Why consider the lighthouse a public good?
Originally published in International Review of Law and Economics
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 debated the extent to which the private provision of public goods is possible. We argue that there is no a priori basis to consider lighthouses are a public good, being both rivalrous and excludable. We highlight recent findings in the history of lighting services (especially private provision of said services) to illustrate why it may be incorrect to consider the lighthouse as a public good for two reasons. First, lighthouses are complements 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, 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.