The oldest lighthouse in North America was the last one in the country to shift from manual to automated operations.
Egyptians built the earliest known lighthouses more than 2,000 years ago. For many centuries, however, bonfires on a beach were used to warn sailors of dangerous waters. Their light was not visible very far from shore. By elevating the light source – putting it atop a tower – sailors could see the warning light further from shore.
On 14 September 1716, the lighthouse keeper, George Worthylake, illuminated Boston Light for the first time, probably using candles and oil lamps. It was one of only 70 lighthouses in the world. And it was 60 feet tall.
According to the National Trust for Historic Preservation, “Colonial America’s first lighthouse was so far ahead of its time that nearly 50 years passed before another was constructed in the United States.”
In the 1700s, Boston was Britain’s busiest North American port. The harbor was rocky; the tides, shifty. The result was a treacherous entry that led to “the loss of many a fortune and sailors to its waters.”
The colonial government in Massachusetts built the lighthouse with monies generated from a tax on all ships that traveled in-and-out of the port. Little Brewster Island, its home, sits beyond the entrance to the harbor.
“Whereas the want of a lighthouse erected at the entrance to the harbor of Boston hath been a great discouragement to navigation by the loss of the lives and estates of several of his majesty’s subjects; for prevention thereof — Be it enacted…that there be a lighthouse erected at the charge of the Province, on the southernmost part of the Great Brewster, called Beacon Island, to be kept lighted from sun setting to sun rising.”
-Acts and Resolves Passed by the General Court (of Massachusetts) 1715-1716, Vol. 2, Ch. 4., Wright and Potter, Boston, 1874
As part of the Siege of Boston (April 1775 to March 1776), British troops destroyed the original lighthouse as a “last act of retribution upon leaving Boston.” In 1783, the new commonwealth of Massachusetts rebuilt Boston Light. Version two was 75 feet tall.
On 07 August 1789, President George Washington signed the ninth act of the U.S. Congress which directed that states turn their lighthouses over to the federal government. “Aids to navigation” became a charge of the U.S. Treasury. In 1790, Massachusetts transferred ownership of Boston Light to the new federal government.
As part of the 300th anniversary of the original lighthouse, the U.S. Coast Guard performed a $1.5 million facelift.
One of their startling discoveries on the 2-acre island located three miles out, according to Sally Snowman, the lighthouse’s 70th keeper and the first woman to hold the position:
“You could actually see they used the original foundation in the reconstruction. The granite stones had turned almost cherry pink, which happens when they’re put under a lot of stress, such as an explosion.”
In 1998, Boston Light became the last lighthouse in the country to transition to automatically operated lights. It still, however, has a lighthouse keeper.
Lighthouses and public goods
The first economists were philosophers. In 1848, John Stuart Mill, the English Member of Parliament, philosopher and economist, is credited with being the author of the concept of lighthouses as public goods in his Principles of Political Economy.
[I]t is a proper office of government to build and maintain lighthouses, establish buoys, &c. for the security of navigation: for since it is impossible that the ships at sea which are benefited by a lighthouse, should be made to pay a toll on the occasion of its use, no one would build lighthouses from motives of personal interest, unless indemnified and rewarded from a compulsory levy made by the state.
Thus lighthouses have been used as an example of a public good in economics courses for more than 150 years. (It’s where I learned what follows.)
Types of products or goods
Rival goods are those that cannot be used by two people at the same time. They can be durable (shoes or CDs) or nondurable (pizza). Consumers (buyers) are rivals who may create competition for purchasing the good.
Non-rival goods can be used by many people at the same time. Examples are television stations, an online newspaper or a streaming service like Spotify.
When goods are excludable, it is both possible and practical to require that a consumer pay for the good before using it. These are private, not public goods, and include paywalled websites.
When goods are non-excludable, it is either impossible or impractical to require payment for use. We don’t pay for the air we breathe, unless we are scuba diving. Therefore, anyone can enjoy the benefits, whether or not they’ve paid the owner for providing it. This is known as the free-rider problem.
Four classes of goods
- Private goods: excludable and rival.
Anything sold in a retail establishment. Key characteristic is the concept of scarcity. This is why we have “panic runs” on durable goods before major storms or other shocks to the system (e.g., early days of Covid-19).
- Common goods: non-excludable and rival.
Examples include fish in the ocean (if I catch one, you can’t). Common goods can suffer from the free-rider problem. In the fishing example, the free-rider issue is partially addressed with licensing.
- Public goods: non-excludable and non-rival.
Examples include public parks; the air we breathe; street lights; police, firemen and emergency services; public roads and highways; and national defense. Public goods can suffer from the free-rider problem as well. That’s why we require permits for large crowds in public spaces and why we have traffic jams. It might be why we pay a fee to enter a national park or drive on a toll road; however, I think the real reason is to force those who “use” a park or road to pay more for its upkeep than those who do not.
- Natural monopolies: excludable but non-rival.
Examples include cable television (the cable running down the street) or power companies. Infrastructure (but not only infrastructure.) It’s why there is only one set of power lines, one set of telephone lines, one set of gas lines, one set of water lines, and one cable for television in your neighborhood. The public is ill-served by infrastructure competition. Think cell service, for example: AT&T and Verizon use incompatible technology because of federal government decisions. Thus, two different sets of cell towers are peppered across the county. This duplicative infrastructure may provide profits for the two monopolies (separate issue from mobile devices and the actual service) but the duplication is not in the best interest of society. Standardization benefits consumers; fragmentation, sellers.
Remember, the original economists were philosophers. They lived at a time when most businesses were small and local. There was no global communication or banking systems. It is unlikely that they could have envisioned today’s global corporate conglomerates.
They might have had a hint, however, because The (British) East India Company (1600-1874) was the largest corporation in the world at its peak. With its royal charter, the East India Company was a government-sanctioned monopoly that foreshadowed current conglomerates.
You’re forgiven if you do not know that Adam Smith criticized exclusive stockholding corporations (state-granted monopolies) like the East India Company.
Smith simply did not believe that corporations should be left to their own devices: there is no underlying message anywhere in The Wealth of Nations about ‘letting business be business’. This is because in his framework corporations, all actors, either individual or collective, have a responsibility to those around them.
What tends to be depicted today as a totalising attack on all political interventions into the economic realm was actually a specific attack on the capture of political activity by certain economic actors.
[The Company] enjoyed a large amount of autonomy, which it used to seize for itself monopoly rights in the territories in which it was active. Knowing that this would help to line the pockets of its shareholders – which, incidentally, included a large proportion of the country’s MPs – it was happy to treat those territories as colonial possessions. It undertook asset stripping to the nth degree, relieving each colony of its resources and each colony’s people of their ability to be economically self-sufficient. It also adopted the classic colonialist’s strategy of imposing a form of martial law, denying local people their social and economic rights along the way. All of this was in the interests of repatriating balance of trade surpluses to England.
In 2011, The Economist published an essay about the Company:
Adam Smith denounced the Company as a bloodstained monopoly: “burdensome”, “useless” and responsible for grotesque massacres in Bengal.
He was not arguing that big business was inherently good for country or the world.
Some economists argue that public goods don’t really exist. Lighthouses should/could be converted to private goods.
One argument: whomever owns the docks (should they be private) could bump up the moorage fee to pay for the lighthouse. This substitutes a vertically-integrated profit-making enterprise for the publicly owned or managed lighthouse.
Others argue that public goods could be privatized if the owner generated income from advertising. Tell that to online newspapers, which are non-rival and non-excludable (by default). Online advertising dollars alone are insufficient to support most newsrooms.
What would be the incentive for any for-profit owners to keep lighthouse technology up-to-date? To not price-gouge? To operate sunset to sunrise? To keep lighthouses operational when fewer ships are moving goods (the past two years with Covid-19)?
Moreover, there would still be free-riders: all those ships passing miles off the coast that don’t enter a harbor but benefit from knowing where they are. Oh, wait. That would not have happened without government planning.
In 1792, France abolished private lighthouses and managed them as a public good. They commissioned August Fresnel to design and install a light that was “visible all the way to the horizon.”
In addition, they expanded the network of lighthouses beyond the port. In that way, “whenever a ship went out of sight of one lighthouse, it would already be entering into sight of another.”
The newly formed United States adopted the French system and technology. From historian Theresa Levitt‘s paper, “When Lighthouses became Public Goods: The Role of Technological Change” (Technology and Culture, January 2020:
… a coalition of sailors, scientists, and engineers demanded the creation of a lighthouse board modeled on the French Lighthouse Committee. This board effected a massive, tax-funded program of new building and updated technology, and by the end of 1859 the United States had more than twice as many lighthouses as the British, virtually all of them equipped with Fresnel lenses.
When lights simply marked harbors, one could charge every ship that entered the harbor. But when a light marked some empty, desolate stretch of coast, it was not so easy to charge whoever happened to pass by… A more detailed study of lighthouse administration supports the status of the lighthouse as a public good: the private market failed to either develop or invest in the technology necessary to establish the effective sea-coast lights now associated with the term “lighthouse.”
And this is where philosophy re-enters the picture.
Which world do you want to live in?
One where each lighthouse is owned by a business or one where only one or two businesses own all of them? Or one where there is government oversight and requirements, if not outright ownership?
One where businesses believe that they “have a responsibility to those around them” [Smith’s vision] or one where businesses place their stockholders (and maybe lobbyists) above all, if they even think about other publics [today’s world]?
Because that’s the philosophy behind the rhetoric. I know which I would choose.