Recall that the model of pure public goods outlined in Chapter 3 predicted that a state would contribute to the national treasury only if it received the most nonexcludable benefits from the public goods produced by Congress. Otherwise, each state would withhold its contribution. A quick look at requisition payments made during the confederation shows that states behaved in a manner that was inconsistent with that model. More states contributed to the national treasury than predicted by the theory of pure public goods. If we presume that states faced strong incentives to withhold their contributions, then some additional factor must explain why the states contributed. I suggest that private goods, produced both consciously and unconsciously by Congress, gave the states the incentive to contribute.

This chapter evaluates the private benefits hypothesis by testing two relationships: (1) the relationship between state contributions and the proximity of the Continental army, and (2) the relationship between state contributions and the amount of public debt held by citizens within each state. Both sets of data include direct measures of private benefits and both suggest that the states were more likely to fill their quotas when they received private benefits than when they did not.