Noah Webster primarily identified the issue of individual states acting in their own self-interest as a fundamental problem of the Articles of Confederation. He believed that the lack of a strong central government allowed states to prioritize their own needs over the collective good, leading to a disunified and ineffective national government. This behavior could result in states undermining national policies or refusing to cooperate on issues that necessitated a united effort, ultimately harming the nation as a whole.
While concerns about the distribution of power between larger and smaller states, as well as the fear of harsh taxation by the central government, were legitimate issues raised by figures of the period, Webster's emphasis was more on the need for a functional national identity and the ability to create a cohesive policy framework that served the interests of the entire country, rather than just individual states. Thus, the correct answer revolves around the self-interest of states potentially harming the collective welfare of the nation.