The bolded part looks really fishy - how does providing public goods increase income? (I mean, it might increase it as bit, but not as much as the expense of public goods).

I wish Google could search inside Kindle books, so I could quote the relevant examples. Two specific examples the authors talk about is roads and freedom of speech.

Edit: I found the part about the roads, but Amazon makes it impossible to copy/paste text from its books. However, the example about the roads is so good that I decided to post it via a screenshot: http://i.imgur.com/uBZHzqz.png?1

A more plausible explanation (that fits better with the rest of what you wrote!) would be that extracting money from a large population requires a big organization, many parts of which may revolt (so they are "essentials"), whereas extracting money from some oil fields requires a much smaller group of essentials.

With the exception of the revolt part, the authors explicitly acknowledge the above.