Criterion of usefulness

If some service does not get money from voluntary contributions (without state support) to run itself, then it is not beneficial; what is really beneficial will definitely not disappear just because the state stops managing that service.

For many years I have spent a great deal of my free time writing articles about the importance of the freedom and harm of the state; similar texts often trigger interesting and enriching debates that I – personally through the Internet – like to participate. In one debate, I used the following sentence as an argument: “If some service does not make money from voluntary contributions (without state support) to run itself, then it is not beneficial; what is really beneficial will definitely not disappear just because the state stops managing that service.” After some time I found that this statement, or its variations, can be a valid argument in most debates with the statists; and not only that: it is, in my opinion, one of the most universal ways to point to the evil caused by the state power. I would like to devote a whole today’s article to this thesis because I believe that if someone truly understands it - sees its consequences and is able to apply it to specific problems - can hardly not be a libertarian.

To avoid any misunderstandings, I will begin with explanation what I mean when something is beneficial: Beneficial is something that benefits people more than the resources consumed by running such service. A miller is a good example. People take wheat to this miller from which he makes flour; for this service, he gets some flour for himself as a reward. For each customer, the service is beneficial if the wheat which he takes to the mill is less valuable to him than the flour he gets (after deducting the part which is a reward for the miller). For the miller, it is beneficial to run his service in case that the flour he gets as a reward has a bigger value to him than the resources (including his time) consumed by running the mill. As long as the service is beneficial to both – its provider and its customers, it will be running; otherwise, it will eventually disappear. It is important to realize that this is always true without exception, even if the following situations arise: the mill is damaged or pulled down by big water (this will increase the operating costs of the mill so it may no longer be beneficial to provide the service), someone is able to produce flour much cheaper (for example, a kilogram of wheat will no longer have a bigger value than two kilograms of wheat, when somebody is able to give, for example, 1.5 kg of flour to customers for the same wheat), the miller finds a treasure of immense value (then he may stop working, because the free time starts to have a bigger value than the flour he gets for his work) and so on.

In any case, if people are not willing to pay for the miller’s services on a voluntary basis, these services are no longer beneficial (and it is totally irrelevant for what reason: flour consumption may fall, or cheaper competition comes into the market or anything else). It does not matter whether the payment is made in flour as we have shown for simplicity in the example above or in money (if anyone was in doubt about this claim, read the article “Money and prices as information carriers”). This leads to the inevitable conclusion that what does not make money to run itself is definitely not beneficial as it consumes more resources than it brings to its customers (In our example it would be a miller who is unable – for any reason – to provide for a heap of wheat sufficient quantity of flour so there are not many people who benefit from his service and because he doesn’t have enough customers, it is not beneficial for him to run such service.); and because all the above statements were formulated in a general way (ergo they are valid in all cases, regardless of the circumstances), it means that the conclusion drawn from them is quite general – it is valid in all circumstances and for every service (the mill served only as an example): If something does not get money - from people who voluntarily want to pay for such service - to run itself, then it is not beneficial. And if it is not beneficial, it is, of course, nonsense to subsidize it anyway, as it is a waste of resources that can be used better.

We can often hear arguments from the statists, such as: “If the state did not subsidize that library, it would not make money to run itself so the state must subsidize it so this service will not disappear.” In that case, one of two options is valid: Either it is not true and the library would get money for running itself (in spite of some organizational changes in its operation or the provided services), or it is the truth and the library would be in a loss without the subsidy, but that inevitably means that the library’s services are less valuable than the resources it consumes, ergo it is not beneficial. Many people at this point discard logic and say something about cultural, non-material benefits and so on. However, I can only say that cultural and non-material benefits (and all other forms of benefit) have already been included, as I have formulated my theses in a general manner and I didn’t come from the assumption that the service necessarily has to have some material output (although I have chosen an example with flour for an intelligibility); many institutions (starting with theaters and libraries, ending with brothels and sports clubs) provide services that do not generate any material gain for the customers because they only focus on the experience, but the general example with the miller can be also applied on these services which are beneficial only if the resources they consume are, by the consumers of such services, less valuable than the experience they get by this service (including cultural and non-material benefits). That is why a theater that does not make, from voluntary contributions or from the price of gate-money, enough money for running that service, it is not beneficial because the resources needed for running such a theater can be used in a better and more beneficial way; and no – although the most wise - politician or anyone else can decide what is beneficial because the only reasonable criterion of usefulness is whether people are willing to pay for some service more than what the operation costs of the service are.

Česky: https://mises.urza.cz/clanky/kriterium-uzitecnosti-1629.aspx
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