Coase and Van Zandt on Lighthouses

Abstract

Mainstream economics maintains that ``public'' goods will not be provided (adequately) by free markets. Rather, if society is to have (efficient amounts of) public goods, government intervention is required. Traditionally, lighthouses, along with national defense, were held up as the quintessential examples of such public goods that require governmental intervention if they are to be provided (in optimal amounts). This changed, however, with Coase, who maintained and is widely credited with proving that, historically, the market (i.e., free enterprise) provided lighthouse services. Our thesis is that although Van Zandt showed Coase's claim to be mistaken on the basis of this valid criticism of Coase, Van Zandt erroneously concludes that private lighthouses were not historically operational. The truth of the matter, we aver, is that private lighthouses were indeed historically operational, and that although Van Zandt himself provides evidence for this claim, he fails to recognize it as such.