Whately argued, “[I]n a great variety of cases, nearly the same time and labour are required to perform the same operation on a larger or on a smaller scale—to produce many things, or one, of the same kind…. For instance, suppose a number of travellers proceeding through some nearly desert country, such as many parts of America, and journeying together in a kind of cafila or caravan for the sake of mutual security: when they came to a halting-place for the night, they would not fail to make some kind of extemporaneous arrangement, that some should unlade and fodder the cattle, while others should fetch fire-wood from the nearest thicket, and others, water from the spring : some in the mean time would be occupied in pitching the tents, or erecting sheds of boughs; others in preparing food for the whole party; while some again, with their arms in readiness, would be posted as sentinels in suitable spots, to watch that the rest might not be surprised by bands of robbers. It would be evident to them that but for such an arrangement, each man would have to go both to the spring for water, and to the wood for fuel would have to prepare his own meal with almost as much trouble as it costs to dress food for the whole and would have to perform all these tasks encumbered with his arms, and on the watch against a hostile attack. Of course, if some of our supposed party chanced to be by nature or by practice peculiarly qualified for some particular task, and others for another, these would be respectively allotted to them in preference; but if there were no such inequality, the division would still take place, and the chief advantage of it would still be felt” (Whately 1831: 145-148).
Longfield agreed, “Roads, harbours, canals, light-houses, offer further examples of the benefit of many being as it were partners in works of a certain description: each derives almost as much advantage from them as if they were exclusively his own, while the expense of making them is shared with a number. According as the density of the population increases, a greater number of such works can be carried on, and finished to a higher degree of perfection. The number of persons to enjoy the advantage of them is increased, while the share which falls to each of the expense of making them is diminished by the entire being shared with a greater number. All the duties of protection and government, &c. which belong to the state, and are provided for at the public expense, are of this nature” (Longfield 1934:96).
Jevons disputed with Whately: that since each benefits from these sorts of goods regardless of who produced the economic good, none will produce the economic good, because each will expect to benefit from lighthouses that they had not build, and because each will not expect to sell lighthouses that they had built—that the production of “public” economic goods that all enjoy will be proportionally lesser, and the production of “personal” economic goods that not all enjoy will be proportionally greater—that government must subsidise the production of public economic goods, which have “positive externalities”, such as benefiting from the clock-tower they had not built, and government must tax the production of economic goods, which have “negative externalities”, such as suffering from the pollution they had not caused (Jevons 1905:40-42).
Machlup agreed with Jevons, similarly, personal cost and personal value different from ‘social cost’ and ‘social value’. Machlup argued, “Often, society, or some members of society, will find that they can enjoy an incidental advantage for which nothing is paid to the producer. For example, if a building company constructs an especially beautiful house on our street, it gets paid from the buyer whatever it is worth to him, but receives nothing from the rest of us whose enjoyment is distinctly increased. (The opposite may occur too: if the house is ugly, the price paid for it by the buyer does not reflect the displeasure caused to the rest of us….[and] private cost does not fully reflect the social cost, the latter including the discomfort suffered by those who have to stand the ugly sight.) Thus, if the price received by a producer reflects only the value to the buyer, but not any incidental benefits to others….the social value (social product) will exceed the private value ([private] product)” (Machlup 1958:57).
Whately and Longfield noticed, however, was that this was nothing more than the mere division of labour. To attribute externalities to the process of producing, by means of the division of labour, some goods and not other goods, is to be arbitrarily prejudiced to the production of some goods and not other goods, because the principle is inherent in the division of labour. There is not special property of public or private goods. The generality of the examples demonstrates this. The question, according to Whately and Longfield, is merely of scale and respective fixed costs. No more. No less.
Example: “[T]he fire lit to warm one will supply heat enough for several; but although all would derive equal advantage from the fire, they will not therefore occupy themselves exactly in the same manner in its production. If one basketful of fuel is enough for the fire which warms ten men, it would still be absurd for each man to go and fetch the tenth of a basket-full, and take a tenth part of the trouble of arranging the fire. They would at once see the advantage of one fetching the fuel, one arranging the fire, and the rest in like manner employing themselves in some manner for the common benefit. In selecting different employments, each would naturally be directed to the one most suited to his disposition and abilities, and if any person was fit for only one employment, that would naturally be thrown upon him, as being the only means of making his labour available” (Longfield 1934:88).
Note: Rothbard added: “military protection, dams, highways, etc., are important. People desire that they be supplied. Yet wouldn’t each person tend to slacken his payment, hoping that the others would pay? But to employ this as a rationale for State provision of such services is a question-begging example of circular reasoning. For this peculiar condition holds only and precisely because the State, not the market, provides these services! The fact that the State provides a service means that, unlike the market, its provision of the service is completely separated from its collection of payment. Since the service is generally provided free and more or less indiscriminately to the citizens, it naturally follows that every individual—assured of the service—will try to shirk his taxes. For, unlike the market, his individual tax payment brings him nothing directly. And this condition cannot be a justification for the State action; for it is only the consequence of the existence of the State action itself” (Rothbard 1956:257). To coerce people into paying, on the other hand, is not pareto-optimal since they clearly prefer other things, otherwise they wouldn’t need to be coerced (Rothbard 1956:256).
Hoppe summarized, “For something to be a good it must be recognized and treated as scarce by someone… Their private or public character depends on how few or how many people consider them to be goods, with the degree to which they are private or public changing as these evaluations change and ranging from one to infinity. Even seemingly completely private things like the interior of my apartment or the color of my underwear can thus become public goods as soon as somebody else starts caring about them. And seemingly public goods, like the exterior of my house or the color of my overalls, can become extremely private goods as soon as other people stop caring about them. Moreover, every good can change its characteristics again and again” (Hoppe 1989:30).
In fact, “[i]n every manufacture, the operation of this principle may be detected. The calculations and measurings that are necessary for one will suffice for a thousand articles. Observe a smith or a carpenter employed at some casual job, how he eyes it, and reflects, and measures, and calculates, and turns over the materials again and again, and if he has an assistant, how much time will be spent in considering what is the shortest, surest, and best mode of doing the work. If that were his regular trade, the same quantity of thought would do for a number of such jobs” (Longfield 1834:96-97; emphasis added).
