Many of us have brushed up against public-goods theory once or twice, in an economics class or in various policy arguments. In the 1970s the concept took off in international-relations studies and we hear much these days about global public goods. This broadening of public-goods theory serves to license a broad array of state activities abroad, modeled on those at home.
Economist Murray Rothbard was a severe critic of the theory. In Man, Economy and State, vol. 2 (1970 , 883–90), he dealt with one argument involving “collective goods” and another involving “external goods.” On the first argument “some goods or services, by their very nature, must be supplied ‘collectively,’ and ‘therefore’ [by] government….” Rejecting the idea that collectivities can actually “want and then receive” goods, Rothbard denied that even defense constitutes a single, collective good or service.
Addressing economist Paul Samuelson’s idea of “collective consumption goods,” which individuals can enjoy without reducing the supply to others, Rothbard wrote,
most governmental services simply do not fit Samuelson’s classification — including highways, libraries, judicial services, police, fire, hospitals, and military protection.… [In fact] … no goods would ever fit into Samuelson’s category of ‘collective consumption goods.’… [If] a good is really technologically ‘collective’ in Samuelson’s sense, it is not a good at all, but a natural condition of human welfare, like air — superabundant to all, and therefore unowned by anyone.
Turning to the matter of “external goods” (“benefits”), Rothbard notes that different formulations of the idea “cancel each other out,” since some writers “attack A for not doing enough for B,” while others “denounce B for accepting a benefit without paying A in return.” But the first argument fails because “it is presumptuous of the free rider [‘B’] to assert his right to a post of majesty and command.” “Compulsory thrift,” which might benefit others and “attacks on potential savers for not saving and investing enough” are examples. In cases of “coerced growth … the various ‘free riders’ band together to force other people to be thrifty so that the former can benefit” (835, 886–88).
(Recall that mercantilists and classical economists alike denounced the poor for not working nearly enough for employers; they preferred, apparently, to work for themselves as much as they could.)
Rothbard’s radical approach to the free-rider “problem” emerges in his response to the argument that someone becomes a free rider by inadvertently enjoying “the ‘unearned increment’ of the productive actions of others.” But this moral judgment was valid only “when directed … against the free rider who wants compulsory free rides.” In many cases “the free rider did not ask for his ride. He received it … as a boon because A benefits from his own action.” To gripe about this is to send in the police “because too many people in the society are happy.” Because of others’ investments, “we are all ‘free riders’ on the past” (888).
For Rothbard, noninvasive free riding requires no state action at all, while invasive free riding stems either from positive state action or from state failure to protect property rights. Where public goods and public ownership apparently exist, state bureaucracy — not the public — “controls and directs and therefore ‘owns’ the property” (828). Accordingly we may address the everyday fact that states control resources and installations without recourse to existing public-goods theory. So stands the critique.
Public goods so far
Looking at two cases, let us ponder these rather abstruse notions. Local inhabitants and travelers may use a public park, perhaps for a fee, but no user can remove an “aliquot” share of it (Rothbard). Somewhere else, these peasants have a right to keep their animals on a specific common field: a specific, local right necessarily excluding all other peasants. (Yet, as Elinor Ostrom has shown, a “tragedy of the commons” hardly follows.) Both cases might seem to involve collective or public goods. In the one, a local government owns the park in the name of some community; it could not provide this service should millions of outsiders arrive. The second case involves a shared private right, and we need hardly say more. So collective need not mean public, or public, state. State-controlled goods and services exist, however, but are not necessarily public in the sense required by the usual theory (some will be “bads” or disservices). Nor can we just assume that literally “public” goods — if they can exist — must be provided by a state.
International public goods
But how does public-goods theory fare in international-relations (IR) thinking? Let us interrogate some practitioners. John A.C. Conybeare, building on Charles Kindleberger’s work of 1973, writes that many IR scholars view “an open world trading system [as] a public good which will not be voluntarily provided by any actor in the system” unless by “an enlightened hegemonic actor” (“Public Goods, Prisoners’ Dilemmas and the International Political Economy,” International Studies Quarterly, 1984, 6). Thus a dominant great power may impose economic openness out of benevolence or self-interest — somewhat in the manner of Rousseau’s republic that forces men to be free. This imposed free-trade regime constitutes a public good. (The whole thing seems rather dubious.) Surveying the usual criteria, “excludability” and “joint supply,” Conybeare concludes that public-goods theory does not have much value for international studies. It would be better, therefore, to make use of the famous “prisoners’ dilemmas” devised by game theorists and others to shed more light on social action and social coordination (6–8). (See below.)
Conybeare sees free trade as generally beneficial. Global trade problems arise from the efforts of states to profit from restricting trade: “Most of the major disputes in international trade are about neo-mercantilist rivalries in the consumption of the benefits of trade.” But it is possible, he believes, to have fairly free trade while excluding some parties (8). But if this relatively free trade “is not a public good, the rest of the system has no need for the hegemon to provide free trade per se….” [Italics added.] In actual practice, states often bargain down their restrictions on trade in pursuit of other goals. Absent a power able to impose poor alternatives, the prisoners’ dilemma does not arise, either. Conybeare has arrived at some interesting conclusions (11–12).
An aside on prisoners’ dilemmas
Prisoners-dilemma analysts spend much time theorizing what individual people will (or might) do when subjected to coercively structured sets of bad alternatives. It is no accident that their classic scenario directly involves manipulation of captives by government bureaucrats. The chief claim seems to be that speculation on various “payoffs” available to either of two prisoners held incommunicado — i.e., the benefits in certain circumstances of “ratting out” the other for a reduced sentence — yields useful insights into human social life. And there is a practical side to this: Paul Craig Roberts and Lawrence M. Stratton showed in 2000 that Benthamite plea bargains are largely replacing real trials in this “free” country, rendering constitutionally guaranteed procedural rights quite useless. Unlike flying saucers, the prisoners’ dilemmas are real.
It seems worse, somehow, that alongside a rising tide of real, nontheoretical prisoners’ dilemmas we must endure social theorists who think like kidnappers. Their work may indeed tell us much about states, kidnappers, and their moral outlook, but not much (perhaps) about society — outside of special situations contrived by third parties (usually a state) capable of taking prisoners in the first place. Whether prisoners-dilemma theory would explain much about a society not suffering from colossal overlegislation, metaphorical “wars” on bad behavior, and unrestrained prosecutors and police, we may leave as unproven.
States and lighthouses
Joanne Gowa takes the argument over free trade and public goods a bit farther. She is interested in the claim that strong (autonomous) states favor free trade, whereas “weak” states cannot withstand pressure from organized, domestic protectionist blocs. Political scientists are divided here, but there is some agreement that the U.S. government is autonomous with respect to policies involving raw materials (oil) and banking (“Public Goods and Political Institutions,” International Organization, 1988, 15–20).
Gowa doubts that public-goods theory sheds much light on collective (social/political) action. She quotes Howard Margolis, who states that the “conventional economic model predicts (incorrectly) such severe problems that no society we know could function if its members actually behaved as the conventional model implies they will” (22). Gowa’s account of interest groups’ problems with their own free riders suggests that the former often overcome their problems through cooperation or “exclusion.” They then go their merry way —with the state helping them to exploit everyone outside their re-configured cartel. Their political-economic “goods” are others’ “bads” (21–25, 28).
On lighthouses, once-popular as the “typical” public good, Gowa cites political scientist Michael Laver, who writes, “I could surround the entire area within which the lighthouse was visible with a minefield, and issue the directions for safe passage only to those whom I wished to use it” (23). Hoping to use this possible exclusion of users to undermine lighthouses as public goods, Laver has to think like a state. We can more easily resolve things if we adopt Rothbard’s understanding that actually existing “public goods” are state goods. State officials can and will exclude users from them, by denying them to noncitizens, by restricting them as punishment or social control, et cetera. Such practices may be good for the state, but they are not good for the pure theory of public goods.
Sensibly observing that “few goods are unalterably non-excludable,” Gowa adds, “Whether potentially public goods are treated as such is determined by political institutions” and that “the public character of the specific goods of trade and monetary policy resides as much in the political institutions that produce them as in the goods themselves” (28–29, italics added). Exactly: these goods are grants of privilege by the state and instances of coercive free riding. They are state “goods,” and “state” does not equal “public.” The public-goods category is rather arbitrary.
International public “bads”
Our third witness is Rahul Rao, who reasons that the case against empire as imposed, external rule “applies even if, as many have argued, empires supply public goods.” Even if the empire provides real public goods for free for its own reasons, it hardly follows that “this [U.S.] empire … is providing the public goods that it claims to” (“The Empire Writes Back,” Millennium, 2004, 161–62). Rao cites language from the Bush Doctrine about protecting friends and allies — language suggesting that security can indeed be excludable and nonjoint (unshared). But if so, “then security cannot be considered a public good” (162–63). And there are “very sound reasons for doubting whether U.S.-imposed ‘security’ is a public good,” since “world politics for a long time to come will be driven by blowback from the U.S.-led ‘war on terror,’” with the United States “producing public ‘bads’ both for itself and others.” This, he adds, is essentially what happened during the Cold War, when U.S. policy fostered cooperation in the core western states and disruption in the world’s periphery.
If it turns out, he adds, that the “assumption of benevolence is unwarranted or exaggerated,” the imperial power may nonetheless “be capable of coercing others into paying for the goods.” By implying that those who do not pay for imperial services, wanted or unwanted, are suspicious “free riders,” public-goods theory becomes “a moral prop” of imperial pretensions (163–64).
The effort to shift imperial costs onto others brings us to the global monetary system as a mechanism for universalizing U.S. inflation. No one doubts this, although some —like the Nietzschean technocrat Thomas P.M. Barnett — have redefined it as a “voluntary transaction”: an implicit bargain wherein America provides invasions and aerial assaults (“security”) and a grateful world accepts and uses devalued U.S. dollars (The Pentagon’s New Map, 2002, 308–309). This supposed exchange fails the test of demonstrated preference (Murray Rothbard, “Toward a Reconstruction of Utility and Welfare Economics,” in Mary Sennholz, ed., On Freedom and Free Enterprise, 1956, 224 ff. Rothbard opposed “demonstrated preference” to neoclassical “revealed preference.”).
If dollars-for-security were a real economic exchange, actual foreigners would sign detailed security agreements, including commitments to “pay” (or not) by accepting evanescent U.S. dollars. Instead, we see foreign politicians — caught up in alliances and monetary relations they cannot (or prefer not to) escape — agreeing to nothing so specific. Since these parties constitute a large subset of Rothbard’s “coercive” free riders, we can analyze their mutual relations politically, but without conjuring up specifically economic theorems on public goods. Economist Hans-Hermann Hoppe was quite realistic when he called U.S. monetary authorities the “autonomous counterfeiter of last resort to the entire international banking system” and attributed many existing evils to its works (“Banking, Nation States, and International Politics,” Review of Austrian Economics, 1990, 83–84).
If the U.S. government issues excess money for its own reasons and if much of the world accepts that money as sounder (for the moment) than any other, those facts alone do not prove U.S. monetary services to be “public” or a “good.” The claim that a benevolent superpower must provide world public goods looks like a bad long-run bargain. Of course identifying this Benevolent Hegemon is dead easy. As Anglo-Canadian historian Edward Ingram writes, the favorite game of American scholars is searching for “the King in the Castle … knowing he is the United States” (“Hegemony, Global Reach, and World Power,” in Colin and Miriam Fendius Elman, eds., Bridges and Boundaries, 2001, 250).
Down with public-goods theory
Exposure of the weaknesses of public-goods theory seems to have been an unintended (but over-determined) consequence of its migration into international relations. Public-goods theory sought, after all, to explain (and justify) things governments were already doing (cf. Musgrave, Samuelson, and Baumol). Since governments do those things, economists reasoned, there must be good, functionalist reasons for them. Still, merely being done did not make them public or goods. There are perils in thinking like a state, and public-goods theory may have developed in part to justify taxes.
There is an analogy with eminent domain. Kings sometimes just took land they wanted, whether under “prerogative” or “war powers.” Since all property was “held of” the king (especially in England), the king or his favorites were well-placed to seize land for purposes they could call “public,” however arbitrarily. Lawyers arrived, followed at length by economists, and both sects crafted rationales for what rulers had long gotten away with, time out of mind. If economists had been choosier about where they got their models or metaphors, economic theory might contain fewer state-centric (or state-serving) premises.
“Distribution,” seen as a process separate from production, arose rather directly out of the state’s fiscal activity of taxing some and paying others (Rothbard, Man, Economy and State, vol. 2, 794–95). So abstracted, John Stuart Mill could treat it (in Frank van Dun’s words) as “free moral activity” (“Natural Law, Liberalism, and Christianity,” Journal of Libertarian Studies, 2001, 20). Similarly, men impressed with Harvey’s medical discoveries might still have thought twice about the “circulation” of money (Rothbard, vol. 2, 666).
The public-goods rationale for imperial activity is widespread today. Some parties claim that the United States must go beyond providing inflationary dollars and imposing “free trade” and guarantee global democracy and general happiness. That is the American state’s World Mission — something Americans would do well to avoid. As for public goods, the term might be excusable, if it referred only to things or relations that really are nonexcludable and joint. But in what must seem deliberate mystification, obsessive focus on harmless free riders diverts attention from invasive free riders inside (or allied with) the state.
This article was originally published in the August 2015 edition of Future of Freedom.