Crowdfunding Defense

Abstract

National defense is the hard case for the voluntary provision of public goods because without recourse to taxation it is difficult to overcome the free rider problem, much less provide defense superior to that of government provision because of the tremendous costs associated with national security and war-making. The theoretical explanations for how collective action problems can be privately solved have generally not been applied to national defense, despite being applied to other public goods. I use the theoretical solutions to the collective action problem provided by Olson to understand the extensive private provision of national defense by Ukrainian citizens in their war against Russian-backed separatists. By reducing the size of the population in question and focusing on uniquely high return types of military capital, private defense charities attracted enough in donations to supply critical funding and military materiel in places the Ukrainian government had failed to do so.

Keywords: Public Goods, Voluntary Provision, Crowdfunding, National Defense

JEL Classification: D74, D82, D83