Bryan Caplan  

A Story that Warms My Heart

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Economic Nationalism... Honest Measurement...

Think firemen provide a public good? At least in rural areas, think again:

MINNEAPOLIS – Carl Berg failed to pay a $25 annual fee for rural fire protection and, as a result, firefighters let his house burn to the ground last month near International Falls, Minn.

Along with his daughter and a grandson, Berg escaped the fire.

"I lost everything else," he said. "Stand and watch it burn was all I could do. . . . They should have put the thing out, but they didn't."

Some area residents are expressing outrage about a system that can let that happen – and about a dispute involving the International Falls Fire Department, Koochiching County and the Rural Fire Protection Association, which collects annual fees and pays the city for each fire it fights outside city limits.

"You either buy it or you don't have it," said Don Billig, the association's secretary.

One puzzle is why the fire department didn't offer to put it out for an "emergency fee." That way, you could either pay your $25 annual fee, or wait for a fire and pay $10,000. Don't have $10,000? You could give new meaning to the phrase "fire sale" and sell the fire department your house while it's still worth something.

I wonder if that would hold up in court. I think not.


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COMMENTS (15 to date)
Walter writes:

I've long thought that if a fire dept charged either a membership or a pay-per use fee then mortgage companies would require homeowners to pay the membership.

This is contingent on the fire dept's ability to put liens on properties after failure to pay for using firefighting services.

This kind of fire protection association used to be fairly common in rural areas.

It sounds like a libertarian dream, but most places have gone to tax-supported fire departments (or, as a libertarian might put it, forced membership in the fire protection association). As it turns out, lots of people weren't very happy with a system that would let their house burn down while the fire department watched--even if it was their own dumb fault.

So the membership systems tend to be politically unpopular (it doesn't take many stories like the one above before lots of people think the system is broken), and get replaced with tax-supported fire departments.

Tom West writes:

Most people don't want a single decision (or quite possibly an overlooked bill - I doubt at $25 you get a lot of reminder notices) to be able to destroy their lives. It's why Libertarianism is never going to be wildly popular.

One of the advantages of living in a wealthy society is that it *can* protect you from lots of stupid decisions. Day to day stress is massively lower when you think that only the most obviously bad decisions (step in front of that moving truck) will cause you catastrophe.

A strongly suspect that a majority (larger elsewhere but still a majority in the USA) *like* having a government that ensures their safety from the drastic consequences of seemingly trivial decisions. (I strongly suspect most Libertarians *can't* read the above story and say "that could have been me"...)

spencer writes:

This use to be common in urban areas as well.
If you look on the older building in London, Boston, New York, etc., you will see the insurance plaques on many buildings.

This is just another example of the libertaian belief that they have an untested model while in fact many of their theories were tested in the 1800s and found wanting.

Zac writes:

Yes Tom West, its a very trivial decision to not pay $25 to have fire protection on your house. As trivial a decision as choosing to open your eyes before crossing the street.

You're right, I can't read the story and think "that could have been me." Why? Because I am not stupid.

spencer writes:

At least in an urban area there is an externality here. I have an economic interest in my neighbor having fire protection because it impacts my property value and safety.

If my neighbor does not have fire protection it increases the risk that a fire on his property will spread to my property. Second, having a
burned out building in my neighborhood will damage my own property value.

So, how do I assure that my neighbor has fire protection. One, I could require everyone to
buy fire insurace. But this creates problems of enforcement. Moreover, if you have a limited number of private fire fighters you create an obligolophy-monopoly situation that in other industries generally lead to the industry being regulated. Two, I could make fire protection a public good as we have generally done.

Do libertarians have an alternative solution?

Chris writes:

I think, even if one accepts Tom West's hypothesis that it is just a forgotten bill, that there is a way out of that problem. Namely, the government could charge everyone for the fire service (like a tax would do), but offer the people the opportunity to "opt out" and receive cash. That kind of system when applied to 401(k) plans supposedly increases participation massively; one might suspect the same thing with fire protection. Then you would have a reasonable compromise, where people wouldn't be "forced" into a fire protection system if they really didn't want it, but a simple oversight wouldn't be a catastrophe.

And spencer, surely there is a differnce between a fire in a crowded urban area like London or New York that can (and almost certainly will) jump to the next building, and an isolated fire in a rural house with nothing near it, right? One involves massive externalities and the other virtually none, so I am frankly at a loss as to why you seem to think they represent the same economic system.

Chris writes:

Ah, I see spencer posted while I was typing. Sorry about that.

David Thomson writes:

"You're right, I can't read the story and think "that could have been me." Why? Because I am not stupid."

But you could be ill. Someone close to 100 years old can be feeble minded. The U.S, Post Office also may have not delivered your mail. It is outrageous that firemen allow a building to be burned to the ground. The tax could have been collected after the fire. There are times when we should cut each other some slack. These firemen are not pure libertarians---but jerks!

Bob Knaus writes:

In The Bahamas several services that we normally think of as public goods are provided by voluntary private associations. BASRA (Bahamas Air/Sea Rescue Association) does what it can for boats & planes because there is no coast guard. Garbage disposal is handled by a voluntary homeowner contribution on many cays. Ditto for any paving projects outside the village limits. Med-evac to Florida is vountarily funded. And of course firefighting is too.

Sure, you have some free riders, but most people who benefit pay. It works because the islands consist of rather small communities. If you can pay and don't, people look down on you.

Shame as an enforcement mechanism may not appeal to modern sensibilities, but it beats letting a house burn down. I think you'll find the former to be much more common than the latter in rural America even today.

In sum, a "Man Bites Dog" story.

liberty writes:

I don't see why a voluntary system plus the insurance company's desire to see you have fire insurance wouldn't combine to 99% protection. Add to that the fact that most fire companies would be willing to put charge you if you had failed to pay, and I don't see the story as being a very common occurance.

liberty writes:

There are also many volunteer fire departments all across the country - many may receive some help from government, but they don't receive a salary and they do collect donations to fund the department.

Ben Cremeens writes:

I live under an agreement like this.

It made sense to me, especially since we don't do that whole "fire insurance plaque by the barn" thing that was so popular for my grandparents.

The annual letters soliciting fees, however, are hilarious.

"Nice house. Hate for something to, y'know, happen to it. But fires start sometimes, don't they?"

Jon writes:

Suppose you don't pay the fire department bill and your neighbor's carelessness causes a small fire to start on your property. If the fire department lets the home burn to the ground -- does your neighbor get off because you did not prepay the firemen or does he may the full value of your property?

James writes:

Spencer writes,

"This is just another example of the libertaian belief that they have an untested model while in fact many of their theories were tested in the 1800s and found wanting."

This is just another example of the nonlibertarian belief that libertarian practices have been tried and failed. The reason why free market fire protection has largely disappeared is that big city unions and politicians saw municipal fire departments as a great source of revenue. Details here.

You might as well claim that the free market model for the delivery first class mail was found wanting and so the federal government made it illegal for private firms to compete with the post office.

But I don't mean to be narrow minded here. Perhaps in dense urban ares, there really is a big externality problem with fires spreading. So it seems that there is a cost-benefit tradeoff. Under the free market model, I can pay something inside of $100 per year to make sure that the fire department will take care of a nearby fire, or I can invest in a structure built so as to reduce the risk of a fire spreading. Under the statist model, I'm stuck paying the government price for whatever form of fire protection the government fire department wishes to provide.

This bad enough in the present, but the future of such a system is the real strike against it. When the time comes that technology allows for structures that are far more resistant to fires than present construction methods permit, the people running the state fire protection program won't say "Ok, you guys have made this public goods problem into a private goods problem. We'll get new jobs. Enjoy the tax cut." They'll stick around for as long as they possibly can.

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