Wednesday, July 24, 2019

And That Right There is the Problem with "Public Goods" Theory

Interesting piece on "public goods" by Jon Murphy at

Samuelson shows that public goods will tend to be underproduced compared to a socially optimal level ...

Not exactly.

Yes, it's reasonable to predict that if a good collects "free riders" who use it but don't pay for it because it's non-excludable and they don't have to pay for it, less of that good will be produced than if everyone who used it had to pony up.

But a "socially optimal level" is a matter of subjective valuation, not some kind of indisputable factual claim.

When someone calls for government subsidies of a "public good" to spread the cost around, he's doing so because he thinks there should be more of it and doesn't want the costs to be borne only by those who agree, not because God struck "400 more tanks and 20 new fighter-bomber aircraft for the 'public good' of national defense" onto stone tablets and dropped them from the sky onto all our heads.

Some of us may not value those new arms at all. Some of us may even place a negative value on them (we'd be willing to pay to STOP them from being produced). The fact that they're not excludable doesn't mean we want them or think they're a good idea. Our idea of "socially optimal" differs from the "public goods" yammerer's.

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