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Source link: http://archive.mises.org/6057/new-working-paper-by-larry-sechrest/

New working paper by Larry Sechrest

December 22, 2006 by

The Privately Funded Warships of the U. S. Navy: Blowing Holes in Public Goods Theory
by Larry Sechrest (Sul Ross University)

In 1798 the United States faced an undeclared naval war with France. The existing tax-funded vessels of the U.S. Navy consisted principally of a small number of very large frigates. These were probably not the ideal weapons for coping with the French threat on the seas. Therefore, a number of self-interested citizens took it upon themselves to provide nine additional fighting ships. These privately funded frigates and sloops-of-war served with distinction. Most of them were considered outstanding examples of naval architecture. Some saw action only against France. Others lasted through the Barbary Wars and even the War of 1812. The lesson to be drawn from this little-known episode in American history seems clear. An effective fighting force can be financed and constructed entirely by means of voluntary contributions. National governments need not direct the process, and involuntary taxes need not be employed. Public goods arguments to the contrary are incorrect.

{ 4 comments }

Vedran Vuk December 23, 2006 at 6:45 pm

Dr. Sechrest,

While this is the case on sea, on land during the revolutionary war draft was still present. One could pay his way out of being drafted for a cheap price. It is estimated that only 15% actually could not pay and fought forcefully during the war. This is from a Journal Of Libertarian Studies a while back by Jeff Hummel I believe.

Kaveh Pourvand December 24, 2006 at 9:03 pm

Mr Sechrest,

Your paper provides a valuable insight into how private initiative can contribute to achieving social goals.

However, I believe the central claim, in regards to the falsity of the public goods hypothesis is mistaken. As far as I understand it, the hypothesis states that private supply of a non – excludable good will result in a sub – optimal quantity. Upon my reading of it, your paper did not contradict that claim. It is stated that the private additions to the US navy constituted a 65 % increase. This means that the majority of ships were government ones. In this regard, the private supply of this good was subsidised by the state, just as the public goods theory would predict!

Björn Lundahl December 29, 2006 at 7:02 pm

National defence is a private good and not a public good*.

Why would individuals, in a pure free market, want to spend money on national defence?

As people in a free market would want to protect themselves (life and property) against aggression (physical violence and theft), for example, through insurers (or other protection agencies), risks against warfare would, also, be included in the insurance premium.

Warfare is only aggression or physical violence of a greater magnitude, but is still the implementation of physical violence.

Aggressors prefer to aggress against people in densely populated and market valuable areas than unpopulated and worthless areas**.

The more heavily populated an area is, the more valuable properties are and the more threatened people are in a certain area, the more incentive they will have to protect themselves against aggressions and therefore, also, the more recourses would they allocate to fulfil that need.

As named areas are risky places, property values are therefore also lower than what they would be if those risks did not exist. People have an incentive to invest and live in other, less risky areas.

Insurers and protection agencies have incentives to cooperate against the intruder and pinpoint retaliation against them. That would reduce risks and increase property values, wages and prosperity.

The government apparatus is clumsy machinery against free market institutions. Producing consumer goods and services by government owned organizations and through taxation, does not stand a chance in their effectiveness of the utilization of resources and in their quality of output compared to free market institutions.

Thanks to Hans-Hermann Hoppe, a so called typical public good has been instead concluded to be a private good.

Because of this, consumers and the free market, have every incentive to spend and invest in a national defence.

As teaching of economics in our universities are objective and true, this will be common knowledge among economists in a few years time. Honesty and truthfulness are teacher’s lodestar (joke).

A more difficult question to analyze and to answer would instead be: Didn’t their mammies teach them to be honest and truthful, so why aren’t they?

* A quote on public goods from an interview with Hans-Hermann Hoppe:

“The mistake of public goods theory is to presume that economists can detect that something that is needed but is not being provided by markets, either at all or in sufficient quantity. But this is just an observation that we don’t live in a Garden of Eden. At all times, people want goods and services that do not exist or are unaffordable. But just because we want something to be made available does not mean that it should be made available.

If we have to consult with economists to discover whether there are not enough lakes and roads, shouldn’t we also check with them to see if are too many tennis shoes and toothpaste brands on the market? Ultimately, public goods theory is a rationale for central planning and an attack on the market itself. The real question is whether it is economically beneficial and economically justified to override voluntary transactions and market verdicts, and forcibly transfer property from private owners to the state. I don’t think it ever can be justified.”

http://mises.org/journals/aen/aen198.asp

** To occupy unpopulated and worthless land would be aggressions against people wanting, in the future, to visit or to make use of those areas.

Björn Lundahl
Göteborg, Sweden

Björn Lundahl December 29, 2006 at 7:09 pm

“Free riders and government failures”

To talk about the government as an alternative to the market is an illusion.

If there is such a thing as a free rider problem at all, then we should quickly get rid of the welfare state. In the welfare state some people are net payers and some are net beneficiaries and, therefore, free riders. The people who are supposed to solve this so called problem are themselves free riders i.e. people working for the government and in the state apparatus.

People working in the government apparatus are not in an efficient way providing services for bettering the market system. People in the government apparatus are only blind when it comes to efficiency and they are only following and fulfilling randomly chosen values without knowing if there are any market values at all in the supposed services which they are delivering. When the political machinery intervenes in the market to a greater extent as in the former Soviet Union, the destructiveness is revealed. The very function of the state apparatus is anti market.

If the market worked in the same manner as the state does and its participants would receive their incomes, therefore, through violating people rights and this also would be a natural way for the market to function; we would not even consider free enterprise as an alternative way of making society wealthy and prosperous. In other words, we would not worry about if the free enterprise system was based on some “market failures” or not, as the system would considered to be a “totally failure” and, therefore, not to be considered at all.

In a pure free market; rich, poor, black, white people etc have rights.

If a poor man has not bought any protection services from a protection agency, he still got his rights. If someone would violate his rights, a protection agency might very well protect him anyway, as it could reap its incomes from the violator i.e. if necessary, through forced labour.

Björn Lundahl
Göteborg, Sweden

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