Presentation given at the second national Swedish transport research conference. Discusses the existence of different organizational models for providing services in transport infrastructure generally seen as cases for public sector provision, such as lighthouses. The presentation relates to Coase's 1974 article on "The lighhouse in economics".

1. The lighthouse in economics –
a Swedish case
Björn Hasselgren, October 23, 2013
School of Architecture and the Built Environment

2. Research questions
• What was the core message in Coase’s classical 1974
article on the ”Lighthouse in Economcis”?
• How has Coase been countered?
• Is there a Swedish experience from organization of
lighthouses that differ from the standard ”market
failure” model?

3. Private or public good – or both?
Ear-marking
Coase
Organizational
efficiency
Full cost
coverage
Institutio
nal
Pigou
Welfare
optimizati
on
Neoclassical
General tax
revenue
Marginal cost
coverage

4. Coase’s conclusions
• Economists (Mill, Sidgwick, Pigou, Samuelson) have
drawn conclusions from a too simplified dichotomy
with private/public goods without proper basis in
empirics
• Coase supplied empirical examples of private sector
engagement in the core “public goods” sector, the
Trinity House (management body for light houses ni
the UK)
• Private engagement is likely to be more efficient and
open to the needs of the users than government
administration based on taxes
• Further studies should be made, but the
Samuelsonian “clean” example does not seems to
exist

5. Some of the critical voices – and
supporters
• Van Zandt (1993) argued that there were no clean
cases and that most of them were blurred and that
Coase was mistaken
• Barnett & Block (2007) argues that both were right
and wrong; there have been purely private examples
but mostly backed by governments
• Both seem to be focusing on the dichotomy public
private (excludability/free riders etc) not on the merit
as such of private vs public management and the
likely efficiency of these – ”the lighthouse presents a
setting of conflict among institutional arrangements” > entrepreneurial opportunity (Wagner, 2007)

6. A Swedish case
• Lindberg (2012) a number of cases of contracting out
of lighthouses – 17-18th century
• Lighhouses have been provided historically by
government and private operators through
concessions
• Nationalization of a relatively few privately run
lighthouses in 1839
• Dominating fee-funding from users
• Lindberg argues that Coase speaks in favour of the
free market, which seems wrong
• Also argues that Samuelson is wrong – not only
government

7. Examples from Sweden –
municipalities, Sundsvall 1901

8. Examples from Sweden – private 1900

9. Direktionen för segelsjöfartens
förbättrande på sjön Wänern, 1855
• 1851-55 five new lighthouses
• Fee funded according to government concession from
1813

10. Swedish 19-20th century lighthouses experience
• Predominantly government run – but fee funded
• A variety of organizational models
• Light-houses often connected to industries
• Coase seems to be fairly right - private or club
organization with support from government
regulation
• Openness to some experimentation
• More research necessary

11. Björn Hasselgren, PhD
KTH Royal Institute of Technology
Architecture and the Built Environment
+46-70-762 33 16
bjorn.hasselgren@abe.kth.se
www.kth.se/blogs/hasselgren
@HasselgrenB