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Government Needs To Focus On The Real Public Goods


I wrote last month about “anarcho-capitalists” who think we don’t need any government because markets can provide everything.

Most people, though, think that there are certain things (such as national defense and the rule of law) that are “public goods” because they won’t exist if they’re not provided by government.

Academics tell us, if we want to be rigorous, that there are two characteristics that define public goods.

  1. They are goods that people won’t buy because they can reap the benefit without paying (economists say this means the good is “non-excludable” while normal people refer to this as the free-rider problem).
  2. They are goods that can be universally shared since one person’s consumption of the good doesn’t limit another person’s consumption of the good (economists say such goods are “non-rival”).

That’s a bit wonky, so let’s consider the example of national defense.

In a world with bad countries (or, to be more accurate, a world with nations governed by bad people), there’s a risk or external aggression. Since most people wouldn’t want to be conquered – and presumably mistreated – by foreign aggressors, national defense is valuable.

But how would it be provided in the absence of government? Maybe Bill Gates and Jeff Bezos would have an incentive to cough up some cash since they have a lot of wealth to protect, but most people (including most rich people) might figure that someone else would cover the cost and they could enjoy protection for free.

This two-part series from Marginal Revolution University explains public goods, using the example of asteroid defense. Here’s an introductory video.