Economic theory and its application to understanding real-world problems and events has public policy implications. Economic theorists have used the existence of facts that demonstrate a set of market failures, such as externalities, monopoly power, and public goods, to justify government intervention to correct such failures. However, a similar set of facts can also demonstrate the market’s failure to exist, meaning that the very government intervention that was implemented to correct for the alleged market failures prevents a market solution to such a failure from emerging.
Before and since the publication of Ronald Coase’s “The Lighthouse in Economics” (1974), the extent to which the lighthouse is regarded as a public good (Samuelson 1954) …show more content…
Section 2 provides a brief overview of the literature that has challenged and critically engaged the arguments originally proposed by Coase (1974). The section also underlines the key institutional features of the broader lighting market, which included lightships. Section 3 explains the case of privately provided lightships in England from the 1670s through the 1730s. We focus particularly on the case of the opposition faced by private developers from Trinity House for the construction and operation of the lightship on the Nore, a shallow area on the Thames estuary going in and out of London from the North Sea. Section 4 ties this case to the argument that, rather than being an instance of market failure, the English (and Welsh) lighthouse system under Trinity House before the 19th century illustrates an example of a tendency toward political failure. By creating the conditions for rent seeking, Trinity House generated a tendency toward monopoly power in the provision of lighthouse services. This, in turn, generated higher prices than those that would have prevailed under open conditions of entry and exit. As a result, Trinity House unleashed a dynamic of intervention that later justified the nationalization of privately produced lighthouses. Section 5 …show more content…
However, this was not unusual given the premodern institutional context within which lighthouses first emerged in England and Wales. As Allen states, lighthouse services were “quasi-private affairs in which the Crown was involved to some extent. Like the purchase system in the army in which the Crown regulated prices, approved sales, and generally had an interest in outcomes, pre-modern governments also took an interest in lighthouses and their dues, operation, and construction” (2012, p. 175). First, private lighthouses represented a minor share of the market by the time of nationalization: 14 out 55 lighthouses were privately operated (Coase 1974, p. 366). Second, the private lighthouses did exist as a result of state support. They obtained fixed-duration patents from the Crown that allowed them to compel the payment of light dues at harbor (Van Zandt 1993; Taylor 2001; Bertand 2006; Barnett II and Block 2007; Block and Barnett 2009; Allen 2012; Carnis 2013, 2014). As such, their functioning resembled that of modern public-private partnerships. Third, the aforementioned patents were localized monopolies because they also prohibited the establishment of competing lighthouses within a certain range of a lighthouse (Van Zandt 1993, p. 64). This allowed the delegation of lighthouse management, which economized costs for the government (Carnis
Before and since the publication of Ronald Coase’s “The Lighthouse in Economics” (1974), the extent to which the lighthouse is regarded as a public good (Samuelson 1954) …show more content…
Section 2 provides a brief overview of the literature that has challenged and critically engaged the arguments originally proposed by Coase (1974). The section also underlines the key institutional features of the broader lighting market, which included lightships. Section 3 explains the case of privately provided lightships in England from the 1670s through the 1730s. We focus particularly on the case of the opposition faced by private developers from Trinity House for the construction and operation of the lightship on the Nore, a shallow area on the Thames estuary going in and out of London from the North Sea. Section 4 ties this case to the argument that, rather than being an instance of market failure, the English (and Welsh) lighthouse system under Trinity House before the 19th century illustrates an example of a tendency toward political failure. By creating the conditions for rent seeking, Trinity House generated a tendency toward monopoly power in the provision of lighthouse services. This, in turn, generated higher prices than those that would have prevailed under open conditions of entry and exit. As a result, Trinity House unleashed a dynamic of intervention that later justified the nationalization of privately produced lighthouses. Section 5 …show more content…
However, this was not unusual given the premodern institutional context within which lighthouses first emerged in England and Wales. As Allen states, lighthouse services were “quasi-private affairs in which the Crown was involved to some extent. Like the purchase system in the army in which the Crown regulated prices, approved sales, and generally had an interest in outcomes, pre-modern governments also took an interest in lighthouses and their dues, operation, and construction” (2012, p. 175). First, private lighthouses represented a minor share of the market by the time of nationalization: 14 out 55 lighthouses were privately operated (Coase 1974, p. 366). Second, the private lighthouses did exist as a result of state support. They obtained fixed-duration patents from the Crown that allowed them to compel the payment of light dues at harbor (Van Zandt 1993; Taylor 2001; Bertand 2006; Barnett II and Block 2007; Block and Barnett 2009; Allen 2012; Carnis 2013, 2014). As such, their functioning resembled that of modern public-private partnerships. Third, the aforementioned patents were localized monopolies because they also prohibited the establishment of competing lighthouses within a certain range of a lighthouse (Van Zandt 1993, p. 64). This allowed the delegation of lighthouse management, which economized costs for the government (Carnis