The Myth of Lighthouses

Brian Doherty | May 29, 2007

National Review's redoubtable John Derbyshire begins to contemplate giving anarchism a chance, over at the Corner:

The more I contemplate our federal government and its works, the better Murray Rothbard is starting to look.

It was in 1949 that Rothbard first concluded that the free market could provide all services, including police, courts, and defense services better than could the State.

I wouldn't be a bit surprised. Probably there are limits. (The quip about Rothbard used to be that in a Rothbardian world, the proprietor of a lighthouse, seeing that some ship at sea was using the lighthouse to navigate by, would have to jump into a rowboat, make his way to the ship, and demand a fee from the captain.) It may be that immigration control is inside those limits, though.

That lighthouse canard is an oldie-but-baddie for those mocking libertarian anarchists. Here, from an article by Dr. Rothbard himself, is a discussion of the facts of the lighthouse matter, relying on the scholarship of Nobel prize winner Ronald Coase:

To Professor [James] Buchanan, the "classic" example of a collective good is the lighthouse. The beams of the lighthouse are indivisible: "If one boat gets all the light beams, all boats may do likewise." Or, as Samuelson has put it, "A businessman could not build it for a profit, since he cannot claim a price from each user." The theory is that it would be virtually impossible for a lighthouse keeper to row out to each boat to demand payment for use of the light. And that hence lighthouses have always been supplied by government.

..............

In his trenchant critique of the offhanded way in which economists, from Mill to Samuelson and Arrow, have wrongly used the lighthouse as an example of a collective good, [Ronald] Coase concludes:

These references by economists to lighthouses are not the result of their having made a study of lighthouses or having read a detailed study by some other economist. Despite the extensive use of the lighthouse example in the literature, no economist, to my knowledge, has ever made a comprehensive study of lighthouse finance and administration. The lighthouse is simply plucked out of the air to serve as an illustration....

......contrary to the belief of many economists, a lighthouse service can be provided by private enterprise.... The lighthouses were built, operated, financed and owned by private individuals, who could sell the lighthouse or dispose of it by bequest. The role of the government was limited to the establishment and enforcement of property rights in the lighthouse. The charges were collected at ports by agents from the lighthouses. The problem of enforcement was no different for them than for other suppliers of goods and services to the shipowner.

Coase the lighthouse mythslayer was interviewed by reason in our January 1997 issue.

To get better educated on Rothbard than is the Derb, read, of course, my new book Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement .

Comments

|5.29.07 @ 7:49PM|#

"National Review's redoubtable John Derbyshire..."

"Redoubtable" means I shouldn't take his word for it, right?

|5.29.07 @ 7:53PM|#

Actually, it means you can build a defensive fortification out of him.

|5.29.07 @ 8:08PM|#

Redoubtable: doubt, and doubt yet again.

M|5.29.07 @ 8:27PM|#

Ron Paul? Name rings a bell...

I see/hear a bright future in buoys programmed to ring out commercial and political messages, on the order of Burma-Shave canons, in the rocky shallows surrounding yon lighthouse...

Mike Laursen|5.29.07 @ 8:41PM|#

When I was younger, I used to be a lot more interested in theoretical discussions about how we could have dogcatchers or lighthouses or whatever without the government. Now, I feel like it's just a distraction from the libertarian movement's focusing on the big stuff: wars, civil rights, massive public debt, etc.

|5.29.07 @ 8:44PM|#

Sorry, back during the battles over the war, etc., Derbyshire wrote some shit over at the Corner that I just can't seem to forget.

So Derbyshire's talkin' about Rothbard? I'd rather read about what Doherty has to say.

"The charges were collected at ports by agents from the lighthouses. The problem of enforcement was no different for them than for other suppliers of goods and services to the shipowner."

I imagine port operators, railroads, trucking companies, manufacturers, insurance companies and myriad others who benefit from having ships come safely to port, might benefit from giving lighthouse services to ship captains for free.

|5.29.07 @ 8:44PM|#

But you still need a government to provide enforcement. This Coase sounds like a crypto-statist to me.

edna|5.29.07 @ 8:48PM|#

he's the only scientifically literate person at nr, so let's celebrate that. he's also one of the few folk there who, when presented with the coase response, would say, "oh, well then, never mind, let's find a better example," as opposed to, "look at those wacky libertarians!"

he'd then do a probabilistic analysis of lighthouse placement relative to water current velocity.

|5.29.07 @ 8:52PM|#

I imagine port operators, railroads, trucking companies, manufacturers, insurance companies and myriad others who benefit from having ships come safely to port, might benefit from giving lighthouse services to ship captains for free.

Indeed. In my opinion, the most likely constitution of anarchy will have insurance companies serving as the organizational nexus that government serves now.

To insurance companies, lighthouses are no-brainers.

The Wine Commonsewer|5.29.07 @ 8:55PM|#

Brian, I love stuff like that. You ARE, da Man.

|5.29.07 @ 9:22PM|#

It seems like insurance companies would contract for most formerly government services--lighthouses, police and courts, fire (which they definitely did), levees, etc.

|5.29.07 @ 9:25PM|#

I seem to recall reading some years ago that fees for the use of private lighthouses were usually bundled in with the fees that shippers paid to use the associate harbor.

But you still need a government to provide enforcement. This Coase sounds like a crypto-statist to me.

You know nothing. At least about Coase. The point under discussion is whether you can privately sell services that are conventionally thought of as public goods that only the government can provide. This example shows that, with a little bit of thought, you can find ways to do so, at least in some cases -- specifically, e.g., the case that used to be held up as the classic example of why you couldn't.

Enforcement (to ensure of getting paid by selling those services) by private means is another issue. On that score, you might also read up on the degree to which various nations used to rely heavily on private versus government means to enforce the law in general (including during the classic Age of Sail, and especially the case with England, a leading maritime nation.) Start by looking around David D. Friedman's Web site. The following writings are available online there:

"Making Sense of English Law Enforcement in the Eighteenth Century," The University of Chicago Law School Roundtable (Spring/Summer 1995).
"Law as a Private Good," Economics and Philosophy 10 (1994), 319- 327.
"Private Creation and Enforcement of Law -- A Historical Case." Journal of Legal Studies , (March 1979), pp. 399-415.
"Less Law than Meets the Eye,"a review of Order Without Law, by Robert Ellickson, The Michigan Law Review vol. 90 no. 6, (May 1992) pp.1444-1452.

|5.29.07 @ 9:46PM|#

Lighthouses aside, getting 12 million people legally integrated into our current system (or even the most radically libertarian version of it possible within 4-8 years) is going to cost a ton of cash and require a mind-boggling bureaucratic effort. I think Derb's point is that citizen-taxpayers shouldn't have to foot the bill for that. Has anyone read Derb's "Libertarianism in One Country"? http://article.nationalreview.com/?q=YTNiMDIxNTk3NGQ0NTUyYmExMWE0NGE2NTk1Mzc1Yzk=
He's got a point that strong U.S. Sovereignty is probably all that keeps libertarianism alive in the U.S.; are the U.N. and the E.U. moving things towards liberty in their spheres of influence? Will mass immigration favor or harm liberty here?

|5.29.07 @ 9:53PM|#

I don't remember the priest telling me when I went to Confession when I was a kid, "Well, Lance, it was wrong of you to disobey your mom and talk back to her like that, but since you set the table every night and do your homework and sent your aunt a birthday card, what the heck! You're a good kid. Your sins are forgiven automatically. 糖尿病 心脑血管 文秘 糖尿病分型 糖尿病 maybe it's happened a few times and I haven't heard about it but I can't recall a judge ever letting somebody walk on the grounds the crook was a good guy and his friends really like him.

edna|5.29.07 @ 10:09PM|#

getting 12 million people legally integrated into our current system (or even the most radically libertarian version of it possible within 4-8 years) is going to cost a ton of cash

as our previous experience with immigration shows, if we make "legally" a whole lot simpler, the cost is very low compared to the gains, and not nearly as high as it is made out to be. the difficulty is getting past the lawyers, the pc hustlers, and the bumper-sticker slogans, and implementing a rational immigration policy: fairly open borders, no welfare before citizenship, no citizenship without x years of productive, tax-paying work.

SPD|5.29.07 @ 10:27PM|#

I'm curious to know what Rothbard's take would be on this story:

http://www.signonsandiego.com/news/nation/20070529-1541-homelandinsecurity.html

|5.29.07 @ 11:21PM|#

Lets say I own a ship and I pull into a harbor I've never been to before. Then say I go up to the lighthouse owner and say "thanks for the free light, but I never made an agreement to pay you for that so I'm not going to". Would I be within my rights to refuse payment?

I guess many private parties who would benefit from the lighthouse could get together and work out a mutually beneficial contractual arrangement to fund one. There would, however, probably be substantial negotiating costs and a few free riders.

I don't really have a strong opinion on what the proper role of government is with respect to lighthouses, if anything. I'm just sort of thinking out loud (or, technically, thinking in the form of typed words).

|5.29.07 @ 11:32PM|#

"Would I be within my rights to refuse payment?"

Of course.

On the other hand, your harbormaster would be well within his rights to refuse to sell you the last ten feet or so of deck to your boat.

|5.29.07 @ 11:33PM|#

BG,

The free rider problem is not such a big problem; Walmart allows you to park in their parking lot without coming into the store (which is convenient for diaper changes on a long trip). The fact is that the parking lot is most profitable to Walmart when they make it widely available to potential customers. The few lost spaces to free riders are not worth the trouble.

In the case of light houses, it is in the interest of the port owners and the merchants to make entry into the ports as easy as possible. One of the two groups will get together to fund a light house. If the port owners do it, everyone pays the harbor fee. It a merchant association decides it is worth their money t build a lighthouse, the cost will be borne by the members of the association. Any free riders do not diminish the value of the lighthouse, so they will not detract form the merchants' ability to use the lighthouse. Thus, if the merchants' association calculates that the lighthouse is profitable for them to maintain, the calculation will not be affected by the presence of free-riders.

|5.29.07 @ 11:42PM|#

You don't just pop into a harbor you've never been to before (or indeed to one you *have* been to before)


You contact such ports beforehand and make arrangements for pilot services, berthings, hotel services, in addition to arrangements for cargo - the port then charges you fees based on your consumption of these services.

In the old days before you could easily call ahead you made these arangements on the spot with the local port authority and if you didn't like the prices you didn't pull into the port.

The lighthouse charges the port authority a fee to keep the lighthouse lit - the authority agrees because the light is a service to its customers worth the cost.

Vessels don't actually interact with the house at all.

|5.30.07 @ 1:29AM|#

"I'm curious to know what Rothbard's take would be on this story:

http://www.signonsandiego.com/news/nation/20070529-1541-homelandinsecurity.html"

Well, Rothbard's dead so we'll never know what he would say, but speaking as an anarchist who was highly influenced by Rothbard I would say that that article illustrates what is wrong with the incentive structure of governmental agents--i.e., they profit from government spending regardless of the results that spending produces. Can you imagine a private company with even a quarter of the federal government's resources deliberately hiring shoddy guards for high-risk projects?

Flomax|5.30.07 @ 2:30AM|#

getting 12 million people legally integrated into our current system (or even the most radically libertarian version of it possible within 4-8 years) is going to cost a ton of cash

Fluffy|5.30.07 @ 7:04AM|#

I don't think the argument works, because basically what Rothbard is saying is that if you control a monopoly good that people must use, that gives you a chance to secure payments - and with those payments you can subsidize another related good that you might otherwise have trouble securing payment for.

You still can't build a freestanding lighthouse and make it pay. You can only recoup your expense if your lighthouse is integrated into a larger harbor system - and only if you have a monopoly. If more than one individual can dock ships at the harbor, neither should build a lighthouse, because if they do their competitor's customers can use it for free.

How do you get stable monopolies in harbor services? You almost certainly can't, without doing it by fiat.

|5.30.07 @ 7:26AM|#

Fluffy,

The free rider problem is not a problem! If Ship owner A decides it is worth the expense to build a lighthouse, he will build it.

Other people taking advantage of the lighthouse's existence in no way reduces the lighthouse's utility to the guy who built it.

In fact there have been lighthouses used to warn ships of dangerous shoals that were funded by merchants associations for this very reason. The merchants in the association felt a lighthouse would reduce their losses enough to pay for itself. Other people such as non-aligned merchants also using it didn't alter that calculation.

edna|5.30.07 @ 7:37AM|#

tarran, that's an interesting analogy to intellectual property...

|5.30.07 @ 7:37AM|#

Not everything in an anarcho-capitalistic socieity need make itstelf "pay". Common goods, paid for by volunatary contributions can exist in such systems. A lighthouse would benifit the Harbor area as a whole. One could easily imagine the merchants that benifit from a booming Harbor bonding together to fund a lighthouse.

|5.30.07 @ 8:47AM|#

One could easily imagine the merchants that benifit from a booming Harbor bonding together to fund a lighthouse.

Right, and as long as you don't call it a government, people are cool with it.

That seems to be the crux of a lot of these discussions...libertarians don't care for the government or the state but are big fans of people joining together to create rules, collect revenue, own common property, etc.

Just don't call it a government.

|5.30.07 @ 8:58AM|#

Coase: Some have said what happened in lighthouses wasn't really private enterprise. The government was involved in some way in setting the rights and so on. I think that's humbug because you could say that there's no private property in houses by that logic, since you can't transfer your rights to a house without the examination of title and registration and without obeying a whole series of regulations, many enforced by government.

IOW, he's saying that the government needs to be involved in everything, not just lighthouses.

http://www.independent.org/publications/working_papers/article.asp?id=757
Historically, according to Van Zandt, "private" provision involved government granted lighthouse owners monopolies, government-set lighthouse fees (so-called "light dues"), and governmental assistance in fee-collection enforcement. As noted by Johnson (1890, p. 113), "Payment of light dues is made to and enforced by the customs offices, and they are a lien on ship and cargo. They usually appear in the bill of port charges."

Fluffy|5.30.07 @ 9:40AM|#

Tarran -

I think the assertion that free ridership isn't a problem probably would not stand up to actual implementation. It's not a problem until a critical mass of people decide to be free riders.

And a merchant that went around spending resources to make capital improvements that all other merchants could use for free would be competed into oblivion in the long run.

I think it's really overconfident to assume that people will line up to put themselves in a position where they will be outcompeted. Free ridership becomes a problem when people can anticipate that the resources they are deploying will be free-ridden on. The merchant with foresight will refrain from making a capital improvement that will cost him alone, but will benefit all his competitors as well. And that's only on the basis of pure calculation of advantage - I think you also have to account for the fact that the presence of free riders outrages the basic sense of justice of many system participants, and the merchant with foresight might not only refrain from building a lighthouse for competitive reasons, but because he just doesn't like the idea of his competitors benefitting from his effort for free.

Frankly, if free ridership isn't really a problem, what's everyone's problem with socialism? So what if the productive are exploited. As long as they get any benefit from their production, who cares if free riders also benefit from it. Right?

Wild Pegasus|5.30.07 @ 9:47AM|#

That seems to be the crux of a lot of these discussions...libertarians don't care for the government or the state but are big fans of people joining together to create rules, collect revenue, own common property, etc.

Just don't call it a government.

Libertarians aren't opposed to government. We're opposed to the state. Libertarians have spent a lot of time and effort explaining how we think governments will work in the absence of monopoly power.

- Josh

|5.30.07 @ 10:03AM|#

Fluffy,

There is no doubt that the situation you describe could happen. The local Chamber of Commerce folded in my neighborhood for exactly that reason. But over in Miami Beach, their Chamber is still running strong and has been for a number of decades. And a Lighhouse is really no different than a chamber. For a fictional example of a quasi anarcho capitalistic society, look at the HBO program "Deadwood". In Season One they had a plauge. The merchant class called a meeting, and everyone pitched in to go get vaccine and set up a sick tent. Self interest compells them to create a common good. And don't forget the power of social sanction. When EB's contribution is questioned for being a bit too light, he adds more, because having a positive relationship with the other businesses is a form of self interest as well-in a tight kit community, social pressure alone could solve the freeboater issue. Later on in the series, the same men get together to establish a system of voluntary contributions to be used for bribes to the US Government. When Doc Cocharan falls ill, Cy suggests to Al that they put an ad in the Eastern papers looking for a new Doc. Now Al could, as you point out, figure that Cy needs that ad just as much as he does, and if he refuses to pony up his share, Cy will be forced to pay all of it, but that's just not the way people operate in real life. And to answer your final question, the problem people have with socialism is not "free ridership" but these relationships come about not through free will and voluntary trade, but rather, with a government gun pointed in your face.

|5.30.07 @ 10:10AM|#

And to answer your final question, the problem people have with socialism is not "free ridership" but these relationships come about not through free will and voluntary trade, but rather, with a government gun pointed in your face.

But let's be accurate - in a free market society the government is still sticking a gun in your face.

Fluffy|5.30.07 @ 10:20AM|#

FDS -

I would have to say that mere opposition to compulsion is not the real problem most people have with socialism.

Other than true anarchists, everyone concedes the power of the state to compel something.

People object to the power of the state being used to compel the pooling of property or the proceeds of labor because they don't think that particular compulsion is fair or just. The economic and political failure of collectivism can actually be pretty neatly understood as a mass objection to the presence of free riders - no one wants to be the dupe of the system, so everyone competes to see who can be the best free rider instead. We can talk all we want about Hayekian arguments against the utility of central planning, etc., but on the ground people "check out" of socialist schemes by not producing as much.

|5.30.07 @ 11:19AM|#

Lighthouses sweep (or blink) in a unique pattern. In a coast with multiple lighthouses, you can tell which one you are looking at. If you can get a bearing to two lighthouses, you know where you are. The lighthouse owner can change the code daily, and sell the code book to shipowners. The free rider problem disappears. Military coded GPS is the same idea. So is XM radio.

SPD|5.30.07 @ 11:24AM|#

Nasika,

My comment was more a hypothetical one (R.I.P., Mr. Rothbard).

Can you imagine a private company with even a quarter of the federal government's resources deliberately hiring shoddy guards for high-risk projects?

That was the point of the article, was it not? That private industries, when left to their own devices, are going to cut as many corners as possible in order to increase their profit margin, regardless of quality. That's fine if you're making novelty items, but not if you're contracted to field a security team assigned to protect potential targets from terrorist attacks. You get what you pay for.

|5.30.07 @ 11:27AM|#

"anarchy will have insurance companies serving as the organizational nexus that government serves now"

I got shivers with that one...

So would government work better with higher deductibles?

|5.30.07 @ 11:37AM|#

So would government work better with higher deductibles?

Yes, in a manner of speaking.

If government provided only a true safety net and did not try to micromanage so many small displacements in people's lives, government would be vastly smaller and much less expensive, and the populace would be far better off.

libertreee|5.30.07 @ 1:29PM|#

That private industries, when left to their own devices, are going to cut as many corners as possible in order to increase their profit margin, regardless of quality.-spd

This comment illustrates the fallacy of thought that looks at a "market failure" hypothetical without considering the "government failure" converse.

The idea that private business "cuts corners whenever possible...regardless of quality" simply is not true in the real world because to do so would invite loss of market share to another firm or firms who would profit from the
bad publicity, or customer dissatisfaction, resulting from the cost cutting.

Not to mention that the increased profits that theoritically would result from such foolish cost cutting would also invite more competition into the market. Competiton that could fail, or could result in better products. Either way, market share would diminish.

No. Profits are made almost always NOT from foolish cost cutting, but from well planned cost cutting that carefully distinguishes what can properly be cut while still satisfying customers and improving product and service.

It is government (the monopoly, non cost cutting type) that refuses to improve service while constantly RAISING prices. EG, Post Office, Education, Medical Care involvement, Military waste, the FAA, FDA, etc. etc ad infinitum.

Sea Cap\'n|5.30.07 @ 1:34PM|#

I mythed a lighthouse once... ran aground...

libertreee|5.30.07 @ 1:39PM|#

When I was younger, I used to be a lot more interested in theoretical discussions about how we could have dogcatchers or lighthouses or whatever without the government. Now, I feel like it's just a distraction from the libertarian movement's focusing on the big stuff: wars, civil rights, massive public debt, etc.=Mike Laursen

Mike--

We are at the beginning of a new century. Imagine the world in 1906. Could anyone have ever imagined in the Progressive Era how the dominant ideas of a technological elite overseeing a centralized state conceived for social engineering the horrors of totalitarianism that it produced?

We are at what could be the tail end of that era. The era of the nation state, or certainly of the continuing centralization of power in same, is over.

In Somalia, we have the first Westphalian nation state to consciously rid itself of government.

We have intellectuals of every strife writing about the end of the nation state.

We have fourth generation war bogging down the world's greatest superpower in a hopeless endgame.

We have citizens rejecting centralization, and secession is being discussed and acted upon all over the world. The world's empires are falling.

Yes, the governments are lashing out, and the next decades could see more repression, loss of civil liberties, maybe even a very bad war.

But, don't you think our job is to hold up the theoritical light of liberty even in the face of repression so that our children and grandchildren have a chance to utilize the wealth and technology they will possess to make a new, free world?

One World Government is dead! Long live One World AnarchY!

Murray Rothbard, RIP!!

|5.30.07 @ 4:44PM|#

"That seems to be the crux of a lot of these discussions...libertarians don't care for the government or the state but are big fans of people joining together to create rules, collect revenue, own common property, etc."

It's all fine and dandy with this libertarian 'til the guys that collect the revenue to finance operations on their common property decide that everybody in town has to pay for the lighthouse whether they want to or not.

...it ain't about semantics.

Russ 2000|5.31.07 @ 11:23AM|#

Frankly, if free ridership isn't really a problem, what's everyone's problem with socialism?

Coercion. Duh.