The takeover of public goods provision: Lighthouses in the Early American Republic

If public provision of public goods is potentially suboptimal, then why do states still intervene to provide them? This question parallels the broader inquiry into whether state provision can be explained without resorting to justifications invoking the public interest, or suboptimal private provision. This paper shows that whether states take over the provision of public goods depends on the political rents that can be secured in markets beyond the one for the public good itself. This creates a redistribution that is wide enough to secure sufficient buy-in from key interests (sustaining an equilibrium). Using the federalization of American lighthouses in the Early Republic (1789–1815) as a case study makes clear that this shift was not merely administrative. Rather, federal control was part of a rent-seeking arrangement that embedded subtle, yet significant, protectionist measures for the domestic shipping industry, created a broader “hidden tariff” often overlooked in economic history, and expanded patronage opportunities for political machines at both the state and federal levels. This example can be extended to other key historical episodes with implications for our understanding of the causes and consequences of state takeovers of the provision of public goods.