THE RIGHT SIDE OF THE PUBLIC GOOD TRAP

The analysis of public goods in Chapter 34 and the discussion of government viewed as a market in several other chapters make it possible to analyze the merits of government and anarchy in a new, or at least a more explicit, fashion. Under a government, good law is a public good. That is why it is not produced.

The concept of a public good originates in the economics of the market but applies to politics as well. Under our current institutions, people do, in a sense, buy laws. They bear various costs, such as going to the polls and voting, investigating the implications of different proposals on the ballot and the voting patterns of different politicians, or supporting campaigns with time or money, in order to influence legislation. Many discussions of democracy assume that these costs are essentially zero, that if 60 percent of the people want something it will get done. But that is true only for very simple issues. More often, the cost of finding out what is really going on and influencing it is substantial.

One cannot simply go to the polls and vote for the good guys; no candidate takes ‘I am a bad guy’ as his campaign slogan. The political process can be viewed as a peculiar sort of economic process, intermediate between a grocery store and a horse race. Each voter decides what costs he is willing to bear in trying to get the laws he wants according to how likely his efforts are to succeed and how much he values succeeding. He buys law. And, by the nature of the peculiar marketplace on which we buy law, we are likely to buy more bad law than good. For good law, like national defense, is a public good.

A public good, you will remember, is something which, if produced at all, must be produced for all the members of a preexisting group. It is difficult for the person who produces it to charge those who benefit, since he has no way of refusing the good to those who refuse to pay. For this reason a public good may fail to be produced even when the cost of producing it is much less than its value. Since laws apply to everyone in their jurisdiction, whether or not he has worked or voted for them, good laws under governmental institutions are a public good and are consequently underproduced. Worse still, bad law is often less of a public good than good law. The result is that the laws of a government are worse, not better, than its citizens, in terms of their individual values and beliefs, deserve.

Consider a specific example. I have a choice of two ways of making $1,000; both are political. The first way is to work for the repeal of an enormous number of different special interest laws—CAB and ICC price-fixing, agricultural subsidies, oil quotas, and so on ad nauseam—each of which costs me from a few cents to a few hundred dollars a year. The second way is by working to pass one more special interest law which will benefit a small special interest of which I am a member and will cost everyone else a few dollars. If I have no moral preference for one method over the other, I will choose the second; it is enormously easier to pass one law than to repeal a hundred.

The first method not only benefits me, it benefits everyone else—but I get nothing from that. The second method benefits me and a few others and harms everyone else—but that costs me nothing. Even if I am just as willing to make money in a way that benefits others as in a way that harms them, the existence of governmental institutions makes it enormously easier for me to do the latter. The result is that in a society such as ours, in which most people would rather produce than steal, we all spend a significant part of our time using the law to steal from each other. The theory of democracy may be, as Mencken said, that the common people know what they want and deserve to get it, good and hard. The practice of democracy is that people get something a good deal worse than they either want or deserve.

Any attempt to improve the society as a whole is caught in the same public good trap. Anything I do to make America freer will benefit everyone; the small part of that benefit going to me is rarely sufficient to justify my doing very much. This is an especially bitter dilemma for those libertarians who are Objectivists. Improving the world mainly for the benefit of other people would be altruism, which they view on philosophical grounds as the ultimate evil.

How we may succeed in working our way through that trap is the subject of the next chapter. The point I wish to make here is that once an anarchist society has been established, good law ceases to be a public good. Instead it is bad law—more precisely, the reintroduction of government—which becomes a public good. Or, more precisely, a public bad.

Since, under the anarcho-capitalist institutions I have described, each individual buys his own law and gets the law he buys, law itself ceases to be a public good. Good law is still expensive—I must spend time and money determining which agency will best serve me—but, having decided what I want, I get what I pay for. The benefit of my wise purchase goes to me, so I have an incentive to purchase wisely. It is now the person who wishes to reintroduce government who is caught in the public good problem. He cannot abolish anarchy and reintroduce government for himself alone; he must do it for everyone or for no one. If he does it for everyone, he himself gets but a tiny fraction of the benefit he expects the reintroduction of government to provide. He may be sufficiently altruistic to think it desirable that everyone receive the benefit of government, but he will hardly value every other person’s receiving it as much as he values receiving it himself. Nobody is altruistic enough to be as happy about everyone in the country getting a penny as about himself getting two million dollars.

Meanwhile, the people who defend the anarchist institutions, individual consumers insisting on laws that leave them free to run their own lives, members of rights enforcement agencies protecting their clients from coercers (such as thieves, hoodlums, and altruists who want to set up governments), are all producing private goods and getting the benefit of what they produce.

Let me repeat the argument once more. The producer of a public good can get only a part of the value of producing that good. Therefore a public good is produced only if it is worth much more than it costs. The producer of a private good gets virtually all the value (by selling it for what it is worth, usually) and so produces it whenever it is worth more than it costs. Thus public goods are underproduced relative to private goods. Under the institutions of government, bad laws, laws that benefit special interests at the expense of the rest of us, are private goods (more precisely, they are more nearly private goods than are good laws), and good laws, laws that benefit everyone, are public goods. Under an anarchy good laws are private goods and bad laws are public goods. Public goods are underproduced. The citizens of a government get worse laws than they deserve. The inhabitants of an anarchy get better. It is no more than a slightly exuberant exaggeration to say that a government functions properly only if it is made up exclusively of saints and an anarchy fails only if it is inhabited exclusively by devils.

This argument should not be confused with the argument popularized by John Kenneth Galbraith, that public goods (meaning goods produced by the government) are underproduced and that we should therefore have higher taxes and more government spending. In the technical sense in which I use the term, the benefits of increased government spending are usually less of a public good than the costs, since the taxes that pay for a given program are usually more evenly distributed than the benefits of the program.

The amount of government spending is determined by the balance of costs and benefits in the political marketplace. Since the costs are more of a public good and thus have less weight in that marketplace than the benefits, there will be too much spending not, as Galbraith argued, too little.