Chartered Monopoly Service Provision

I alluded to this in writing about the U.S. Postal Service, but it’s worth noting that the specially chartered monopoly has a long history as a form of service provision in the western world. One example, which should be well-known to people who’ve taken a class on American legal history, is things like the Charles River Bridge case. In the 18th century, it was taken for granted that if a state government wanted to build a bridge or a road somewhere it would charter a corporation for the purpose, with the right to build the bridge and charge a toll. Typically to sweeten the pot, some form of monopoly right would come with the charter. In a time before effective tax collection bureaucracies, this seemed like a superior option to directly spending money on things.

Indeed, in Europe at the time, kings would sometimes sell monopoly rights to private business interests as a way of raising revenue. Congress could, in this way, reduce the deficit by granting Apple a monopoly on touchscreen tablet computers in exchange for a lump sum of its huge cash horde and a cut of future sales. Of course Congress won’t (I hope) do that. But the patent system is a vestige of this means of delivering public services. Whatever you think of patents, or bridges, or US Postal Service the takeaway people ought to have from this is simply that looking at the tax share of GDP is a very poor to think about the “size of government.” If you want the government to ensure that there are bridges over some river, or drugs for some disease, or that letters get delivered in Wyoming, there are plenty of different ways of making this happen. You can even raise revenue without taxes if you want to.