“There is no art which one government sooner learns of another, than that of draining money from the pockets of the people.” Adam Smith (1776, p. 813)
Abstract
Economists argue that government produces national defense because it is a public good, and markets fail to produce public goods optimally. This argument has two shortcomings. First, it relies on different assumptions of individual behavior in the private and public sectors. Second, it assumes that government has a comparative advantage in the production of public goods, despite evidence to the contrary. Employing the standard assumption of self-interested behavior for both private sector and public sector individuals, government has an incentive to produce national defense because by doing so it is protecting its source of income: its tax base. Incidentally, citizens benefit from the exchange of protection for tribute because their assets are protected.
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Holcombe, R.G. Why does government produce national defense?. Public Choice 137, 11–19 (2008). https://doi.org/10.1007/s11127-008-9313-y
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DOI: https://doi.org/10.1007/s11127-008-9313-y