The Market and the Lighthouse. Public Goods in Historical Perspective
|
|  Yüklə 151 Kb.
|
Lighthouse systems in practice: England and SwedenThe construction and maintenance of lighthouses has always demanded considerable sums of money. In England the privilege to collect dues from ships entering harbours had to have legal backing, and this came in the form of grants or licences from the crown, the parliament or Trinity House. The most important institution that governed lighthouse construction and accompanying due collection was Trinity House. Trinity House of Deptford Strond was a charitable organization, founded in 1514, which had evolved out of a medieval Guild of Mariners. Among its duties were to regulate pilotage and provide aid to old seamen and their families. During the first half of the 16th century, it was the Lord High Admiral’s exclusive responsibility to supply buoys, regulate beacons and seamarks and to collect funds for the maintenance of lighthouses. In 1566, these rights of supervision, maintenance and collection of dues were shared with Trinity House and after 1594, all Lord High Admiral’s rights were gradually transferred to Trinity House. After 1679 Trinity House was the sole issuer of patents regarding building and collection of light dues. Trinity House would get the patent from the Parliament, and then grant a lease to a lighthouse operator (or operate the lighthouse itself). Trinity House was, in Taylor’s words, “a private corporation, but performed a public role which would otherwise have had to be performed by a central government agency”.50 The charter of 1514, which was granted by Henry VIII, gave Trinity House the right to regulate pilotage, and in 1566 it was also given the right to provide and regulate seamarks.51 Early in the 17th century, Trinity House built its first own lighthouses (Caister and Loewstoft). The principle of collecting light dues in harbours is, however, of an older date, at least from 1261, when the Barons of the Cinque Port of Winchelsea obtained the right to collect such dues for the maintenance of the harbour light. This principle was to be used for centuries thereafter. Along side Trinity House, there also existed a number of private lighthouses. These private lighthouses had the legal backing through patents granted by the king’s Privy Council, the parliament or Trinity House. Those entrepreneurs willing to risk their money in lighthouse construction would arrange for the presentation of a petition signed by shippers, merchants and local administrators, desiring that the patent granters would issue a patent for a lighthouse. By the beginning of the 19th century all major ports in the United Kingdom employed collectors from Trinity House. In 1836, the Whig government reformed the lighthouse system of England. The private lighthouses were abolished and all lighthouse administration was then placed in the hands of Trinity House (although a private organization it performed a public role). However, no national lighthouse authority was created, because of the refusal of Scottish and Irish members of parliament to subject their lighthouse authorities under an English one.52 The first Swedish lighthouses were Nidingen, Falsterbo and Kullen, which as a result of peace agreements with Denmark 1645 and 1658 became Swedish since the land they were placed on also became Swedish. The Admiralty was authorised to act as a supervising authority in 1652; in 1803 a government body Förvaltningen av sjöärendena was formed and in 1872 the Royal Administration of Pilotage (Kungliga Lotsstyrelsen) became the government agency for pilotage and lighthouses.53 The financing of the Swedish lighthouse system had a peculiar structure. The Danish lighthouses had been financed out of the Sound Toll, a toll paid by ships entering and leaving the Baltic Sea. The peace agreement stated that the Danes must pay for the maintenance of these three former Danish lighthouses, something that the Danish government continued to do until 1857 when the Sound Toll was abolished through an international agreement. As additional funding for the lighthouses, the Swedish government imposed light dues, just like in England. The first lighthouse built and maintained in Sweden was Landsort, built by a Dutch merchant, who acquired a patent for him and his heirs for perpetuity.54 The erection of lighthouses in Sweden was usually initiated by a petition from shippers, merchants and local authorities to the Crown or parliament, where the petitioners explained the need for a lighthouse. Capital for the lighthouse was then granted by the state (Kungl. Maj:t). As far as I can tell, only Korsö and Landsort were financed by private capital. In return for building and maintaining these lighthouses, entrepreneurs were granted the right to collect light dues. Korsö was bought by the Crown in 1833 and Landsort in 1839 and thus all lighthouses along the coast were in government hands. Conflicts of interestCoase argued repeatedly that individuals embarked on lighthouse construction when the government (through Trinity House) did not. It must be noted, however, that this process of granting patents to private parties was accompanied by a number of issues that gave rise to conflicts of interests. The first recorded successful proposal for a private lighthouse in Britain in the 17th century seems to have been made in 1612 by a Hugh Bullock who wanted to build a lighthouse. The formulations in the patent of 1566, (that Trinity House was the sole authority to erect sea marks) implied that Trinity House had a monopoly to build lighthouses. The king in 1612, James I, did however not recognise Trinity House’s exclusive rights to build lighthouses.55 The infringement in Trinity House’s patents is of great importance in the understanding of how Coase came to the conclusion that “private” lighthouses provided the public goods in form of lighthouse services. Coase’s main point was to show that individuals embarked on lighthouse construction for their own financial gain. This would not have been possible unless sanctioned by the Crown, whose search for revenue infringed Trinity House’s privileges. Coase, drawing on Harris, came to the conclusion that “with the completion of Lowestoft, [Trinity House] rested content and did no more… Failure to respond to demands… shook confidence in the corporation; since there was a prospect of profit, it was tantamount to initing private speculators to intervene. They soon did so.”56 Coase emphasises that between 1610 and 1675, no lighthouses were erected by Trinity House and at least 10 were built by private individuals.57 Coase paints a picture of a slow moving government agency that obstructs all private initiatives in the profitable lighthouse market. As remarked by Bertrand, the reason why Trinity House was not building any lighthouses between 1610 and 1675 was not because the Brethren of Trinity House were sitting back content, but because the king refused to acknowledge Trinity House’s privilege. Before 1679, despite Trinity House’s privilege, the king granted patents to those he favoured or to those who offered the greatest sum of money.58 For example, in the 1610s, Erskin and Meldrum petitioned to erect a lighthouse at Winterton. Incidentally, Trinity House was discussing with the Lord Admiral to erect a lighthouse at the same place. Eventually, Trinity House was awarded the right by the Privy Council to erect a lighthouse from and to collect dues. Erskin and Meldrum protested, however, and the Privy Council ruled in their favour and gave them 1617 permission to build a lighthouse within a two mile radius from Winterton. Trinity House was restrained from building any lighthouse within this area.59 The king could thus appropriate a part of the monopoly income and Trinity House was unable to obtain those building authorisations for itself. Coase could perhaps have argued that the king had initiated some kind of auction system in order to maximize revenue, where the highest bidder was granted the right to erect the lighthouse. This, however, was not the point Coase wanted to make; instead he argued that Trinity House as a government agency failed, and the market corrected this government failure. Hague and Christ note the serious consequences of these conflicts of interests and the lack of uniform administrative structure. They argue that “[i]t was the machinations, favours and corruptions of the seventeenth-century court which created ideal conditions for privileges which became firmly entrenched that they resisted repeated attempts at reform in the nineteenth century.”60 The system of collection was highly irregular. The collection officials exacted payments for inward lights before the ship could be registered at the custom house. Outward lights should be paid for before the ships’ papers were cleared for them to sail. The dues levied by Trinity House varied from lighthouse to lighthouse, and depended on the class of the boat, the tonnage of the ship, the trade in which a ship was engaged and where it was bound. Foreign dues were double and rates differed between coasting and overseas trade.61 A reason of discontent was the practice of some light dues collectors to board ships bound from a foreign port which had only approached the English shore in order to seek shelter. The collector would interrogate the captain and demand light dues for his outward journey, for his future return and even sometimes retrospectively for past journeys. Should the captain hesitate to pay, he could be threatened with arrest. Light dues collectors often held a post in the Customs House and carried out both duties together. The commissions paid for collection of dues amounted usually around 20 percent.62 As mentioned, dues were collected at ports. Since it was known which route a ship had taken, and therefore which lighthouses it had made use of, it was possible to charge each shipper according to the exact rates for each lighthouse.63 One source of conflict in the nineteenth century was the high profits made by all lighthouse owners, including Trinity House. Table 1 shows the estimated net profits made by various lighthouses in Great Britain. Table 1. Net profits from all lighthouses in UK, 1832.
Source: Taylor, p. 760, Selected Committee… on lighthouses, (Parliamentary Papers, 1834, p xii). By placing the lighthouse administration under one body, it was hoped that light dues could be pressed. The remaining private lighthouses were bought from their owners for a total sum of almost £ 1,200,000 in 1836.64 In Sweden, one source of discontent was not excess profits but allegedly low quality in the lighthouse service. In Sweden, some lighthouses were run by salaried officials, but most lighthouses before 1800 were run by entrepreneurs who had acquired the right to maintain the lighthouse and collect light dues in an auction system. These auctions allocated the right to manage a lighthouse and collect dues for a limited number of years, usually five or ten years at a time. The winner of the auction was the entrepreneur that could run the lighthouse at lowest costs. Critics pointed out that since the light dues were fixed through government regulation, the only way an entrepreneur could make a profit was to lower the quality of the lighthouse service. Around 1800, the entrepreneur of Nidingen, Kullen and Falsterbo had given such a low offer that he only could afford to buy charcoal, not to cover any salaries to the staff and the entrepreneur became bankrupt. After 1810, the Crown was unable to find any entrepreneurs for several of the lighthouses since the risks associated with lighthouse management simply were too high, and the entrepreneurial system in Sweden withered away.65 Further, the nationalisation of the private lighthouses Landsort and Korsö were motivated by two things: the owners’ refusal to upgrade the lighthouse technology and the opinion that it was against the public interest that private interests had such a great influence on such a vital interest as the lighthouses.66 Contractual formsLighthouse erection and maintenance have always required large sums of money and the organizational forms for ownership and collection of dues have been complex and varied. Ancient lighthouses (e.g. the thirty something lighthouses of the Roman Empire) seem to have been funded by governments out of general revenue, which incidentally was the solution Samuelson implied was the optimal organizational form. In Europe, this form of financing lighthouses became common only in modern times.67 In England, there existed three basic institutional forms of lighthouse provision: charitable provision, government provision from user fees and private provision under government grant. Charitable lighthouses soon experienced the non-excludability aspect of public goods: in the early 1400s, a wealthy hermit, Richard Reedbarrow, built a lighthouse at Spurn Point on the east coast of England. Reedbarrow tried to provide his lighthouse service on a charitable basis, i.e., users felt free to donate a sum of money to him in return for that he had built a lighthouse. To provide lighthouse services for passing mariners was part of his religious obligations. Although he was wealthy he still needed a steady income to maintain the lighthouse, and since the voluntary contributions (not surprisingly) were way to meagre, he petitioned the king for a grant to collect dues from all ships entering the harbour.68 The vast majority of charitable lighthouses served local ports. Another common form of lighthouse provision at local port was for local governments to build lighthouses and collect standardised fees. Each port served by a lighthouse was able to maintain a local monopoly over lighthouse services.69 Charging shippers drawn to a local port is not what Coase is writing about. Lighthouses that guide ships into the port are used only by the people entering the port and exclusion on non-users and non-payers is therefore possible. Local ports are normally not public goods.70 Light dues in this case are simply bundled with other fees that a shipper pays for using the port and its services. Collection of the dues is done by asking for it when the ship docks. More problematic are lighthouses serving intercity routes, since ships might be passing many lights without reaching an agreement with the lighthouse owners. These lighthouses aim at keeping ships away from dangers. These services were organized in a number of ways. The importance of private enterprise is illustrated by the construction in 1696 of arguably England’s’ most famous lighthouse, the Eddystone: “If the construction of lighthouses had been left solely to men with the public interest at heart, the Eddystone would have remained for a long time without a lighthouse. But the prospect of private gain once more reared its ugly head.”71 Bertrand claims that the private construction of the Eddystone led to insufficient quality (as a number of documented reparations might indicate) of the building because the lack of regulations.72 One may doubt, however, that the government could have build better lighthouses.73 Rather, the construction of the Eddystone lighthouse illustrates the fundamental principle of the private provision of lighthouse services: risk willing entrepreneurs were granted patents (from Trinity House in this case) to build lighthouses and collect dues for a number of years (99 years in the case of the Eddystone patent of 1709). This mode of provision dominated the English system until the early 1800s, and in Sweden, as mentioned, at least two lighthouses had this institutional form.74 Under this institutional form, the entrepreneur would petition a patent granting authority for a patent to build and maintain a lighthouse. In England, not all patents included a clause that the lighthouse keeper had the right to demand light dues from shippers. In some cases, the entrepreneur had promised to erect and maintain the lighthouse with the help of voluntary contributions only. For example, in 1619 John Killigrew, belonging to an infamous family of smugglers, obtained a patent from James I to build a lighthouse and was given the permission to receive any voluntary contributions for its upkeep. When the tower was completed Killigrew began to lament that no voluntary contributions were coming in. Despite some attempts to persuade the authorities that his lighthouse was a help to mariners, he was not allowed to raise light dues and he extinguished his light in 1624.75 Apparently, the dues payment had to be made compulsory for their collection to be profitable, and that it was difficult to obtain payment for private lighthouse services, just as argued by the economists criticized by Coase. The English patents had three elements. First, it granted the entrepreneur the exclusive right to build and maintain a lighthouse for a specific area for a term of years. In exchange for this right, the entrepreneur paid a fixed annual rent, and the residual was the entrepreneurs to keep. The patents usually forbade any competitors to erect competing lighthouses in the vicinity of the lighthouse. Patents usually ran more than twenty years, although it was not uncommon that patents ran for perpetuity.76 If a private party could or would not renew a patent, it could be sold to another private party, or Trinity House might take over it.77 Second, the patents fixed the amount a lighthouse operator was entitled to charge ships that had (presumably) benefited from the service. Third, and crucial to Coase’s claim that the lighthouses were “private”, is that the patent holder had the right to invoke the power of the Crown if the shippers did not pay this obligatory due. As emphasised by van Zandt, this was nothing but a tax on shipping. More often than not, the lighthouse collector also was a customs officer and carried out both duties together.78 Van Zandt claims that private entrepreneurs were more interested than salaried government employees in keeping track of the costs: As Coase points out, this last institutional form [private provision under royal grant] had the decided advantage of providing a decision maker who had a personal stake in controlling the costs of lighthouse services, an advantage usually missing when the government administers the provision of a good.79 Not only hade private entrepreneurs a personal stake in the costs of the lighthouse, the only variable they could control in order to raise revenues was to lower these costs. If this cost reduction was accompanied by a reduction of lighthouse quality, this would put ships in danger. The dominant contractual form in Sweden – entrepreneurs running the lighthouse for the lowest sum – encouraged not only cost control but also quality deterioration. The transition from “private” to “public” provision of lighthouse servicesCoase argues that the nationalisation of the British lighthouse system was motivated by an erroneous belief that this would lead to lower light dues. Taylor argues that the nationalization was based on an ideology in leading government circles, where “certain resources should be excluded from the realm of private property by the state, and that private profit made at the expense of the public interest was morally wrong”.80 Further, “even in an industrializing, expanding economy, private profit was not always seen as desirable: some services, it was held, should be non-profit making”.81 In 1836, the British semi-private lighthouse system was reformed. Private property and surplus profits were removed and the lighthouse administration was placed under one authority, the Trinity House. The committee of 1834 suggests the following problems with the British lighthouse system: Your committee have learned with some surprise that the Lighthouse establishments have been conducted in the several parts of the United Kingdom under entirely different systems; different as regards the constitution of the Boards of management, different as regards the Rates or Amount of the Light Dues, and different in the principle on which they are levied. These establishments… instead of being conducted under the immediate superintendence of the Government, upon one uniform system… have been left to spring up, as it were by slow degrees, as the local wants required, often after disastrous losses at sea; and it may, perhaps, be considered as a matter of reproach to this country, that… a considerable portion of the establishments of Lighthouses have been made the means of heavily taxing the trade of the country, for the benefit of a few private individuals…82 The committee points to the ineffectiveness inherent in the complex system of ownership, management and dues characterising the British lighthouse system. Further, it claims that the dues were nothing but high taxes benefiting a few privileged individual, damaging the competitiveness of British merchant shipping. The committee’s report is summarized by Taylor as: “[P]rivate ownership of lights led to inefficiency in management, high collection costs, and wide variation in charges for lights”.83 Although Coase cites this report, he immediately minimises some of its conclusions and maintains “[T]here can be little doubt that the main reason why the consolidation of lighthouses under Trinity House received such strong support was that it was thought that it would lead to lower light dues”.84 The 1834 commission report stresses the irregularities of the lighthouse systems. By the beginning of the nineteenth century there were three types of private owner ship of lighthouses: those which had been leased by the Crown in the seventeenth century, those who had been leased in perpetuity by parliament in the same period, and those which had been leased by Trinity House in the eighteenth century. Further, Scottish and English lights were controlled by separate authorities. Taylor argues that the reason the British lighthouses were nationalised in the 1830s, was the contemporary conviction that “public interest was violated when profit was made by those who did not contribute to the trade of the country at the expense of those who did”.85 Similarly, the Swedish lighthouse system was put under one administrative body in the 1830s when the remaining private lighthouses were bought by the state. In the Swedish parliamentary discussions in the 1820s and 30s not one single voice argued that private lighthouses would be more efficient or cost saving than public ones. Shippers, merchants and parliament representatives thought it necessary that such an important service should be under a unified legal and administrative framework and that the management of lighthouses were the proper responsibility of government. |