Are lighthouses public goods?

For many years, Lighthouses were _used to illustrate the notion of public goods. They save lives and cargoes. But lighthouse keepers cannot reach out to collect fees from ships; nor, if they could. would it serve an efficient. social purpose for them to exact an economic penalty on ships who use their services. ‘The light can be provided most efficiently free of charge. for it cosu no more to Warn 100 ships than to warn a single ship of the nearby rocks.

This view became controversial when Nobel Prizewinning economist Ronald Co-as, reviewed the history of lighthouses in England and Wales and determined that these had been privately operated. Case found that English lighthouses’ operated profitably under Licenses purchased from the Crown and were financed by government- authorized “light duties” levied on ships which used nearby pour. From ~is history. Case concluded that “contrary to the belief of many economics, a lighthouse service can be provided by private enterprise.” Some have even concluded that lighthouses are not public goods.

But let’s look carefully here. The two key attributes of a public good are that the cost of extending the service to an additional person is zero (“non-rivalry”) and that it is impossible to exclude individuals from enjoying it (“nonexchangeable”). Both these characteristics are applicable to lighthouses.

But a “public” good is not necessarily publicly pro- Sided. Often, It Is provided by no one. Moreover, just because It Is privately preceded does not indicate slat It Is deficiency provided or that a mart mechanism en pay for the lighthouse. The shows the Interested case where, if provision of the public Good can be tied to another & good or service (in this cue, wise! tonne), and if the Oftentimes Jives private persons the Richter to collect what are essentially taxes, then an alternative mechanism for nonfading the public Good can be found. Such an approachable work poorly where the fees could not be easily deed to ton,… (such as In International waterways).And It would not work at cliff the Oftentimes refused to privatize the collect light dudes on Snapple.

America shows quite a ‘different experience. From Its earliest days, the United States belayed that navigational aids should be movement-collided. Indeed, one of the lint acts other first Cress. and America’s first publication s law, provided that ”the necessary support, maintenance, and repaint of all Lighthouse, beacons, [and) buoys shall be cite) Cecile out of the Treasury of the United States.”

But. Dice many public Joists lighthouses Precised “fund Inc, and It Is Interest”l to note what happened In the absence of navigational aids.A fascinating case lies off the east coast of Florida, which Is a treacherous water way with 10200-referee lying submerged a few feet ~ the subsume In the most active hurricane track of the Adan tic Ocean. This heavily used channel was prime territory for storm, shipwreck, and piracy.

There were no lighthouses in Florida until 1825, and no private-sector lighthouses were ever built in this area. The market responded valorous to the perils, however. What arose from the private sector was a thrall”wreck- ING” I~, Wrecker were ships that lurked near the dangerous reels Walton for an unfortunate boat to become disabled. The wrecker would then appear, offer their help in saving lives and cargo. ‘tow the boat Into the appropriate port, and then claim a substantial part of the value of the cargo. Wrecking was the major Industry of South Florida In the nineteenths century and made Key West the richest town In America at that time.

While wrecker probably had positive value added,they provided none of the public-attributes of lighthouses.Indeed, because many cargoes were Insured, there was significant”moral hazard” Invoked In navigation.Connivance between wrecker and captains often enriched both at the Expense of Wrens and insurance companies.

Taxes, The government must find the revenues to pay for its public goods and for its income-redistribution programs. Such revenues come from taxes levied on personal and corporate incomes, on wages, on sales of consumer goods, and on other items. All levels of government-city, state, and federal-collect taxes to pay for their spending.

 Taxes sound like another “price”-in this case the pie we pay for public goods: But taxes differ from prices in one crucial respect: taxes are not voluntary. Everyone is subject to the tax laws;we are all obligated to pay for ‘our share of the cost of public goods. Of course, through our democratic process, we as citizens choose both the public goods and the taxes to pay for them. However, the close connection between spending and consumption that we see for private goods does not hold’ for taxes and public goods. I pay for a hamburger only if I want one, but I must pay my share of the taxes used to finance defense
and public education even if I don’t care a bit for these activities.

 

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