Abstract
Coase’s publication of “The Lighthouse in Economics” (1974) sparked a polarizing debate over his claim that government intervention is not necessary for the existence of a private lighthouse market. The purpose of this paper is to reframe this debate by asking the following question: why was nationalization the outcome of lighthouse regulation? We answer this question by utilizing the Austrian theory of interventionism to illustrate how regulation of the lighthouse market distorted the entrepreneurial market process. We argue that the nationalization of the lighthouse market in England and Wales was a result of prior government failure to exclude private lighthouses from the market, not a failure of the entrepreneurial market process to privately provide lighthouses.
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Notes
According to Clarke, pilotage refers to “the art of taking a vessel from one place to another in sight of land and providing ships with safe passage onto rivers and harbours or through dangerous waters” (2016: 32). In the case of the Thames River, this is particularly important for our narrative because, according to Adams and Woodman, of the 210 miles flowing between its source of the Thames and the Nore, and with a sandbank at the mouth of Thames River, “only the lower 30 miles are navigable by sea-going vessels.” (2013: 35).
A seamark refers to an object that aids the navigation of mariners in avoiding shipwreck due to rocks, shoals, or sandbanks. Seamarks include “every kind of terrestrial object that might assist the mariner in his course. The spire of a church, the tower of a ruined castle, a windmill on a height, an isolated tree, or even a rock” were often used as seamarks (Clarke 2016: 20). Among these seamarks included buoys and beacons, the latter of which refer to a navigational aid, such as “poles set in the seabed, or on the seashore, with perhaps an old lantern affixed to the top” (Harris 1969: 153). According to Meade, lighthouses are a particular seamark that derive their name “from the fact that the illumination was in the first place exposed from an ordinary house or from some even less pretentious building. Many of the earlier shore lights were simply the usual dwellings with a lantern or some other appliance placed on the roof” (1949: 101–102).
Though the nature of our contribution to this literature is primarily empirical, we wish to raise and address two potential theoretical objections regarding the applicability of the dynamics of interventionism framework to explain the nationalization of the lighthouse market.
First, one might argue that our application of the Austrian account of interventionism does not hold, since Mises’s original rendition, and those extending his framework, such as Kirzner, had assumed benevolence among the proponents of intervention. However, the crucial component in Austrian political economy, and the theoretical account of interventionism in general, is the epistemic assumption of radical ignorance, or as Boettke, Leeson, and Coyne put it, “structural ignorance” (2007). In other words, though proponents of intervention may seek regulation for their own private interests, the contextual knowledge required to anticipate the consequences of such regulation are precluded to them, since outside the institutional context of private property rights and market prices, such beneficiaries are not full residual claimants of profit and loss signals available only in the entrepreneurial market process. Therefore, as Ikeda points out, “the assumption of public spiritedness is not an indispensable or even a defining component of [Austrian political economy]” (2005: 47). The “unintended consequences that arise from radical ignorance, and not public spiritedness per se, are the key to understanding discrepancies between (open or concealed) intentions and actual outcomes” (Ikeda 2005: 48). Thus, relaxing the benevolence assumption entails “little or no loss of methodological integrity” (Ikeda 2005: 49).
Second, one might object that Mises did not consider nationalization in the theoretical framework of interventionism, since he wrote that “[p]artial socialization of the means of production is no intervention in our sense. The concept of intervention assumes that private property is not abolished, but that it still exists in substance rather than merely in name.” For example, “[n]ationalization of a railroad constitutes no intervention” (1926 [2011]: 4). However, our application of the dynamics of interventionism, as Lavoie has pointed out, shows that the “whole thrust of Mises’s economic writings seems more consistent with the inclusion of nationalization of industries within the category of intervention into the market order” (1982: 173).
Other sources point this fact of port collection lighthouse service fees, known as “light dues,” out as well. For example, Meade states the following: “It has frequently been asked how the lighthouses and the various systems of light-vessels, buoys, and becomes were paid for…In the early days, when the business was in many places in private hands, the means of collecting dues had of course to be carried out by an agent at a seaport. Once could not expect the lighthouse-keepers to go out on a boat and collect a toll as in the case of a turnpike road on land. It meant that the owners of lighthouses would have the additional expense of paying their agents, which naturally ultimately fell upon the shipman (1949: 114).
More recently, James Taylor has similarly written that light dues “were collected by private agents working on behalf of the lighthouse owner, or sometimes by customs officials working for a fee, from the masters of ships when they reached harbor: it was known from the route the ship took which lights it had made use of” (2001: 752–753).
Ballastage refers to “a toll paid for the privilege of taking ballast” (Meade 1949: 173). The purpose of providing ballast, i.e. additional weight, at the bottom of an empty ship is to stabilize it. For example, Trinity House supplied ballast in the form of gravel or sand dredged from the Thames, which in turn was intended to keep it navigable in shallow parts of the river, such as sandbanks (Harris 1969: 127).
Tran (2003) notes that pilots had to be members of Trinity House, but it was possible – as late as 1808 – to be a pilot without being a member of the Trinity House in London. As will be seen below, there were some exceptions that created pockets of competition which Trinity House fought hard to quash. However, these were minor exceptions and Tran (2003) is correct – from the standpoint of economic logic – to consider Trinity House’s regulatory power as the equivalent of a monopoly. For the all-important Thames River, the 1604 charter granted by King James I made pilotage compulsory and gave Trinity House the exclusive right to license pilots.
According to the secondary source literature on the history of Trinity House, due to the Great Fire of London in 1666, and particularly another fire at Trinity House in 1714 (Meade 1949: 5; Ruddock 1950: 458; Tanner 1929: 573), many primary source documents were unfortunately destroyed. Records of many primary source documents prior to 1714, however, were fortunately recopied by Samuel Pepys, who was first made the Master of Trinity House on May 22nd, 1676 (Meade 1949: 52). Ruddock states that Pepys “had a number of the chief documents copied for the compilation of his projected history” (1950: 459). Although never recorded, the transcripts of documents which would have been used for this historical project are currently stored at the Pepys Library of Magdalene College, Cambridge, England (Harris 1969: 6).
Deptford is where Trinity House was located until 1660, at which time it moved to London.
Loadsman, or “lodesmanage,” was the vernacular used at the time for pilots, or pilotage, respectively.
As Boettke, Coyne, and Leeson argue, “Policies may in fact be adopted for very sensible political reasons that reflect political efficiency, but they can simultaneously deviate significantly from efficiency-enhancing economic policies that would be adopted if politics were able to operate on economic criteria” (2007: 138).
Incidentally, it is worth highlighting that pilotage as a substitute to the lighthouse, which historians such as Adams and Woodman (2013: 36) describe in terms that make it a perfect substitute, entail that the lighthouse may have been too hastily categorized as a public good.
As Adams and Woodman (emphasis added, 2013: 99) point out: “The monopoly on dredging and selling ballast by which Trinity House was originally supposed to raise funds to provide seamarks was, of all the Brethren’s activities, the most contentious.”
Nor is the word phari ever written. According to Stevenson (1959: 254), the term phari was not yet displaced by the word lighthouse at the time in which the act was written, the former term being derived from the ancient light tower constructed in 285 B.C., the Pharos of Alexandria, in Egypt (see Meade 1949: 101, fn. 1; Stevenson 1959: 8).
And this included the lightship at the Nore which had, by that time, passed into the hands of Trinity House. It is probably a vestige of Avery and Hamblin’s experiment as it was one of the last establishments that practiced price discrimination in 1832 (House of Commons 1834: 341). The other lighthouses were private lighthouses and their discrimination was based on increments of 100 tons.
The Eddystone was the first lighthouse recorded in modern history to be built on a rock exposed to the sea, located on the Eddystone reef which lies 9 miles off the south coast of England. As Stevenson states, “the Eddystone reef shared with the extensive sandbanks of the south-east coast of England the terrible record of wrecking ships most frequently” (1959: 113). Though a petition had been received in 1655 by the British Admiralty, which it passed on to Trinity House, the latter refrained from acting on such petition. It wasn’t until 1694, when Walter Whitfield received a patent from Trinity House that construction began (Stevenson 1959: 113–114). Completed in 1709, the Eddystone remained in operation until 1755 when it was destroyed by fire (Coase 1974: 366).
Modern lightships under the Trinity House system are no longer manned. According to Clarke (2016: 150), the majority of manned lightships were decommissioned in the 1970s and 1980s. The last manned lightship in England, the Inner Dowsing, was decommissioned in 1991.
Clarke reports that the ancient origins of modern lightships can be traced back to ancient Roman galleys, known as liburnae, used by the Roman navy for raids, but also provided lighted beacons to deter pirates. As he further states, these “vessels carried on their mastheads iron baskets in which fire was built serving as a signal when a friendly vessel was sighted.” However, their function as lightships were limited as ancient sailors tried not to sail at night (Clarke 2016: 38). It is unclear whether Avery or Hamblin were aware of their historical existence.
Adams and Woodman (2013: 87) mention that Hamblin attempted to open another lightship (date undisclosed) with a Yarmouth pilot at the Cockle Gat but that Trinity House turned them down, preferring the existing lighthouse.
A third way in which ideological change manifests itself as a by-product of the dynamics of interventionism is what Ikeda refers to as the “self-fulfillment thesis.” Briefly stated, it postulates that “an unintended consequence of an intervention that is based on a spurious rationale could be to render that rationale conceptually coherent, and in doing so provide a stronger basis for further intervention” (2005: 38).
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Acknowledgements
We are very grateful to Peter Boettke, Christopher Coyne, Caleb Fuller, and Ennio Piano for their helpful comments and feedback in writing this paper. We thank two anonymous referees for their valuable feedback and comments, which greatly improved our paper. We also thank the archivists at the Trinity House Corporation for providing us with primary source material for this project. Any remaining errors are entirely our own.
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Candela, R.A., Geloso, V.J. The Lighthouse Debate and the Dynamics of Interventionism. Rev Austrian Econ 33, 289–314 (2020). https://doi.org/10.1007/s11138-018-0422-7
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DOI: https://doi.org/10.1007/s11138-018-0422-7