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Cambridge Journal of Economics Advance Access originally published online on October 31, 2005
Cambridge Journal of Economics 2006 30(3):389-402; doi:10.1093/cje/bei068
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© The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Article

The Coasean analysis of lighthouse financing: myths and realities

Elodie Bertrand*

* LEMMA, University of Littoral Cote d'Opale

Address for correspondence: LEMMA, University of Littoral Cote d'Opale, 17 rue du Puits d'Amour, 62327 Boulogne sur mer cedex, France; email: Elodie.Bertrand{at}univ-littoral.fr

Abstract

In ‘The Lighthouse in Economics’ (Coase, R. H. Journal of Law and Economics, vol. 17, no. 2, 357–76, 1974), Coase reached the conclusion that in England there existed a relatively efficient privately financed lighthouse system, which would refute economists' traditional statements concerning the production of public goods. The purpose of this paper is to challenge his conclusion. We first show that, from a methodological and theoretical perspective, ‘The Lighthouse’ is consistent with ‘The Problem of Social Cost’ (Coase, R. H. Journal of Law and Economics, vol. 3, 1–44, 1960). Then, applying Coase's own method (historical case studies), we attempt to re-examine the respective roles and efficiencies of private initiative and government.

Key Words: Coase • Lighthouses • Public utilities • Externalities

JEL classifications: B25, B41, D62, H41.

Manuscript received May 19, 2003; final version received July 1, 2005.


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