Economics

The Myth of Lighthouses

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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 .