Rothbard’s Underappreciated Contributions to Public Goods Analysis
One of the primary justifications given for state provision of a good or service is that it is a “public good,” meaning that it is sufficiently costly to exclude nonpayers from enjoying the good and that one person’s enjoyment of the good doesn’t interfere with anyone else’s. Provision of such goods through voluntary means is considered to be either impossible or, at the very least, inefficient compared to state provision. Rational individuals will choose to free ride by enjoying the good without paying for it. As a result, market provision of the good will result in underproduction, because any business providing such a good will produce a quantity in which marginal revenue equals marginal cost, but marginal cost will be unequal to marginal benefit. Furthermore, if the provider were to contract with all beneficiaries to get them to agree to pay before the good is produced, the transaction costs would still be prohibitive. As such, the state would be a more efficient mechanism of provision, as it can force all beneficiaries to pay for the public good, thus overcoming the free rider problem.
Rothbard rejected this analysis, denying that the state is capable of providing goods more optimally through coercion than are freely acting individuals through voluntary means (Rothbard 1956, 1961, 1962). Individuals voluntarily organize and contribute to all kinds of activities on the market, including common projects that benefit more people than the contributors themselves, i.e., which generate “positive externalities.”
Critics of Rothbard have consistently misread and misunderstood him, be they defenders of public choice economics (Frech 1973) or mainstream neoclassical economics (Caplan 1999). The majority of economists, to their detriment, sadly live in complete ignorance of Rothbard’s contributions in the field of public goods theory.
Robert Lawson and J.R. Clark (2017, 136), in a
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