Public Choice

, Volume 137, Issue 1–2, pp 11–19 | Cite as

Why does government produce national defense?

  • Randall G. Holcombe
Presidential Address


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.


Public goods National defense Market failure Free riders 

JEL Classification

D7 H11 H21 H41 


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Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Department of EconomicsFlorida State UniversityTallahasseeUSA

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