The end of an era for a public good - and economics textbooks?

For years, lighthouses have been given as a classic example of a public good – their beaming lights are non-rival, as one ship benefitting from them doesn’t diminish their usefulness to all other shipping, and non-excludable, as their benefits cannot be reserved only for those who have contributed to paying their costs. It would be almost impossible to avoid the free-rider problem (although enterprising students often try to come with suggestions for this). And it would be very difficult to charge each beneficiary for their use of the light, so there is little possibility of running them at a profit.

Many economics textbooks have illustrations to demonstrate this, some with delightful photographs of lighthouses and others with diagrams illustrating the non-rival and non-excludable nature of the beam of light. They have therefore been very useful to economists as well as to shipping, as good examples of pure public goods are very hard to find – but they are about to disappear.

The problem lies with increasing use of systems like GPS technology – an example of dynamic efficiency – as even smaller vessels now are equipped with satellite navigation systems which may make the lighthouse unnecessary.

There are mixed opinions about this – suggestions that the technology may not be completely reliable so the light is still necessary vie with suggestions that lighthouses now have more value as tourist attractions than as aids to shipping, so it is down to Trinity House, the owners of the five remaining lighthouses around the UK, to decide whether the value of the marginal social benefit provided by the light is greater than the cost of maintaining it.

This report contains a reference to the Happisburgh Lighthouse, which was sold off by Trinity House some years ago and is operated privately. At first sight this seems to undermine the ‘public good’ definition which suggests that the market will not provide lighthouses because there is no profit to be gained from doing so – but further investigation shows that this lighthouse, which marks safe passage around the southern end of the treacherous Haisborogh Sands in East Anglia, was saved as a working light by the local community, it is maintained and operated entirely by voluntary contributions (lots of information about how that was achieved on the website here). So that part of the economics textbooks, at least, is not under threat.