Why “Public Goods” Don’t Justify Government Intervention

by Philipp Bagus

The theory of public goods is one of the main arguments that is usually employed to justify economically the existence of the state.

There are some dangers in employing neoclassical terminology, as it systematically drives thinking away from sound economics. Nevertheless, for the sake of the argument, let us accept the two defining characteristics of a public good according to mainstream text books.

First, a public good can be consumed by additional consumers without any additional cost. This characteristic is known as nonrivalrous consumption. For instance, once a lighthouse is built, it lights the way for other ships without any additional costs.

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