Written by Christophe Cieters.

Not only is the moral and factual basis for public goods theory – and the supposed justification of State intervention and its inherent coercion – totally absent (as we have discussed in the previous Chapter), even its utilitarian reasoning shoots itself in the foot as soon as one takes a closer look. The question is worth asking: would you rather be poor in North Korea or in South Korea? In other words, let us now think the utilitarian excuse for State aggression – in order to produce those supposed public goods – through from an economic point of view.

Nothing is a good “unless at least one person subjectively evaluates it as such. But then, when goods are never goods-as-such – i.e. when no physicochemical analysis can identify something as an economic good – there is clearly no fixed objective criterion for classifying goods as either private or public” (Hoppe, 1989b, emphasis added). Indeed, “the very subject matter of economics – capital goods, money, wage rates, etc. – is not defined by physical or chemical properties, but instead by the mental or subjective attitudes that human minds take toward these things. […] For example, even if a particular root cures cancer, if no one knows this fact, then the root has no economic value, and people will not trade money for it. Consequently, value is caused by an individual’s subjective desires and his or her beliefs about the causal properties of a particular item” (MI, 1996). In other words, the value of a good is solely determined by the interdependence of supply and demand, or what might be called the interaction of inherently subjective cost and inherently subjective utility.

Imagine a bottle of water which in each of the following situations costs 10 to supply, including everything from manufacture to delivery (unless mentioned otherwise, for each separate scenario the location of the water bottle factory, wages, etc. change as well, along with the other circumstances, so the cost of 10 including transport and such stays the same):

1.a) Person A who is taking a break at work around noon is willing to pay 10 for the bottle of water, i.e. he values it at 10. His colleague B is willing to pay 14 for that exact same bottle in the exact same circumstances, perhaps because he has more money than A or he is a bit thirsty. Colleague C, under the same circumstances, is not thirsty and does not like plain water all that much anyway; he is willing to pay no more than 7 for the exact same bottle and is not interested in it for any more than that at this point in time. In this situation, the value of the bottle of water is 14, which is what B is willing to pay (the supplier’s own preferences aside for a moment).

1.b) If (perhaps a different) supplier already sold a bottle of water to B, and B consequently no longer wants any water regardless of price, then the value of a bottle of water in those circumstances now drops to 10, which is what A is willing to pay.

1.c) If the same now happens with A and only person C is left, then the value of the bottle drops to 7 – unless the supplier still values it at 10 because he wants to break even, or perhaps 11 since he wants to make at least 1 profit and will not sell it for less (the value is then 10 or 11 respectively, and no exchange will happen because the supplier values it more highly than anybody else).

1.d) But it is equally plausible that taking the bottle of water back to the storage facility to store it there would cost the supplier an extra 4, or perhaps the supplier needs money quickly for whatever reason and cannot afford to leave his investment tied up in an unsold bottle of water. Because of this he might very well decide to reasonably cut his losses and willingly sell the bottle to C for 7 even though it cost him 10 to supply it. The value of the bottle is then 7: that is the most anybody is willing to give for it.

1.e) If both A, B and C are no longer thirsty or interested in the bottle of water no matter what the price is, the supplier has no more storage space and does not want to take it back because it would cost him too much to build such extra storage space (or it is impossible to build it on such short notice), then nobody wants the bottle of water at that time and nobody is willing to give anything for it: nobody values it at anything – the bottle of water has at that time no value whatsoever.

1.f) If instead of taking the unwanted bottle of water back with him – which would cost him 4 (see 1.d) – the supplier has the option to instead pay 3 for garbage disposal and he opts to do so, this does not make the value of the bottle negative at -3. Instead, the bottle is still valued at 0 like in 1.e, but the supplier is willing to pay – he values – the service of garbage disposal at 3 since it saves him the added cost of taking the unwanted bottle of water back for storage and gives him a net benefit all things considered.

1.g) If the supplier learns that A is willing to take the bottle of water with him for 1, the supplier might not be willing to pay 3 for garbage disposal any longer and instead could opt to pay A 1 to take the bottle with him. The bottle of water itself is in this case still valued at 0 like in 1.e and 1.f: it is the service which A provides which is now valued at 1 by the supplier. If this transaction between the supplier and A occurs, this would not mean that A values the bottle at 1: A still values it at 0 but at the same time also values the payment of 1 enough for rendering the service of taking care of the bottle of water for the supplier.

1.h) The following day the whole process could start over again (exact same location, exact same circumstances, exact same people, exact same costs), but this time around perhaps C is extremely thirsty and is willing to pay 16 for some water, A still wants to pay 10 at most like the day before, while B has developed a stomach ulcer and currently does not want any water no matter what the price is. The value of the bottle of water would now be 16 and could then again begin to fluctuate as in 1.a to 1.g.

It also follows that the value of something and the price it is sold for are two different things entirely. If the supplier sets his price at 12 for all his available bottles of water (perhaps because he does not have the time to barter or delivers his product to various offices and has noticed that at the price of 12 his return on investment is maximized at this point in time), then even if it is valued at 15 or more by a consumer, that consumer will still be able to buy it at 12. This is called a consumer surplus: the consumer can buy something for less than he actually values it at. Along the same lines a producer surplus can exist where the producer is able to sell his product for a better price than what he would minimally want for it. Also note that in this case, as long as the supplier keeps the price at 12, even if there are no customers for the bottle of water, the value will not drop below 12 since that is what the supplier then values it at (if he valued it less he would be prepared to sell it for less), see 1.c.

Let’s take this all a bit further:

2.a) The location changes and the same three people – A, B and C – now are not in their air-conditioned offices but have been lost in the desert for a few hours. They are all getting pretty thirsty. A would be willing to pay 14 for a bottle of water in these circumstances, B 15 and C is so thirsty that he is willing to pay 20 for the same bottle of water. The value of a bottle of water in this situation is 20.

2.b) A camel caravan crosses their path which has one bottle of water available for sale. Because of the bartering going on, A and B hear about how C is willing to buy the bottle of water for 20 and they also learn that the closest oasis is still several hours away. A and B reassess the situation and now decide that they are willing to pay 21 and 25 respectively. C says that he does not want to pay 25 for a bottle of water and decides that he will wait a few hours until they reach the oasis. The bottle of water at this point is valued at 25, B’s offer.

2.c) Instead of having been lost for a few hours they now have been lost for two full days in the blistering desert sun. A is so thirsty that he is willing to pay 100 for a bottle of water, B is even thirstier and is willing to give 200 and C thinks he is about to die if he does not get a drink soon and is willing to pay everything he has (1.000) for some water. The bottle of water’s value in this situation is 1.000, which is what C values it at.

In all of the above situations and their different variations, the cost of the water bottle stayed the same at 10 (2 worth of resources and 8 worth of labour) throughout 1.a-h and 2.a-c. But clearly, even though the cost of the bottle did not change, sometimes the availability of water (the supply) fluctuated and consequently so did its value, while at other times the demand for water fluctuated and, again, so did its value. If we were to repeat all the situations but now were to suppose that in supplying the bottle of water 1 worth of resources and 9 worth of labour (total of 10) was used, this difference in labour as compared to the first round does not change a thing to any of the mentioned situations. Even if we were to suppose that in supplying the bottle of water 1 worth of resources and 7 worth of labour (total of 8) was used, this again does not change anything whatsoever. Neither would it make any difference if the total cost in supplying was 12 due to any variation in the underlying combination of resources and labour. If one producer spent 10 to produce the bottle of water, and another through incompetence or any other factor inhibiting similar or better efficiency spent 15 to deliver the same product, this in itself does not mean anything to the valuations of the consumers (even though the two suppliers might value their product differently due to their own subjective motivations).

Clearly then, resource and labour costs are not the deciding factors in a good or a service’s value.[1]

Let us forget about the bottle of water for a second and imagine a leather jacket owned by Elvis at the start of his career. He himself bought the jacket for 25 when he selected it from a rack of several identical jackets in a store, but now likes it so much that even though it never leaves his closet, given his subjective situation of wealth and melancholy regarding simpler times, he is not willing to sell it to anybody for less than 500. If nobody else is interested in the jacket for 500 or more (perhaps because nobody but Elvis knows of its existence in his closet), its value is 500 (as that is what Elvis himself values it at, he would not part with it for less). A few years later Elvis dies and A inherits the jacket but does not care for it and just wants to sell it for as much money as possible. A memorabilia auction is held and dozens of enthusiastic Elvis fans eagerly start outbidding each other until the jacket finally sells for 5.000 to B. The value of the jacket at that moment is 5.000. After a few decades of leaving it in his closet himself, B decides that he no longer wants the jacket and wants to get rid of it. The highest bidder he can find is willing to pay 3.000. B is reluctantly willing to settle for this and consequently sells the jacket to C for the offered 3.000. The value of the jacket is at that moment 3.000. A few decades pass and C dies. His long lost son D inherits all of C’s property and discovers the jacket but has no idea that it used to be owned by Elvis. Since nobody remembers the route of the jacket to C’s closet, the jacket now is to all living people just another random old leather jacket which nobody would pay more than 5 for. D never wears leather jackets, but – thinking that this might be a good opportunity to start wearing one – he shows it to his girlfriend to ask her opinion. To her it is just an outdated physical manifestation of bad taste. She therefore tells D to throw it in the trash as she does not want it to clutter the closet and 5 is not worth the hassle of trying to sell it. The jacket ends up in the incinerator at the local garbage facility along with some dirty diapers and rotting banana peels.

The amount of labour or resources involved in the making of the jacket never changed, but its value clearly fluctuated immensely in all directions due to the subjective valuations of the people who make up the free market.

As these examples show, nothing has any intrinsic value: the same thing can have a different value to different people or at different places or at different times, and production costs (from labour or something else) do not necessarily translate into value to either the producer or the consumer in any way whatsoever.[2] Even though adding labour or different resources often makes people subjectively value a thing more, it can go either way (positive impact on value or a negative one) or even stay completely neutral depending on who you ask.[3] In short, the value of something is entirely subjective and is objectively observable only through the natural free market mechanisms of fluctuating supply and demand at the time of exchange.

One should at this point take a step back and try to understand what “value” actually is and means. It is not necessarily expressed in monetary form. It is more than productivity and practical usefulness. Crucially, the same free market mechanisms play in more than just the realm of physical goods or services. Any valuation towards a particular thought or action is a valuation and ranking of pro’s (value) and contra’s (cost) based on what are essentially natural free market principles. One could quite easily call it a free market of the mind, where ideas vie for value.

An example to illustrate and summarize the above (and its consequences towards the resulting inability of a State to act within a market without distorting it and thereby causing inefficiency and coercively violating individual rights). A might see value in helping drug addicts (because A feels a “human connection” with them or somehow feels responsible for them, for whatever reason A comes up with; perhaps because he feels like a better person for doing so or because he wants to get a bit of recognition from acting like a compassionate good Samaritan).[4] Because A sees value in helping drug addicts for whatever reason, A might be willing to pay a price for doing so (for example through setting up a charity to help drug addicts by trying to get them off the drugs or providing them with free sterile needles, etc.). B however feels no such inclination – a drug addict simply has no value to B whatsoever. B does not necessarily mean them any harm as such, he is impartial to them: whether they exist or not is none of B’s concerns. However, if the drug addict for whatever reason was somehow a friend of B or related to him, his nephew for example, that specific drug addict might be valuable to B, which might or might not spur B to provide for the care of that person. But perhaps B’s nephew robbed C to get drug money and shot C’s child in the process. C therefore does not want to pay for any care towards the addicted nephew. In fact, C might even vehemently oppose such care on the grounds that the nephew should be punished as severely as possible for murdering C’s child and deserved all the misery that comes with drug addiction.

So on what basis could A make any claims – on his own accord or backed by the force of the taxing State – to either B or C when he claims that they “should” help him in providing help for all drug addicts, whether B and C want to or not. Why should B or C pay for something in which neither B nor C sees value (even if A does, or even if along with A, all other billions of inhabitants of the world think so while B and C do not). One can replace the “drug addict” in this example with anything at all to see how absurd A’s claims really are.

For example: say that A really wants to have – he values – an orange paint job for his car. B does not know A and has no interest one way or another in the colour of A’s car (perhaps B does not even like orange and prefers blue for some reason). A comes up to B and slips him (part of) the bill from the company that spray painted A’s car orange. What is B’s reaction going to be? The orange paint job has a lot of value to A, but it has none to B. Where, then, would A get the right to have B pay for something which A values, yet B attaches no value to and possible even opposes. And where would the State consequently get the moral justification to force B to pay for A’s highly valued wishes against B’s will. There is no moral reason why B or C should – even “partly”, by whichever standard – involuntarily pay the price for something which A values but which they themselves do not. But they might do so anyway of course, for the practical reason of use of force (or the threat thereof) by A and/or the State, as it generally goes with any and all forms of taxation, whatever they are spent on and whatever the values and wishes of the enslaved populace may be.

A sees his concerns of providing help for drug addicts or painting cars orange to avoid car crashes as public goods; claiming that clearly some number of people benefit from them, but fearing that the market would not “sufficiently” – according to A – provide for all who need it. A therefore turns to the State, presenting his case for the need which he sees for the provision of such public goods. As a result, the legitimacy to take from B and C whatever is needed for the provision thereof at gunpoint is supposedly granted to the State who can now forcefully start to tax B and C – i.e. coercively expropriate funds from them against their will – in the name of the greater good in general and the provision of public goods specifically.

But as we have seen, there is no morally legitimate reason why A’s concerns – and the State’s consequent aggression – constitutes a morally legitimate claim on B or C who might have their own concerns diametrically opposed to it. Perhaps B only wants to help his nephew and not others, and perhaps because B is forced to pay even for drug addicts he does not care about, he has no resources left to take care of his nephew as well as he wants to. Neither is there a reason why the lack of moral legitimacy to rob B and C’s resources in order to contribute to what A values but they do not would suddenly transmute into moral legitimacy, simply because the State – whether it is backed by a majority vote or not – was involved or not.


[1] Which is not to say that they never play a role at all. But the role which they play is of secondary concern to the subjective perception of the human beings directly or indirectly interacting with it. The most advanced piece of technology available today, which might be valued at extremely high prices, would quite likely be entirely valueless to a caveman living thousands of years ago (or even people who were alive a few hundred years ago) aside from such things as the hardness of the material, which would have it compete in value with hard or sharp rocks or a tree to crack nuts against. In similar vein, it could be valued at close to zero a few decades in the future as well. Likewise, if two for all intents and purposes identical vases (same material, looks, quality, etc.) were made by two different producers, and one of them managed to produce it in an hour while it took the other an entire day, this does not automatically translate in a different value to the consumer for the two otherwise identical vases standing next to each other in the pottery store aisle. One hour of consulting by an expert might be valued higher than a month of consulting by an amateur; but likewise what to some people might be an expert might be valued as nothing but a charlatan to others – the value of the service in either case, independent of actual quality or amount, is entirely subjective and variable.

[2] “Whatever has value in our world now does not have value in itself. According to its nature, nature is always value-less, but has been given value at some time, as a present – and it was we who gave and bestowed it” (Nietzsche, 1882).

[3] As the saying goes, correlation does not imply causation.

[4] Also see slave morality as discussed earlier.