Alternative Private Financing of Public Goods

You can find the best argument for the feasibility of private financing of public goods in Anthony de Jasay’s 1989 book Social Contract, Free Riding: A Study of the Public Goods Problem (Clarendon Press). As a bonus or malus, you will find there an argument against social contractarianism à la Buchanan. De Jasay’s book is a technical book, not easy to read and not without errors. I summarized the argument and offered a critique at a later date Regulation article (see pages 60-62). In a few words, let people who don’t want to risk social good deprivation contribute to your funding and let the free riders enjoy their free ride. (After all, “we’re not inclusive”? Equal freedom for everyone!)

An Economist The article recently provided an illustration of the private financial sector in the most difficult case of public goods: local protection. The story is about the development of shoebox-sized listening stations that pick up the sounds of attack objects, analyze them with smartphones or mini-computers, and relay the results to Ukrainian air defense operators (“How Ukraine’s New Tech Foils Russian Aerial Attacks, The EconomistJuly 27, 2024):

Kyivstar, a telecommunications company, installs the Zvook kit on its cell towers, manages maintenance and transmits data for free. …

The largest acoustic-detection network was built by a Ukrainian secret outfit called Sky Fortress. It contains several thousand listening channels, with thousands more planned. Although its first listening stations captured and processed sound with Android smartphones, the network, like Zvook’s, now uses dedicated microphones and microcomputers. The data is fed into the Ukrainian command and control system known as Virazh. Like ePPO and Zvook, Sky Fortress is largely funded by donations, an amazing development in air defense.

Few outside experts know the workings of the Sky Fortress. One of them is Riki Ellison, founder of the Missile Defense Advocacy Alliance (MDAA), a non-profit organization in Alexandria, Virginia. Sky Fortress has become so widespread and “very good”, he says, that it now receives many Russian weapons flying down into Ukraine. Russian units have begun to mix or modify the acoustic signatures of their drones, but the information acquisition algorithms are quickly adapting. “This is AI at its best,” Mr Ellison said.

The key sentence is the last one in the second paragraph quoted above: “Like ePPO and Zvook, Sky Fortress is largely funded by donations, an impressive advance in air defense”—even if the constraint “mostly” suggests that government funding is involved. . The EconomistThe article does not say whether the voluntary donors are Ukrainians or their supporters elsewhere in the world, which would inform us in general whether it is possible to finance public goods privately.

Ukraine is not a rare bird called a free society, but it is certainly free (or much less free) than, say, Russia—free enough that we can see that independent innovation and private action make a difference.

Note that social welfare for some is not socially good for others, as in the case of an invading army in the present situation. This observation also supports the common sense of allowing individuals in normal social life to be free to earn for each individual what he wants if he thinks it is beneficial for him (regardless of his motives). Note also that even in liberal societies, defense against international tyranny will be necessary—as I tried to illustrate in a recent post (“Since the Fourth Millennium, The Libertarian Myth”).

I am not saying that these ideas solve all political problems. But they cannot be ignored.