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This article is from the Anarchy FAQ, by Bryan Caplan with numerous contributions by others.

How would anarchists handle the "public goods" problem?

Modern neoclassical (or "mainstream") economists -- especially those associated with theoretical welfare economics -- have several important arguments for the necessity or desirability of government. Out of all of these, the so-called "public goods" problem is surely the most frequently voiced. In fact, many academics consider it a rigorous justification for the existence and limits of the state. Anarcho-capitalists are often very familiar with this line of thought and spend considerable time trying to refute it; left- anarchists are generally less interested, but it is still useful to see how the left-anarchist might respond.


We will begin by explaining the concept of Pareto optimality, show how the Pareto criterion is used to justify state action, and then examine how anarchists might object to the underlying assumptions of these economic justifications for the state. After exploring the general critique, we will turn to the problem of public goods (and the closely related externalities issue). After showing how many economists believe that these problems necessitate government action, we will consider how left-anarchists and anarcho-capitalists might reply.