We call a state of affairs Pareto-optimal when no one can improve his situation without making the situation of at least one other person worse. For Betty and Adam living peacefully side by side without violating one another's rights and interests is a Pareto-optimal outcome - an equilibrium that balances both parties needs, a stable condition. However, in § 24, we have seen that there are circumstances where Betty and Adam would be trapped in a Pareto-inferior situation, unless a powerful third party like the state assures them that all players in the game will adhere to the rules that guarantee the mutually superior outcome, allowing the parties to move on to the point of Pareto optimum.
There are other unpleasant situations that an agent of unrivalled power may be able to help us overcome. Multiple equilibria belong in this category. If Betty and Adam and all other people drive on the same, say left, side of the road, we enjoy a Pareto-optimal equilibrium - everyone is doing fine, and there is no way to improve this happy situation (for any person desiring to drive on the other side) without making at least another driver or even many of them worse off (by causing accidents that would not have happened had we refrained from such "improvements").
Still, we may have a problem, because there could be another equilibrium, with everyone driving on the other side - say, the right hand side instead of the left hand side. If different people choose different equilibria, everyone is worse off because accidents are sure to occur.
If it is possible to force everyone to accept the same equilibrium, say driving on the right-hand side of the road, we thereby enforce a Pareto-optimum for all participants.
§ 26 - The Public Good, Public Goods, and Effective Trust
By compelling everyone to drive on the same side of the road, the state has brought about a number of beneficial conditions. Admittedly, the state is threatening coercion against the opponents of the driving rule, thus restricting the options of action from which any one is able to freely choose. But has the state acted arbitrarily? In an important sense it certainly has not. For its coercive measures are aimed at achieving a Pareto-optimum, or at least a Pareto-improvement, a movement closer to the position that provides an optimum to all parties. By its intervention, the state has prevented death and serious harm, while at the same time considerably widening the range of valuable human options. After all, the seamless flow of traffic is clearly a condition for achieving countless worthy human objectives.
As enforcer of a traffic rule, the state has contributed to the public good by providing a number of public goods, among them effective trust, which is indispensable if social cohesion is to prevail in a populous community.
- Roughly speaking, the public good ( = common weal) is what is good for all of us.
- A public good is anything that is good for all, or at least most of us, and cannot be had without collective action involving state coercion.
- Effective trust is established when people act as if they trusted each other, even if they are complete strangers to one another or are not well acquainted enough to feel mutually trustful on the basis of personal vetting.
Effective trust is an important contributor to the common weal. We can do a lot more useful things and avoid much harm, when we are forced to trust one another by a mediator committed to enforce benign equilibria that we are unable to accomplish of our own accord. Effective trust is a public good in that it cannot be attained in the absence of state coercion. In fact, the case of effective trust exemplifies that coercion can be exceedingly benign and productive.
In a large population, it is impossible for me to establish, let alone enforce, trustful relationships with every member. But if the state is able to force everyone to behave as if such trusting relationships existed on all sides - with regard to certain socially pivotal issues such as public traffic -, we face hugely improved prospects for undisturbed personal action and social cooperation. Trivially speaking, I do not have to worry with every approaching car, whether it will drive on the right side of the road. The state is seeing to it. Being a policing specialist in this and other regulatory matters, thus benefiting from economies of scale and learning curve effects etc, the state can do the job more efficiently and at less cost than I can. In fact, it is the only agent that is able to bring about this optimal outcome.
§ 27 - The State Releases the Powers of Private Attainment, Provides Public Benefits Unattainable by Private Effort, and Thwarts Private Action Detrimental to the Common Weal
The state has more power than any other agent, for which reason it can marshal more resources than any other agent, for which reason it can sustain projects that private agents cannot afford or do not find in their interest to undertake.
Individuals as individuals cannot warrant anywhere near as much personal freedom for every individual as is possible when a supra-individual sovereign force is enlisted in the cause of liberty. Hence, with the advent of the liberal state, there is more scope for the autonomous individual, not only because the state protects the private sphere of the individual, thereby setting free the enormous potential of private capabilities and aspirations. Apart from
§ 27 - The State Releases the Powers of Private Attainment, Provides Public Benefits Unattainable by Private Effort, and Thwarts Private Action Detrimental to the Common Weal
The state has more power than any other agent, for which reason it can marshal more resources than any other agent, for which reason it can sustain projects that private agents cannot afford or do not find in their interest to undertake.
Individuals as individuals cannot warrant anywhere near as much personal freedom for every individual as is possible when a supra-individual sovereign force is enlisted in the cause of liberty. Hence, with the advent of the liberal state, there is more scope for the autonomous individual, not only because the state protects the private sphere of the individual, thereby setting free the enormous potential of private capabilities and aspirations. Apart from
- (1) releasing the energies and intelligence of private striving from which the entire community benefit - an achievement that represents a public good in its own right -,
- (2) compensates the inability of private agents to produce certain public goods by providing the missing public benefits on its own account, and
- (3) counteracts the dangers that private agents pose to the common weal.
As for (1), protecting private ownership, for instance, contributes to the unfolding of productive and peaceful private initiative. In this way, the modern liberal state is the most significant impediment to inefficient collective ownership. (Obviously, this is not to say that all forms of collective ownership are inefficient or unwarranted for other reasons.)
As for (2), would it be reasonable for the bakers of Germany, or indeed any other private agent or association of such agents to secure the borders of the country, establish an effective army, and take responsibility for running the police force? In the absence of the core competence of the state, coercive superiority, they would not be able to marshal the resources required to provide the public goods associated with border control, a military and a police force. Private funding of such functions is impossible, because shirking and free riding is certain to be widespread when the necessary contributions cannot be forced. In such a situation, private agents left to their own devices are bound to "refeudalise," that is, retract to well-fortified manors (which is economically inefficient and socially regressive), or fight among themselves for absolute dominance, thus returning to a primitive and highly destructive stage of state-building.
As for (3), by influencing politics to their advantage, private parties forming highly focussed special interest groups may ipso facto be acting to the detriment of a public too dispersed, too distracted, and too little incentivised by notable benefits to embark on political counteraction. A small group of three car makers may lobby for tariffs that protect them from foreign competition, thereby securing vast gains, say € 100 million, while the population at large, including 100 million car buyers, suffer per capita costs from the ruse too low to induce them to act. In countless such cases, private agents have strong motifs to damage the public. It is, therefore, incumbent upon the state to use its material and institutional resources, such as the judiciary system, to reign in the potential for inimical deviations between private gains and social costs.
All three above accomplishments of the state represent public goods in their own right.
Continued here.
As for (2), would it be reasonable for the bakers of Germany, or indeed any other private agent or association of such agents to secure the borders of the country, establish an effective army, and take responsibility for running the police force? In the absence of the core competence of the state, coercive superiority, they would not be able to marshal the resources required to provide the public goods associated with border control, a military and a police force. Private funding of such functions is impossible, because shirking and free riding is certain to be widespread when the necessary contributions cannot be forced. In such a situation, private agents left to their own devices are bound to "refeudalise," that is, retract to well-fortified manors (which is economically inefficient and socially regressive), or fight among themselves for absolute dominance, thus returning to a primitive and highly destructive stage of state-building.
As for (3), by influencing politics to their advantage, private parties forming highly focussed special interest groups may ipso facto be acting to the detriment of a public too dispersed, too distracted, and too little incentivised by notable benefits to embark on political counteraction. A small group of three car makers may lobby for tariffs that protect them from foreign competition, thereby securing vast gains, say € 100 million, while the population at large, including 100 million car buyers, suffer per capita costs from the ruse too low to induce them to act. In countless such cases, private agents have strong motifs to damage the public. It is, therefore, incumbent upon the state to use its material and institutional resources, such as the judiciary system, to reign in the potential for inimical deviations between private gains and social costs.
All three above accomplishments of the state represent public goods in their own right.
Continued here.
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