Public goods and public evils

Public goods differ from private goods in that they are non-rivalrous in consumption and non-excludable. Watching a fireworks show does not reduce the amount of “fireworks show” my neighbor can enjoy. If I’m going to put on a fireworks show, I can’t prevent non-payers from seeing my bombs explode in the sky.

Because public goods are non-rivalrous and non-excludable, we won’t get enough of them if we rely solely on the free market. Subsidies and government benefits are the corrective measures by the book. Of course, entrepreneurs and innovators have devised all kinds of ingenious methods to provide private public goods, such as advertising-sponsored radio and TV broadcasts. Edward Stringhams Private administration collects examples of free people figuring out ways to do the things the textbooks say will be done inefficiently without subsidies or government benefits.

However, there is another way we can move this discussion forward. We must take into account the possibility that we are subsidizing the public bad things very seriously. Many of the brutal responses to the Covid pandemic originated in seminar rooms and government-funded laboratories, on the assumption that a brilliant brain can think of what we all need to do. The National Endowment for the Humanities sponsored Nancy MacLean’s conspiracy floor Democracy in chains (I discussed this for EconLog here And here).

I recently found another funny example in some historical documents. In the 1904 United States Department of Agriculture Yearbookwe can read an article by Archibald D. Shamel in which he describes “The improvement of tobacco through breeding and selection”. On the list of things the government should subsidize, growing better versions of a crop that has caused carcinogenic damage in the world is pretty low on the list.

“But that was 120 years ago.” That’s true, and it’s easy to look back and chuckle, but we didn’t learn our lesson. Governments around the world subsidize tobacco; While that may be the price we pay for getting subsidies for good things, it should at least curb our enthusiasm for subsidies and government provision of so-called public goods.

Good ideas have a known free-rider problem. Instead of doing the hard work of research and development, many people join Homer Simpson in wondering, “Can’t someone else do it?” Subsidized research has a less often discussed coercive driver problem. Reports like these are not catalogs from which people can choose where and how they want to contribute. They are reports about what the government does with the money they have “contributed” at gunpoint. The space program is cool and all, and it’s very personal to me: one of my grandfathers worked for NASA. It’s still not clear that this was the best use of the resources put into it.

I think the whole issue illustrates an important difference between economists on the right who are skeptical of government intervention, even in textbook situations, and economists who are more enthusiastic about it. The skeptics think that governments are more likely to subsidize things like tobacco. The optimistic think that governments are more likely to provide subsidies in ways that plausibly address market failures.

Art Carden is a Professor of Economics & Medical Properties Trust Fellow at Samford University, and by his own admission he’s as Koched as they come: he has an award in his office named after Charles G. Koch, he does a lot of work for and is affiliated with a range of Koch-related organizations, and he has applied for and received funding from the Charles Koch Foundation to host events on campus.