Public goods are a type of good that has the following characteristics:
- The characteristic of non-excludability means that it is practically impossible to exclude a person from the group of consumers of this good.
- A characteristic of non-rivalrous consumption is that the consumption of a good by one person does not diminish the availability of that good for another person.
- The sign of indivisibility is that good cannot be broken down into separate units.
Examples of public goods include roads, wells, public order, waste collection, and national defense.
The theory, and indeed practice, suggests that large groups are unable to create public goods without the use of violence or other selective incentives. Essentially, the only justification for the existence of the state is the creation of public goods through the coercive mobilization of resources. We pay taxes, and in return, we receive roads, courts, an army, legislation, hospitals, libraries, and so on.
A state that stops providing public goods ceases to be necessary for its population. Such a state begins to rely solely on violence, which is not aimed at creating public welfare but at protecting the state from its own citizens. This condition is well described by the term “failed state.” Such a state is inefficient and uncompetitive in the “market of states,” and clients—meaning citizens, companies, and investors—who are able to switch “providers” do so with great pleasure.
Such a state is destined for a sad fate, as an unpleasant feedback loop kicks in: the more money is spent on the apparatus of violence, the less is spent on public goods, and the more needs to be spent on maintaining the apparatus of violence. Not only the population suffers, but also the beneficiaries of the state—the ruling elite. This leads to the familiar situation where the elites cannot and the masses do not want to.
The dependence of state stability on the quantity and quality of public goods has long been recognized by the so-called “Western democracies.” No, there is hardly any democracy there. It is more like a bureaucracy. Power is concentrated in the hands of a large number of officials who have learned to benefit from the ever-increasing amount of public goods, funded by a growing number of taxes. After all, the larger the turnover in this business, the more can end up in the manager’s pocket.
“Western bureaucracies” build highways, invest in alternative energy, beautify city streets with flowerbeds, create free educational institutions, develop free or conditionally free healthcare, construct dams, bridges, and canals, and launch rockets into space—in short, they provide the population not with “stability,” but with “confidence in tomorrow,” and not from the word “bottom,” but from the word “day.”
But public goods have one serious problem. They are not needed. They exist either as artificial constructs created by bureaucracy or as something whose consumption cannot be effectively personalized. If you are a recipient of a public good that you were forced into, you are likely not in need of that specific good. Everyone pays equally for the elevator in a building, but each person uses it differently. Equal payment = unfair. A bridge in Krasnoyarsk shouldn’t concern a resident of Omsk, even though it is funded in part by the pockets of Omsk residents. For some reason, the salary of a local police officer is paid by the Ministry of Foreign Affairs, not by the residents of that area, which is not only unfair—since it fails to properly align salary with workload—but also harmful. The police officer begins to work not for those they are meant to protect, but for the “system.”
What to do? Of course, we need to come up with ways to personalize public goods and eliminate the “natural” monopolies that are provided by the state and thus classified as public goods. A simple solution has already been found for roads: a road fee is included in the price of fuel. A more complex approach, like in Germany for freight transport, involves equipping vehicles with a device that tracks “cargo in transit” and calculates ton-kilometers, from which each road user’s contribution is determined. As soon as the cost of such devices, along with the cost of processing this information, becomes lower—and it will become lower—a host of problems related not only to road maintenance but also, for example, to insurance will disappear. Or, it will be much easier to resolve the issue of who should pay for a brand-new road in a remote village. Should it be everyone, or just the deputy who built it for himself at the state’s expense, without any rational justification, since no one lives in that village anymore?
The very idea of personifying public goods is a powerful weapon in the fight against corruption, and when combined with a system of transparent accounting for budget expenditures, it has the potential to eradicate systemic corruption at its roots.
Practically everything we call a public good can be made individually accountable and paid for by each person, but more profitably through tax reductions down to zero. Why do we need taxes and the machinery to collect them if people are already paying for everything themselves, either as they consume or, as in the case of healthcare, through insurance premiums? And if there are no taxes, then poof, there’s no state. There are no “leaders of the nation,” who usually drive the country into the ground, no thieves in power, no pseudo-elections and pseudo-democracy. None of this hustle and bustle created solely for a bunch of leeches to feed off our money.
It’s a good idea, but it’s utopian. We still have things like the army, courts, law enforcement, and legislation. But even here, there are things that can be done.
Law enforcement can be privatized. When a community selects a security firm for a certain period from available options and pays them, the firm is responsible for protecting the area and combating crime. If a criminal escapes into the territory of another security firm, that firm will apprehend the criminal under an agreement with the first firm. The first firm will then compensate the second for the hours worked. Just as airlines sell tickets for other carriers on their own tickets, security firms can operate similarly—clearing, or mutual offsetting of efforts, will make it impossible for a criminal to escape and will also make the security personnel directly interested in capturing him. In this scenario, bribes and connections will no longer be effective.
Courts could very well become private judicial corporations—arbitration organizations that citizens choose for themselves, much like a church congregation, and pay fees to in order to bring their complaints. These “corporate courts” would fund their own appellate bodies and, therefore, would strive to avoid cases going to appeal or to issue decisions that would not succeed in the appellate instance. Such “corporate” courts would specialize in different aspects of activity. Some would receive fees, mostly from companies—clearly functioning as “commercial” courts. Others might specialize in criminal cases, while some would focus on family and civil matters, and so on.
Legislation can similarly be demonopolized through the deepest possible federalization of the country. Yes, lawmakers in each community or federal entity would be local monopolists, but the free movement of people, resources, and capital between federal entities would make this monopoly quite conditional. Laws would be written not just to impose restrictions, but to ensure that people, resources, and capital could choose their federal entity.
Army. Surprisingly, there are three possible solutions here. One is to fund the army through federal contributions from the subjects of the federation; another is for the army to be maintained by the subjects of the federation themselves, resulting in a “military alliance” rather than a unified force protecting the entire country. The third option, as seen in Iran, involves having two (or more) armies in the country, each with its own funding. The presence of an alternative force prevents its operator from having a monopoly on its use and ensures stability for society.
Do we still have “public goods” that can’t be accounted for and itemized individually?