Existing research has shown that highly diverse countries tend to provide less public goods. This article argues, by contrast, that the relationship is spurious: both contemporary ethnic heterogeneity and low public goods provision represent legacies of a weakly developed state capacity inherited from the past. Classical theories of state formation are then tested to show that favorable topography and climate, high population densities, as well as a history of warfare are conducive to state formation. Using an instrumental variable approach, I show that previous ethnic diversity is not consistently an impediment to the formation of indigenous states and thus to contemporary public goods provision. Empirically, this article uses three different measurements of public goods provision and data on pre-colonial levels of state formation in Asia and Africa to test these various hypotheses.