public goods

Topics: Misc
11 Nov 1993

From: ervan

I think the point got lost in a flurry of peripheral issues.
Let me just state my position as clearly and succintly as I can,
as a matter of clarification and not debate, and then you can
attack it directly.

There are a limited number of goods which are public goods in
the strict economic sense. The government should not attempt
to produce non-public goods (either directly by buying them
or indirectly via regulation). It is neither moral, by virtue
of theft via taxation, nor efficient in an economic sense.
For those things which are public goods, the government should
produce those which are of high external value. Those of
low external value are more efficiently produced privately
even though they are still under produced in some sense
(consider imperfectly enforced copyrights versus the NEA).
The only goods which seem to be public goods of high external
value are national defense and arbitrator of last resort in
property disputes (i.e. some police and courts). I would
be open to demonstrations that other public goods exist.
Negative externalities, e.g. pollution, can be viewed either
as theft or as anti-public goods and fit in this framework.

This is, despite what you might think, the consequentialist
libertarian position instead of the natural rights position.
It would be: the goverment has no authority over individuals
that other individuals do not themselves have. Freedom
(and property being a necessary consequence of freedom) is
a natural right that individuals can protect. Thus, the
government can protect it on their behalf and do nothing else.
You have no right to use my property, therefore neither does
the government.

I think that ultimately both of these bases come to the same
conclusion but there are some interesting twists along the way.
I would regard this as a deep conclusion and not an obvious thing.

A public good is one for which the beneficiaries cannot be charged,
i.e. excluded from the benefit. National defense is the classic
example. Education is widely considered (though not by me) to
be a public good based on the reasoning that everyone benefits
from an educated public and there is no way to charge the beneficiaries
directly for the benefit they receive from a particular person's
education. Thus, *if* the numbers were as follows:
1) Getting rid of public education would save $400/year/capita.
2) The quality of education would fall to such a point that
GNP, caeretus paribus, were reduced by $500/year/capita.
One would have a case for education being a public good (I'm
not invoking mere causality here but assuming that caeretus
paribus has been amply demonstrated). It's also remotely possible
that education is, in principle, a public good but that its
*external* (not total) value is so low the government still
produces it inefficiently.

Here is another extreme example of a public good: blasting a meteor
to dust before it hits the earth (assuming we could not tell
where it would hit or that its damage would be global).

Another test for whether or not something is a public good is
if the last person to buy it has an incentive to lie about its
value (beyond simple haggling). David Friedman in "Machinery
of Freedom" did a good job of analyzing why many apparent
public goods are not.