I know I talk about lighthouses a lot. This is because they are economically relevant. They are the penultimate example of public goods and they underlie all positive (i.e. scientific) justifications for state-provision of public goods. However, economic theory has whitewashed the history of the lighthouse in order to make this case. In reality, the lighthouse never was a public good and it never was, before the 19th century, the main way of providing maritime safety. Alongside Rosolino Candela, in a new working paper, I provide a ton of historical evidence showing that it was a complement to private goods and services such as pilotage and ballastage. Because it was a complement to other goods, it could be privately provided through bundling. That option was prohibited, however, by rent-seeking and monopoly privileges granted to firms/guilds involved in the production of the private goods that could (and did) produce lighthouses and other such services. As such, Rosolino and me are arguing that economists were wrong to consider the lighthouse even as a public good. The abstract is below and the link to the SSRN paper (submitted for a special conference on the economics of James Buchanan) is here.
Was the lighthouse ever a public good? The lighthouse is presented as the quintessential public good as it was inherently non-excludable and non-rivalrous. Since the work of Ronald Coase (1974) on the lighthouse, economists have used debated the extent to which the private provision of public goods is possible. In this work, we highlight recent findings in the history of lighting services (especially private provision of said services) in order to argue that it may be incorrect to consider the lighthouse as a public good. First, we argue that lighthouses are probably better seen as a complement to other maritime services (e.g. pilotage, docking, ballastage). The lighthouse could have been bundled with these complements, which were excludable and rivalrous, in ways that would have permitted its provision. Second, we argue that organizations in charge of providing lighthouses were aware of this bundling possibility and lobbied hard to monopolize these other aspects of the trade in ways that limited entrepreneurial opportunities.
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Reblogged this on Utopia – you are standing in it!.