Nonrivalness, Subjectivity and Capital – An Overview of the Austrian Theory of Club Goods

Abstract

According to neoclassical economic theory, club goods would be underproduced by the market in the absence of a monopoly of force capable of coercing every able member of society to contribute to their provision. By applying both the methodological tools developed by the Austrian School of Economics and the tools used to investigate the institutional robustness of various systems of political economy, I shall argue, first, that the neoclassical characteristics of club goods are based on a number of false assumptions or unacceptable oversimplifications, and second, that even if they were correct as stated, they would not establish the desirability of the existence of a monopoly of force due to the existence of a more efficient, purely market-based alternative. Then I shall apply the results of my argument to the issue of the provision of law and defense, which appears to lend itself particularly well to being a promising case study in this context.