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Keynes Fund

 

Summary of Project Results


 

The objective of this project was to produce the empirical foundations for a new analysis of the debates around the public vs. private provision of coastal lighting. All previous studies relied on only a handful of case studies to reach very general conclusions on the role of government in the provision of public goods, but new historical data on English and Welsh lighthouses has recently been created by Dunn, Alvarez and Shaw-Taylor (2020 and 2021) and now on French lighthouses by Litvine, Dunn and Shaw-Taylor (2021) both with the support of the Keynes Fund.

It is frequently assumed that nationalisation in 1836 led to a better service and lower taxes paid by ship owners (in light dues) but no one has been able to test the hypothesis. In order to offer a more rigorous and empirical conclusion to this debate it was necessary to create comparable geo-historical datasets that will make the analysis of network efficiency and the comparison of public vs. private provision possible. This is what this project did.

Coastal lighting has become a test case in the public goods literature. Using historical examples, Coase (1974) famously challenged the popular idea that lighthouses were non-excludable and non-rivalrous goods that only the state could provide. For J.S. Mill (1848), Sidgwick (1883), Pigou (1920) and Samuelson (1964), sea lighting could never be left to the market due to a peculiar free-rider problem: passing ships could not be forced to pay for the service when sailing miles out at sea. Government intervention was required to enforce user fees. Coase, however, claimed that all lighthouses in England were private and profit-making before their partial nationalisation in 1836 and operated without major government interventions, which we now know to be mistaken.

Following Coase (1974) much of the focus has been on the performance of private lighthouse providers and comparisons with what became the largest provider, Trinity House (e.g., Taylor 2001, Bertrand 2006). Van Zandt (1993) argued that private actors could provide public goods but only because the state ensured tolls were paid in port, making light provision a public-private system. Bertrand (2006) showed that all early systems in Europe combined private and public provision, and that Coase’s argument relied on an oversimplification of historical reality. Candela and Geloso (2017, 2018) added that including lightships into the broader lighthouse market implies not market failure, but government failure to allow private lighting services to flourish.

Coase’s arguments have generated a wide-ranging debate, extending to many countries, including the US (Mixon and Shaw Bridges 2018), Hong Kong (Lai 2008), Sweden (Lindberg 2013). Callais and Geloso (2020) recently added to the debate, with the finding that political considerations played a strong role in selecting where lighthouses would be built in the USA. Saito’s (2019) study of Japanese sea lighting shows private individuals in local harbours provided lights before nationalization in the 19th century. The consensus is that before the mid-19th century, private provision was normal (with state support).

Yet, despite this extensive literature on the efficiency of lighthouse provision, no one has yet has not done any rigorous cost-benefit analysis of the different models of provision looking at the entire networks (pre- vs. post-nationalisation, England and Wales’ very early development vs. Scotland’s and Ireland’s later lighthouse building, and Britain’s largely free-market driven model vs. France’s publicly funded model). In order to offer a more exhaustive and conclusive assessment of market failure in the provision of coastal lighting provision we created a series of new data:

  1. to provide a cost-benefit analysis of the efficiency of the lighting network in England and Wales

  2. to compare the efficiency of the spatial distribution of lights in the French (centralised and planed) vs. the British (market-driven) systems by measuring them against an optimal extension/location model.

  3. to estimate the induced productivity gains for the shipping industry based on extended dark-hour navigation, reduced frequency of wrecks/accidents along the coast

  4. to measure the comparative benefits to society of state vs. private provision of lighting by comparing the cost borne by shippers vs. the cost borne by the taxpayer and the resulting effects on safety at sea.

 

ANIMATION 2: combined networks for England and Wales, Scotland and France


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Dr Leigh Shaw-Taylor

 

Dr Leigh Shaw-Taylor is Senior Lecturer in eighteenth and nineteenth century British economic and social history at the Faculty of History, University of Cambridge. His primary research interests are in (i) long-run economic developments in England from the late medieval period down to the late nineteenth centuries with a particular focus on occupational structure; (ii) comparative work in the same field (iii) the development of agrarian capitalism and (iv) the contribution of transport improvements to the Industrial Revolution.

 

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