Buoys and Beacons in Economics

Abstract

The debate over lighthouses has become a central feature of economic theory. It addresses the question of different assignments of property rights and what kind of institutional setting may be able to supply services characterized by limitations to exclude nonpayers and the potential for freeriding conducts. In a seminal work, Ronald Coase (1974) reported on the history of lighthouse provision in England and stressed the role of private investors and private funding for their building and operation. A debate ensued on whether the provision of lighthouse services could be qualified as “private” considering they were financed through “light dues” of a coercive nature. Van Zandt (1993) classifies the different institutional settings in five categories ranging from total private provision and financing to complete government supply. He and other authors claim there are no historical cases of private provision of financing with government enforcement of property and contract rights only. This article shows one such present case in San Isidro, a northern suburb of Buenos Aires. Its existence raises new issues to be considered.