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Security, public or private

Tags Free MarketsEntrepreneurshipPolitical TheoryProduction Theory


Traveled to a big city lately? If so, you must have gotten words of wisdom from someone close to you. Advice, such as: do not walk the streets after dark; and, beware of pickpockets. Sound advice indeed. However, let us look closer to what is being said, and what is not said.

Your sage friend is really stating that you must be careful on public streets after dark, and that you must keep an eye out for pickpockets working the public areas. Your friend is not saying that you must fear roaming bands of muggers as you stroll the streets and avenues of Disney World after sundown, nor is your friend telling you to be on the lookout for troops of pickpockets working the bakeries and shops across from the city park. You see, private security works, and it works extremely well. Public security, on the other hand, is a failure, as the police provide no public benefit, nor do they provide security. Some say that tax-financed security is required since only government will provide such a service due to the supposed free riders effect; you know the old public goods fallacy of a free market failure to provide certain goods and services.

According to public goods theory, the baker will not pay for security outside his shop since his security expenditure would also provide his neighbor with a free, external benefit. Therefore, government must secure the common areas. Yet, it is the common areas that are always unsafe.

Rome is the perfect example. The residents, including the shop owners, are taxed for the benefit of security, though the streets and public areas of Rome are filled with pickpockets acting in concert. Within minutes, the tourists begin figuring out who is up to no good yet the police remain oblivious to that very same fact.

In his shop, the baker notes the obvious right away and sends the thieves out of his store, before the customers even notice what is wrong. The baker has to act fast, as his livelihood depends on a safe and secure environment for his customers. He keeps his store clean of riffraff.

However, right outside his doors the theft continues unabated. The baker suffers due to the reduced number of customers as the pickpockets have scared away many potential customers from the public streets and areas adjacent to his shop.

Publicly financed security provides neither a supposed public good nor any real security.

Remember the next time you get traveling advice, the shop owner is looking out for you safety. The same cannot always be said of the patrolling police officer.

I see. Travel plans and conversations easily confirm that Hoppe is indeed correct.


Jim Fedako

Jim Fedako, a business analyst and homeschooling father of seven, lives in the wilds of suburban Columbus. Send him mail.