these are private or club goods.

    Lighthouses are certainly a public good but most around the coast of Britain were private for profit built and run. The private companies got their money by a levy on harbour/port fees on ships loading and unloading at nearby ports.

    In fact I can think of no public good which could not be supplied by private for profit business; all that is required is to find the means of making a charge sufficient to be profitable.

    Even the free-loader argument does not hold water, because there are plenty of freeholders who pay little or not tax to fund government provided services.

    Defence? In time of war who provides that? The citizenry who are conscripted because the standing military is only big enough to shoot up foreigners at the behest of the crazies in charge.

    There is in fact no need for Government that cannot be served by the private sector and if we got rid of borders there could be no Government so we would have to rely on private sector.

    The notion that we must have Governments is due to brainwashing and it is what we have always known. But if the idea of going from Government to no Government seems impossible to contemplate, imagine how difficult to contemplate going from absolute monarchy to democracy would have been in the 14th Century… and even suggesting it would have been treason and a death sentence.

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    1. Thanks for your comment, John.

      A small point re: government not a public good. There’s no necessity that a public good be tangible. There are “higher order” public goods. ‘Authority’ is one.

      But yeah, like I said above, the public/private distinction doesn’t exist independently of our opinion: every good is excludable at some cost; every good becomes rivalrous at some point.

      Re: lighthouses. Your referring to – off the top of my head – Demsetz (?) “The lighthouse in economics”, I believe. That’s (sadly) wrong, according to Walter Block. Lighthouses around Britain received a subsidy of some sort.

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    2. Apologies, it’s Ronald Coase, not Demsetz. And the Walter Block (and William Barnett) paper is “Coase and Van Zandt on lighthouses”, if you’re interested.

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