A good point indeed, one I would argue elsewhere. However, as I indicated to my response to Bill Bartlett in the same thread - the purpose of this argument was mainly a "subversion" of the neco-classical argument that applies to capital, and apply it to labour.
If I understand neo-classicals correctly, they hold that public character of a good is not a political choice (a position that I have argued elsewhere) but the property of the good itself or more specifically, the absence of effective means of preventing non-payers from enjoying the benefits from that good. An example they would give would be a property value increase due to the proximity of a public park - your property value would go up whether you pay for the part or not, and there is no effective way of restricting that increase only to those who decided to pay for the park. Therefore, the only rational solution in this situation is to impose a compulsory fee i.e. a tax.
Of course the neo-classicals recognize that not all public goods can be paid by taxes, and claim that the public funding of public goods is restricted by what they call the "median voter" i.e. the consent of the majority of voters to fund that good. The argument here is that the "median voter" will not consent to public funding of a collective good that benefits only a small group.
Of course this argument has numerous logical and empirical problems (see for example my piece "The Death Knell of the Utilitarianism" in _Voluntas_ ,2000, 11(4):375-388), chief of them being atomistic individualism that does not allow cooperation (i.e. I trade my consent for your pet public project for your consent for my pet public project) and the oblivion to the role of power in making public decisions, not to mention introducing logical inconsistencies to the rat choice model.
Of course, if you admit that it is institutional settings - which are ultimately grounded in political decisions - that decide what is "public good" i.e. good distributed in disregard of one's ability to pay for it, and what is not - you will avoid most of the theoretical and empirical pitfalls of the neo-classical thinking i.e. why is that we have both public and private goods of the same kind in the same jurisdiction i.e. the toll New Jersey Turnpike (private good) running alongside the Interstate 295 (a "freeway" as the call it in California) in New Jersey (or PA Turnpike and I-80 crossing Pennsylvania). However, admitting the influence of political power on economic decisions would strip the neo-classical story from its main allure - explaining the capitalist economic system as a "natural" (i.e. uncontestable) as opposed to "political" (i.e. contestable) product.
Wojtek