All beginning economics students hear a little story about lighthouses. It goes like this. Lighthouses are good. They save lives and property and make shipping cheaper. Nevertheless, if you let people decide what to do with their own money, they wouldn’t build lighthouses because they couldn’t keep other people from using them for free. This is known as the free rider problem. In an absolutely free market, people would refuse to take actions that would be beneficial to themselves and the whole society.
Governments can correct this problem by taxing people and providing goods and services that will enrich everyone. I have to point out that this argument originate about 6000 years after the invention of government. Before the people who were taxed had any say in their governments, intellectuals depended on brute force and the divine right of kings to justify the existence of the state. Before I go on, I would also like to point out that lighthouses were chosen because they were the very best argument that economists could come up with.
Whenever anyone tries to justify the existence of the state, he makes the strange assumption that people would act the same under the state as they would without it. The economics student is discouraged from asking a simple question, “What would people do without the state?” These lighthouses, then, are meant to blind us to the possibilities.
If we open our eyes a little, the light of the possible begins to shine. Perhaps we could have lighthouses without the state. Maybe the owners of harbors would build lighthouses to encourage shippers to use their facilities. If their harbors were near dangerous waters, they would be even more likely to build them. Large importers could agree among themselves to foot the cost of lighthouses. Insurance companies are also candidates for paying for lighthouses. They could increase their profits and secure goodwill from their customers. Shipping companies, or groups of shippers, might construct lighthouses that could be turned off when none of their ships were near the area. They might also use moveable beacons. They could be set up at certain sites known only to the crews of their own ships and be moved occasionally to thwart free riders.
Suppose that lighthouses actually do increase the wealth of nearly everyone. Is it impossible to think that people could voluntarily find a means to finance them? Yes, there would still be a few free riders, but if the payers actually increased their wealth with the investment, why should they fret about those who didn’t pay? Or perhaps some coalition of different parts of the shipping industry could agree to pay for the lighthouses and pass the expense on to the consumers.
What’s so terrible about free riding? Everyone acts all the time to increase his wealth without giving a thought to what his actions do to increase or decrease other people’s wealth. Besides, civilization itself is based on free riding on past achievements. Should we, who are so pampered, return to caves and invent fire? Even if we did, we would be riding on the knowledge that fire is useful, knowledge that we didn’t create.
Maybe no lighthouses would be built. I understand that they work best at night. Perhaps ships would simply avoid dangerous coastal waters at night and waste a little time. Would it even be necessary for ships to approach the land? Why not construct platforms off the coast in deeper waters and link them to the land with railroads?
My last suggestion is getting into the realm of science fiction, but who knows what could be? I know nothing about shipping and navigation and yet I have proposed many alternatives to the government-sponsored system of lighthouses. If people who really understood shipping were forced to deal with the problem they could come up with dozens of alternatives to government financed lighthouses. What if they didn’t? What if a lighthouse gap made shipping more expensive? People would be encouraged to invent unthought of safety features that might be cheaper and better than lighthouses. For all I know, there may be ways that are cheaper and better for carrying heavy cargo over the seas than traditional shipping.
There are people who build intricately detailed worlds around model trains. They are full of houses and trees, roads, people, and even pets, all to perfect scale. These people remind me of political thinkers. They imagine political systems and staff them with the correct number of lighthouses, schools, policemen, and grocery stores. Libertarians and anarchists sometimes create models of society in order to compete with these political utopias. Intelligent and imaginative people are more easily taken in by fortune tellers than others. They can fit the charlatans’ words to their own life more easily than dull people can. In the same way it’s tempting for thoughtful, intelligent libertarians to create alternate societies; but they should not think that they are describing reality. Libertarianism is not fortune telling; it is the political means for unleashing the possibilities in the world. Libertarians are too concerned with assuring people that things they don’t like won’t happen in a libertarian world. The truth is that many things we don’t like will occur without government; but many things we don’t like occur now. Anarchy and libertarianism should be about the possible.
What is the correct number of lighthouses? My suggestions were based on the idea that we now have the right number of lighthouses. Some social thinkers would prefer to end most international trade. They and others might answer “zero” to my lighthouse question. At the other extreme, we might construct a thousand lighthouses around Lake Erie alone. Such an undertaking might simplify navigation, but the government has decided that the expense would be too great for the benefits.
How many lighthouses is enough? The intellectuals of the state simply assume that the state is maintaining the correct number of lighthouses. They also assume that other systems would give us the wrong number. If they need evidence, they simply frame their questions in the context that their assumptions are right to begin with. They have no evidence but only the assertion that they know best how to spend other people’s money.
You may not understand my thinking on this point but I make the opposite assumption. I say that the right number of lighthouses is the number that would be built in economic anarchy. Economic anarchy delivers what real people actually want. When the state fails to mimic this reality closely enough, the people grumble and the state weakens.
Each light casts its shadow and so do the lighthouses of the government. In the state system, there are winners and losers. Without lighthouses, certain goods might be transported more cheaply by planes. Other material might be cheaper to buy from producers using overland transportation. But these victims of government lighthouses still have to pay their share of the cost.
The greatest shadow the state casts is the destruction of the possible. What might the people have done if they had retained their own money? The government takes a penny from 300,000,000 people, gives $1000 to 2500 people, and uses $500,000 to administer the program. No one particularly cares about a penny but the beneficiaries and administrators of the system will fight like demons to keep their subsidies and salaries. This is government’s wonderful conjuring trick. But pennies turn into dollars and dollars build up to thousands and we soon have totalitarianism. Soon everyone complains, but there’s no way back because no cares about a penny.
This is the problem in Russia today. They can’t get out of economic totalitarianism. What the Soviets did with the country’s wealth is not as important as what the people might have done with it. That is the shadow. We can only see the possibilities of what might have happened in Russia because there were freer economies in the world. We can not see what might have happened in America if it had economic anarchy.
Soviet life expectancy decreased in the 1980’s. If it only decreased one year for 300,000,000 people, that would still be the destruction of 300,000,000 life years, or the deaths of 10.000,000 36 year old people. It was a shadow genocide caused by the destruction of the possible. Some governments are worse than others, but they all cast shadows over what might have been. The pennies turn into into life years and still everyone clings to the state and its central planning because they fear what might be. They fear the shadow of the future.