The Public Good

Economists are very adept at devising "market failure" arguments for government intervention. The latest surge has been the public good. A public good is a good that is nonrivalrous and non-exclusive. This means that if I consume some of the good it does not reduce the amount left for others. Non exclusive means that individuals can not be excluded from consuming the good. Recently Ben Bernanke said that R & D is a public good so that the government should support research and development. Why would research and development be non-rivalrous or non-exclusive? If I carry out research don't I own that work? Can't I decide who to include or not to include in knowledge about my research? And if I innovate something why can I not make money bring the something to market? In what way would government support generate a good that wouldn't otherwise be produced? Bernanke's argument is simply another dose of urging the government to pick and choose winners and losers. It is the constant failure to recognize Bastiat's broken window fallacy.

I have been in a long term debate with a colleague of mine over control of the money supply. I argue that money should be privately produced and competitively supplied. Seignorage not with standing, there is not a natural monopoly in supplying money. It would be much like a network where the marginal value of the membership in the network increases as the network grows. But in every network, there are competitors, upstarts inducing individuals to switch to another network. There is not just one network -- for instance we have ATT, Verizon, Sprint, ....etc. We have the Mac and the PC and Linux operating systems. If Pratt money is viewed with confidence and trust then people will use Pratt money. But if Jones is able to provide a better guarantee of value -- say by backing with gold or 100% deposit balance -- then people will switch to Jones from Pratt or perhaps use both. People now use Visa, MasterCard, American Express, and other private forms of credit.
But my colleague says money is a public good. To me this does not make sense; how is currency non-exclusive or non-rivalrous?

Although we have seen many public goods myths debunked over time -- such as the claim that the lighthouse, fire and police protection, food safety, and even national defense are public goods -- economists continue to create arguments that this or that is a public good and therefore requires increased governmental role.