What is a logical criterion, or rule, for deciding whether a certain good or service should be provided by private enterprise or by government?(6 ¶ 1)

This is a fundamental question. How many of our law-makers have thought it through? Has the man in the White House an answer to it?(6 ¶ 2)

I have put this question to classes in economics. On the principle that a teacher should not propound tough questions for which he himself has no answer, here are some tentative thoughts on this one:(6 ¶ 3)

Government differs from free enterprise. Government has power over people's persons and property. It exercises this power by enacting laws and levying taxes. If people do not obey the laws or pay the taxes, government seizes their property and often their persons. To avoid such punishment, people obey. Thus, government exercises power.(6 ¶ 4)

But private enterprise has no authority to pass laws or levy taxes. It can make rules to govern those who use its property, but those who do not wish to obey the rules can avoid them by vacating the property. The private enterprise charges prices for its goods and services, but these are not taxes. One can avoid paying by not buying the goods or services.(6 ¶ 5)

Thus, in the sphere of private enterprise, free choice prevails, but in the sphere of government, people do not have free choice; they must be members and patrons of the state willy-nilly, and they must obey the rules laid down and pay the taxes levied.(6 ¶ 6)

It is plain that under private enterprise men enjoy a large measure of freedom, while under government they are compelled. Hence, freedom being a prime good, which all men value, private enterprise is by its nature superior to government. It follows that insofar as possible the superior way—private enterprise—should be employed.(6 ¶ 7)

The duty of government would seem to be to do those jobs in which compulsion is necessary, that is, those functions which cannot be performed by voluntary, free-choice agencies. Our problem is to identify those functions and to define their distinguishing characteristics.(6 ¶ 8)

Defense is usually held to be such a function. Why?(6 ¶ 9)

Defense is of two kinds: (1) Protection of groups such as communities or nations from other communities or nations which may attack or invade, and (2) protection of the individual from other individuals who may assault, rob, or otherwise molest him. Thus, (2) is a problem within (1), the individual being a part or member of the community. (1) may be conveniently spoken of as the military function, while (2) is the police function.(6 ¶ 10)

Although historically defense has been largely provided by government, people are not, by the nature of things, compelled to have defense rendered by either government or private agency; just as each may paint his own house, mow his own lawn, or drive his own car, each may defend himself. Or, following the principle of specialization, which has proven highly efficient in the modern economy, each may employ others to defend him.(6 ¶ 11)

It is considered impractical for individuals to defend themselves more than partially because aggressors may bring superior force to bear, thus making it necessary for the defender, too, to secure the help of others. In short, defense, as well as offense, is by its nature a group activity. Mr. A cannot defend himself without also defending Mr. B, and vice versa. It follows that defense must be organized on a community-wide basis (just how large the community must be has never been decided: there are nations of many sizes). It seems logical, then, that defense be organized and carried on by the agency which embraces and includes the whole community, that is, by government.(6 ¶ 12)

There is near-unanimity on this point. But why? Is it not because people see no way to buy defense, each person buying as much or as little as he chooses, as is done with other goods and services? Nor do they see any way by which producers of defense, either individuals or companies, can sell their product at a price, rationing it out to people in the amounts demanded and charging so much per pound or other unit. In short, it seems that defense is not priceable.(6 ¶ 13)

You will not find this word—priceable—in the dictionary. It is my own invention; hence, I must define it.(6 ¶ 14)

Price is value expressed in dollars and cents. Thus, a thing is priceable if the owner can put a price per unit on it, selling it to those who value it highly enough to pay the price, and denying it to those who don't.(6 ¶ 15)

Price rations goods. The share or ration that each buyer gets is the number of units for which he is willing to pay the price, no more and no less. Priceable goods are simply goods that can be price-tagged.(6 ¶ 16)

The natural, fair and just way to distribute goods is through the price system. One cannot get something for nothing, because nature makes all things scarce, but one always gets a thing by paying the price for it. And the price is set by the owner, being relatively lower if he has a quantity to sell, higher if he has little, in order to match the quantity supplied to the quantity demanded.(6 ¶ 17)

Defense from foreign foes is a service which, it is widely assumed, is non-priceable. By its nature it cannot be divded into units, or packages, each person choosing how many or how few units he will buy. And so defense is not distributed by the price system, through a market; it is provided collectively.(6 ¶ 18)

But defense does not come for nothing; it costs money. Since this money cannot be collected by charging prices, it is collected in taxes, or compulsory payments. The amount of tax paid by each person is not proportionate to the amount of defense received by him, since people are not defended singly but as a group. Rather, the Marxist principle, from each according to his ability, is roughly followed.(6 ¶ 19)

Because defense as we know it—that is, the services of armies and navies—is apparently non-priceable does not mean that it must be paid for by taxation. The cost might be defrayed by voluntary contributions. After all, many good things, including the whole, vast area of religious services, are paid for in this manner.(6 ¶ 20)

There is precedent for support of defense by voluntary giving. When Napoleon threatened invasion of England, many public-spirited Englishmen gave substantial gifts of money to their government to enable it to finance the common defense.(6 ¶ 21)

In a sense, voluntary giving is part of the market. One gets psychic satisfactions from giving. Thus the consciousness of having helped defend one's country through a monetary contribution is the price. Certainly, gifts are far more closely akin to prices than to taxes.(6 ¶ 22)

Still another alternative to tax-financed defense would be forms and techniques of defense, collective or individual, which are priceable. Such forms and techniques wait to be devised. That they have not yet been devised and adopted is, very likely, because of well-nigh universal acceptance of present techniques of defense which are non-priceable.(6 ¶ 23)

Certainly, freedom would be mightily increased if priceability were used as a criterion for dividing functions between private enterprise and government. Let us look at some of the arguments for this criterion.(6 ¶ 24)

Automobiles are surely priceable; they can be and are distributed by price. Unlike defense, autos are wanted in different quantities and qualities by different people. They do not have to be distributed to everybody as a group; individual desires can be served, and individuals demand that they be served.(6 ¶ 25)

People are willing to accept a uniform kind of defense; they do not demand that this product be differentiated. But in the case of automobiles, there is no limit to the differentiation they demand. Perhaps this is a basic reason why Americans accept government-provided defense but do not even suggest government-produced automobiles.(6 ¶ 26)

For another example, consider education. It is priceable; the price is called tuition. The success of many private schools demonstrates that education can be distributed by price. Again, like automobiles, education is wanted in different quantities by different people. Some want a bachelor's degree, some a master's, some a doctorate. Operation of colleges under the price system makes it possible for each to get the quantity he desires.(6 ¶ 27)

Furthermore, each is enabled to buy the kind and quality of education he wants. The freedom to choose among brands of automobiles may not seem overly important, but the freedom to choose among kinds of colleges—large or small, liberal arts or vocational, secular or religion-related, conservative or socialistic—is precious.(6 ¶ 28)

The more government penetrates into the schools, the less freedom of choice is left to youth or to their parents. First, the choice of whether to go to school is denied; all are compelled to go, and for the most part to go to one certain school. That school becomes too small and government decrees that it must be consolidated, which is to say that mass production must be adopted. People resign themselves to it on the plea of efficiency.(6 ¶ 29)

The human mind cannot be standardized, but the hand of government in education is a standardizing hand. State adoptions of textbooks, as well as of curricula and teaching methods, result in uniform indoctrination, not education.(6 ¶ 30)

All this, and much more, comes about because service and price have been severed. The recipient of the service does not decide whether or not to pay a price for it and hence is not allowed to decide whether or not to receive it, or what kind to receive. This is the result of scrapping price in a priceable area.(6 ¶ 31)

Advocates of government-provided education assume that by reducing the price of a service to zero you can overcome its scarcity and make it available to all. They look upon price as just a millstone that profit-seeking sellers hang around the necks of poor, poverty-stricken buyers.(6 ¶ 32)

Price, on the contrary, is a great blessing to the poor as well as to the rich. Because of price, the poor man can sell his scarce services for a substantial sum; with the money he can then claim goods in the market—goods that have been reserved for him by price.(6 ¶ 33)

To scrap price is to destroy the rationing mechanism and return us to a world of first come, first served and devil-take-the-hindmost.(6 ¶ 34)