The Political Economy of Lighthouses in Antebellum America

Abstract

Lighthouses are the quintessential public goods and thus constitute a key illustration of market failure in need of government remedy. Considerable debates have been waged over whether optimal private provision was historically possible. However, little to no attention has been devoted to how lighthouse systems operated once governments took charge of remedying the public goods problem. Using the fact that Antebellum America came close to following the ideal textbook solution to the provision of public goods, we assess how government allocated lighthouses before the Civil War. We find some evidence that the lighthouses were built according to commercial needs. However, we also find strong evidence that political considerations played a strong role in selecting where lighthouses would be built.