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A Synthetic Anarcho-Capitalist Perspective on Public Goods

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By: Fabrizio Ferrari Among the several misgivings non-anarcho-capitalist people might have with anarcho-capitalism, there is the issue of public goods. Public goods, in fact, are supposed to be those goods which free markets cannot efficiently supply and allocate because of two properties: non-rivalry, i.e., the fact that A’s consumption of (public) good X does not impair B’s consumption of it; and non-excludability, i.e., the fact that A, the owner of (public) good X, cannot prevent B from enjoying it as well. So, the argument goes, public goods supposedly need to be produced by governments; otherwise, they would be underproduced or overused—that is, free markets would fail to deliver optimal (i.e., desired) quantity and allocation. However, even setting aside historical instances of

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By: Fabrizio Ferrari

Among the several misgivings non-anarcho-capitalist people might have with anarcho-capitalism, there is the issue of public goods. Public goods, in fact, are supposed to be those goods which free markets cannot efficiently supply and allocate because of two properties: non-rivalry, i.e., the fact that A’s consumption of (public) good X does not impair B’s consumption of it; and non-excludability, i.e., the fact that A, the owner of (public) good X, cannot prevent B from enjoying it as well.

So, the argument goes, public goods supposedly need to be produced by governments; otherwise, they would be underproduced or overused—that is, free markets would fail to deliver optimal (i.e., desired) quantity and allocation. However, even setting aside historical instances of private provision of alleged public goods,1 it is the theory itself—as well as the alleged necessity for their governmental production—that relies on shaky and fallacious premises, as I will briefly summarize.

First, consider that a truly non-rivalrous good is not even an economic good itself: nobody, indeed, would face the need to economize it. In fact, if both A and B can consume (public) good X without reducing the satisfaction each one of them can derive from it, then X is no longer a scarce means that must be allocated efficiently—i.e., it is no longer an object of economic choice and action. On the contrary, X could be considered a “natural condition of human welfare”.2 But, if X is so abundant that neither conflicts nor tradeoffs would arise when both A and B are eager to employ it, then A and B need not worry about any potential underproduction, squandering, or misallocation of X itself. Indeed, X will always be available to A and B for whatever purpose they might need it.

That said, moreover, oftentimes so-called public goods—when scrutinized more carefully—actually feature rivalry: hence, conflicts and tradeoffs are bound to arise when it comes to their employment. Therefore, governments themselves, while allocating such goods, must be guided by some principle. Since such a principle is not (by definition) the free-market price mechanism blamed by public-goods theorists, then governmental production and allocation of public goods would require some ethical principle justifying it—that is, some justification for coerced exchange between subjects and governments, i.e., taxation and government expenditures.3 However, such an ad hoc ethical principle would be outside the realm of value-free economic theory.

Second, what about non-excludability? Here, the anarcho-capitalist answer is straightforward: governments cannot introduce coercive mechanisms preventing the depletion of (rivalrous) non-excludable goods.4 In fact, on what ground could bureaucrats maintain that depleting a scarce resource today is worse than doing so tomorrow—or in one year, in one century, etc.? Of course, they could not do so on the economic-theoretical ground.5 Why? There are two main reasons.

Reason number one: economics does not allow aggregating individual utilities into a social welfare function (utilities are, in fact, unmeasurable, and you cannot perform on them such mathematical operations as additions, averages, etc.). Hence, aprioristic assessments about the social (dis)utility of consuming a (scarce) non-excludable resource today as opposed to tomorrow—or of having a (scarce) non-excludable resource consumed by a group of people rather than a different one—cannot be performed on an economic-theoretical ground.

Reason number two: economics does not allow interpersonally comparing the utility of one person (who, say, is depleting the scarce resource today) with the utility of another one (who, say, is not eligible to deplete the resource today, and hence would be depleting it tomorrow). Thus, economics has nothing to say about the distribution of a (rivalrous) non-excludable resource among individuals—i.e., economists cannot know whether (public) good X is desired more eagerly by A or B, and thus have nothing to say about which one among A or B should be entitled to consume it.

Therefore, again, since public-goods theorists maintain that the free-market price mechanism is not suitable for allocating (scarce) non-excludable resources, then some sort of ethical justification for governmental coercive provision would be required. However, again, this moves us beyond the scope of value-free economic theory. Economic theory, in fact, cannot proffer value-judgements about the allocation, production, consumption, etc., of scarce resources—this being, instead, the realm of ethics and aesthetics.6 Economics can, at most, show the most efficient arrangement to achieve the desired allocation of resources and satisfaction of (given) ends.

Moreover, oftentimes so-called public goods are actually both rivalrous and excludable;7 hence, they can be homesteaded according to Lockean-Rothbardian ethics—i.e., the first one employing (or better: fencing) them is to become their owner. Thus, there is no need for entrusting governments with public goods’ production: the free market, once a just ethical system of assigning property rights is in place, can do that more efficiently—via the price mechanism.

Third, as we already hinted, even if such a thing as pure public goods were to exist, this would not suffice to establish the case for their governmental—i.e., coercive—production.8 In fact, governments can produce public goods only if financed via taxation. But then, what gives governments the right to take away resources from citizens—i.e., taxes—in order to produce public goods? There are, indeed, at least two issues with such an ethical stance legitimizing governmental provision of public goods.

Problem number one: government, in order to produce and allocate public goods, would invade—via taxation—the legitimately acquired property of its subjects. In fact, if I can no longer enjoy my property to the extent I deem fit—but rather government is to barge in, take it away from me, and employ it as it wish—then government becomes (against my consent) the true owner of the resource. But this would be a prima facie theft—and, unless we want to advance an ethics legitimizing theft, aggression, and invasion, we must recognize this option as deeply unethical.

Problem number two: what if the (public) goods that government is supplying are not goods at all for some taxpayer—being “bads” instead? That is, what if government is forcing its subjects to consume goods they actually abhor?9 For instance, I hate watching TV: were government to tax me in order to finance public provision of TV programs, then I would be dissatisfied twice—the first time being deprived of a share of my income, the second time being subjected to junk TV programs.

Fourth, and last: any coerced exchange is always suboptimal with respect to a free one. In fact, why do people (freely) exchange? They do so because they know they are psychically profiting from it. If A performs an exchange with B, then we can conclude that both A and B are happier (after the exchange) than they were beforehand—i.e., they revealed their preference for such a free exchange through their action. But things are totally different when governments are involved in coercively supplying—via taxation—public goods. As Hoppe wrote,10

“the value of the public goods is relatively lower than that of the competing private goods because if one had left the choice to the consumers (and had not forced one alternative upon them), they evidently would have preferred spending their money differently (otherwise no force would have been necessary)”.

Conclusion

Public-goods theory is no compelling argument against anarcho-capitalism. Public goods are, oftentimes, resources that are rivalrous; when they are not, they nonetheless can be oftentimes produced on the free market—and be rendered excludable applying the standard libertarian homesteading principle. Moreover, it is impossible to ethically justify governmental production of public goods—unless we consider as legitimate both theft and coerced dissatisfaction of consumers. Lastly, consumers would always prefer at least one private good—acquired via uncoerced free exchange—over any conceivable governmental public good—produced via coerced taxation.

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Mises Institute
The Mises Institute, founded in 1982, teaches the scholarship of Austrian economics, freedom, and peace. The liberal intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995) guides us. Accordingly, we seek a profound and radical shift in the intellectual climate: away from statism and toward a private property order.

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