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Explaining Public Goods to Rep. Alexandria Ocasio-Cortez

New York’s high profile Rep. Alexandria Ocasio-Cortez tweeted this week

What are Public Goods?

It doesn’t seem as though Rep. Alexandria Ocasio-Cortez actually knows what Public Goods are. As I’ve written before, Public Goods “have the characteristics of being both non-rivalrous (my consumption of it does not leave less for you to consume) and non-excludable (if I pay for it it still benefits you whether you pay or not).”

National defense is the classic example. The US military protects me but that doesn’t mean that there is less protection available for you (non-rivalry). Also, if I pay towards the upkeep of the military and you don’t, it will still protect you (non-excludability). The theory runs that if, for these reasons, someone who doesn’t pay for a good or service such as national defense gets the same benefit as someone who does pay, there is an incentive for nobody to pay in the hope that they can ‘free ride’ on other people’s payments. The result is that nobody pays and the good or service isn’t provided and, so, the government should pay for it via taxation.

Rep. Alexandria Ocasio-Cortez’ ‘Public Goods’

Bearing this in mind, we can see the problems with Rep. Alexandria Ocasio-Cortez’ list of Public Goods.

Take education. If there is a limit to how many kids can fit in a classroom then the education provided by the teacher is rivalrous. It is also possible to stop kids who haven’t paid from sitting exams or graduating, so education is also excludable.

Likewise for libraries. If I take a book out you can’t. You may even have been through the thing where you try to renew a book and find that you can’t because someone else has requested it. This shows that the service provided by libraries is rivalrous. You can also require people to get a card before taking books out which means that libraries are excludable.

Infrastructure, such as roads, is the same. You can’t drive on the same bit of road as me, at least not at the same time, so roads are rivalrous. And, allowing for administrative issues, the existence of toll roads shows that roads can also be excludable. This might not apply to things like sidewalks, however, so some aspects of infrastructure might well meet Public Good criteria.

Spillovers don’t make goods ‘public’

It might be that the benefit of me getting educated isn’t confined to me. There might be some pay off to you from having a smarter fellow citizen, say. If the cost to me of getting educated is greater then the benefit to me, I’ll do it. But if the cost of my education is less than the benefit to me and you, I might purchase a ‘socially sub-optimal’ amount of education. These existence of these spillovers – ‘positive externalities’ in the jargon – is another argument for the provision of public goods.

But we are on a very slippery slope here. The people on my street might benefit from me painting my house or getting new drapes. Does this mean that my drapes and paint job are ‘Public Goods’ which the taxpayer should finance? Or would it just be ‘free stuff’?

The poet John Donne wrote

No man is an island entire of itself; every man

is a piece of the continent, a part of the main

Almost every human action contains some element of externality, either positive (me putting plants on my window ledge) or negative (me singing along to Judas Preist at the top of my lungs). If these are a basis for taxpayer support, it is hard to see where we end.

The prejudice against real Public Goods

Wherever we draw the line, there can be little doubt that national defense falls within it. And yet, people who argue for government provision of an ever expanding list of goods and services, frequently invoking Public Goods arguments to do so, will often look skepitcally at national defense. When I wrote recently that entitlement liabilities are a graver threat to the next generation of Americans than climate change, the first response was to call for cuts in military spending.

Maybe the US does spend too much on its military. But it is always odd to me that people who are eager for the government to spend trillions of dollars on this or that with whatever spurious justification, are so eager to cut spending on one of the functions of government which truly meets any definition of Public Goods.

John Phelan is an economist at the Center of the American Experiment. 




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