Tag: Public Goods

The positive external effects of stimulus

Some politicians have expressed great frustration over the fact that not all countries are doing their part in engaging in deficit spending and/or manipulating the money supply to stimulate “the economy.” It is not difficult to imagine how such a perspective will invariably culminate in complaints that countries that have not done enough to stimulate the economy are “free riding” on the policies of other countries.  This, in turn, will increase demands for international  policy “coordination” or  increased transfer of power to supranational organizations.  There is a striking parallel between this kind of reasoning and the rationale for making forced contributions to public goods. As Anthony de Jasay has noted in his book Social Contract, Free Ride:

The high road to coercion is the contractarian pretension that acceptance by a person of a share in a benefit he did not solicit is tantamount to his tacit acceptance of an obligation to provide a share of the corresponding contribution in the same way as those who did solicit the benefit.

One of Russell Kirk’s 10 conservative principles is to “pay attention to the principle of variety…as distinguished from the narrowing uniformity and deadening egalitarianism of radical systems.” Another is to “uphold voluntary community, quite as they oppose involuntary collectivism” because “when these functions pass by default or usurpation to centralized authority, then community is in serious danger.“

The increased calls for coordination, harmonization, and centralization as expressed in appeals for more authority for the federal government, the European Union, and international monetary organizations and the attacks on “harmful” tax havens and free-riding countries constitute the elements of a renewed enthusiasm for increased uniformity and less diversity.

Recommended reading:  The Political Economy of the Antifederalists (PDF)

Social contract, free ride

The publisher Liberty Fund has republished Anthony de Jasay’s book “Social Contract, Free Ride: A Study of the Public Goods Problem.” In this book, de Jasay, one of the most original and sharpest political philosophers of our age, offers a critical review of the public goods argument for the state. He argues that a) economists and political philosophers too easily dismiss the possibility of voluntary production of public goods, and b) that the social contract solution to establish a state to remedy market failure and free-riding will create an environment that will bring back free-riding with a vengeance.

Although de Jasay prefers to make his case by staying within the orthodox rational choice framework, he  admits the logical problems implicit in the social contract argument:

“The high road to coercion is the contractarian pretension that acceptance by a person of a share in a benefit he did not solicit is tantamount to his tacit acceptance of an obligation to provide a share of the corresponding contribution in the same way as those who did solicit the benefit.”

The desire for fairness in contributing to public goods tends to generate political arrangements that will undermine both justice and fairness:

“…while the intent of the social contract is to suppress free riding, its actual effects is to open up an altogether new ground on which it thrives with impunity. For the deterrent to state-of-nature free riding is the falling probability of successful public provision of a good as abuse of it by free-riding increases. When the necessary contributions for successful public provision are assured by coercion, no such check operates and free riding is never too risky. Risk, in fact, enters people’s calculations with the opposite sign: from a check upon free riding it turns it into a spur.”

Liberty Funds’ edition of the book is presented as “The Collected Papers of Anthony de Jasay.” Hopefully this indicates the start of an ongoing series of de Jasay’s (unpublished) writings.