Why Consider the Lighthouse a Public Good?

Abstract

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.

Keywords: government failure; lighthouse; pilotage; market failure; public goods

JEL Classification: D72; H40; P48