I have to admit that my example was over simplified and didn’t consider the initial choice of what…

The private sector determines how much money is spent on catching tuna and how much money is spent on catching octopus. Unfortunately, because of the free-rider problem, chances are good that the private sector won’t supply the roads that are needed to transport the seafood from coast to coast. Therefore, the public sector collects taxes and determines how much money should be spent to build the roads that will transport the seafood.

Where it gets tricky however, is that you don’t believe that the government will spend the optimal amount of money on building the roads. You actually said “labor” rather than “money” but the wrong amount of labor, or any other resource, is the same exact thing as the wrong amount of money. The reason that you believe that the government will inefficiently allocate society’s limited resources is because the government lacks transparency.

This is tricky because clearly you believe that private input is necessary… or else how would the government know where a road is most needed? How would the government know how big the road should be? However, you also believe that it’s possible for citizens to give the wrong kinds of private input… which would divert public funds away from more valuable uses. So you also believe that transparency is necessary in order to limit private input to voting rather than bribing.

So with your ideally transparent situation… voting is going to help ensure that the optimal amount of money is spent on roads. This begs the question of why don’t we also use voting to help ensure that the optimal amount of money is spent on seafood. Assuming of course that the necessary transparency is truly obtainable.

Here’s the issue… around half of the country doesn’t pay income taxes… and, because of progressive taxation, the burden is very unevenly distributed among the half that does pay income taxes. This means that the free-rider problem is equally applicable to the democracy that your ideally transparent system depends on in order to ensure that public goods are optimally funded.

To make a long story short… taxpayers should be free to choose where their taxes go (pragmatarianism). If the seafood industry needs better/bigger roads more than they need another unnecessary war… then they’ll allocate their taxes accordingly.

This might help… a relatively brief overview of public finance.