Public Goods, National Defense, and Central Planning—Richard Ebeling

“While competitive markets are understood to be effective engines for fostering innovation and creativity that has helped eliminate global poverty and improve the standards of living of billions of people around the globe, it is claimed that there are some goods that only government can effectively provide, which are known as ‘public goods.’

It is argued that due to the particular and peculiar properties and characteristics of public goods, they cannot be efficiently and “optimally” supplied by private producers. A central problem with the theory of public goods is that there is no way of knowing how much and what type of commodity or service citizen-consumers would actually want, since there is no real market upon which they can express their values and preferences in terms of the prices they might voluntarily pay to have it from market-based producers. Hence, there is no way to know if such a government provided and tax-funded “public good” is being oversupplied or undersupplied, or might not be wanted at all.

National defense, usually earmarked as an exemplar of just such a public good, demonstrates, therefore, an inherent economic irrationality in the decision of how much to supply and in what forms. due it not being bought and sold on a market. In this, it is similar to the problems experienced under government central planning.

It has long been argued by both classical liberals and conservatives that one of the essential functions of government is provision of national defense precisely because it is not practical to have a private enterprise solution to this social problem. This may be the case, but if it is, this means that there can never be the clear certainty of how much national defense and of what type the citizens really want in the same way we can find out for any other good offered and demanded on a competitive market.”

Richard Ebeling