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Subject Area: Political Theory

Choice and Spontaneous Order - Leonard P. Liggio, Literature of Liberty, January/March 1978, vol. 1, No. 1 [1978]

Edition used:

Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.

Part of: Literature of Liberty: A Review of Contemporary Liberal Thought, 20 vols. 19781-982

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Choice and Spontaneous Order

Coase, R. H.

  • University of Chicago Law School

“The Lighthouse in Economics.” The Journal of Law and Economics 17 (1974): 357–376.

Economists such as John Stuart Mill and Paul Samuelson have used the lighthouse as a symbol and example of an economic good that can only be provided by government planning rather than private choice and enterprise. They contend that a private company would find it unprofitable to build and maintain a lighthouse because it could not secure fees from those ships which benefit from the lighthouse. A detailed historical investigation of the British lighthouse system refutes this antimarket symbolism for the lighthouse.

On the contrary, if general taxation supported lighthouses as a substitute for light dues, government cost-efficiency would reduce the efficiency of the service. The general taxpayer is less interested in high quality lighthouse service than the shipowners, underwriters, and shippers who on the free market actually pay for additional services.

Economists need a comprehensive study of lighthouse finance and administration. Such a study would show the richness of social alternatives to state ownership or state administration of economic goods and services.

lf0353-01_1978v1_figure_034

The early history of the British lighthouse service shows that, contrary to the belief of many economists, private enterprise can provide profitable lighthouses. In the early sixteenth century, shipowners and shippers could petition the King to allow a private entrepreneur to construct a lighthouse and to levy a specified toll on ships benefiting from it. The lighthouses were built, operated, financed, and owned by private individuals who could sell or dispose of them by bequest. The role of government was limited to enforcing property rights in the lighthouse. Agents for the lighthouses collected the charges at the ports. The problem of collection was no different for them than for other suppliers of goods and services to the shipowner. The lighthouse owners' property rights were limited only by price controls. The most celebrated British lighthouse, the Eddystone on a reef of rocks some 14 miles offshore from Plymouth, testifies dramatically to show how private interests promote “public” ends despite the opposition of storms and government agencies.

In the 1830s the provision of lighthouses in England and Wales was entrusted to Trinity House, a private agency with public duties. But tolls levied on ships continued to finance the service. The nonmarket system favored by Samuelson, financed by the government out of general taxation, has never been tried in Britain.

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