Public goods, in general

Topics: Theory, Democracy
29 Aug 1994

From: ervan

> That's why gov't comes in to help.

I don't agree the government ever comes "to help". I'd be a
lot more impressed if they came unarmed to help.

> [ I would support a Baltimore harbor because its Congressman would
> support Texas roads. ]

I think your reasoning here is flawed. The harbor is a
completely excludable good for which all of the value can be
captured by investors. There is no legitimate use for
government intervention. It must necessarily be the case that
government funding for such a project destroys wealth by
diverting capital from more urgent needs. A harbor that was
needed more in Miami was not built. Highways are
trickier. I say we should either give private individuals
immanent domain power or take it away from the government.

I disagree with your analysis of how the government works too.
The congressman from Maryland will support your Texas road
only because he and Mike Andrews have ganged up to screw
Montana, not because you need it. And again, if everybody gets
back what they put in, why not just get rid of the frictional
cost of having the feds redistribute it? They won't of
course. That's the part I'm focusing on (though the frictional
costs of getting back your own money are tremendously high in
their own right).

Democracy is a ring of thieves pilfering each other. Your
argument is that's okay because you are going to steal my
microwave after I steal your TV. Regardless of the moral
component, that's clearly not efficient. We should both keep
our own and stop wasting our time with the theft which produces

Leaving aside the question for forcing people to donate to
charity, are you defending government economic planning outside
of the narrow area of 'public goods' are you arguing that the
harbor project is actually a 'public good'? Even if it is a
'public good' for Boston how the heck can it be one for the

On the narrow issue of how large of a zone is relevant,
consider the recent crime bill. Focusing just on the part that
allocates money for police, look at what it has done: it has
taken from the states and said you can have it back for police
enforcement only if you spend it the way we (the feds) want and
"we're taking our slice for handling it for you". Is there any
possible way this makes sense? If a state does not feel that
it would be cost effective to spend more on police, how can it
be good for the feds to force them? There are some crimes for
which federal jurisdiction is appropriate, but that is not what
this bill did. The money went right back where it came from.
Operating at this level, it fulfills no 'public good' by being
redistributed nationally. Do think this is good policy? If
not, how do you defend your harbor analogy?

Consider Sematech. It was a government run consortium of chip
makers out to produce a product that only the government could
get people together on. And, of course, 'everyone' was
supposed to benefit. I see this as your analogy for the
harbor. What did it produce? Nothing. Well, that's because
of government bureaucracy and make-work. But even if it had,
consider what it did: it diverted talent that would have been
working on the next generation x86 or on the Power PC to help
develop something that a bureaucrat thought the market would
want. That strictly destroys productivity because capital is
misallocated. I claim (repeating myself here): that so long as
all of the value is internalizable (e.g. chip prices),
government 'investment' must surely be destructive. Even if
the engineers had been taught just for this project and not
diverted Intel people, it would have come only at the cost of
other more urgent needs in the economy having gone unsatisfied.