When Firefighters Don’t Fight
Recently, a flaming trashcan ignited a house in Tennessee. Local authorities were notified and a crew of firefighters rushed to the scene to put out the fire just in time.
Wait a minute. That’s not at all what happened. In Obion County, firefighters are not on-call to the community at large. Instead, the right to a fireman is only guaranteed to those who pay an annual $75 fire protection fee before their property lights up. When this house (belonging to homeowners who had not paid the fee) caught fire, firefighters refused to come to the rescue. They ignored the family’s begging, only arriving at the scene when the fire jumped to a neighbor’s house (who had, in fact, paid for protection). Still, not a drop of water was wasted on the first house. Firefighters merely stood and watched as the house dissolved into ash.
This problem is related to the question of bailing out people with bad mortgages. Should we help those who took o mortgages that they could not afford? Would it encourage them in the future to keep on being reckless?
Or we can ask a more general question — should we actually let people decide whether they’d like to pay the advance protection fee, or is there something ultimately flawed about letting people decide for themselves? Very few of us think that we will be the ones in need of fire protection, and because we don’t foresee the consequences of not paying, we might not be sufficiently prepared for a potential disaster. And maybe we shouldn’t have to make that difficult decision ourselves.
The Honest Truth About Dishonesty: How We Lie to Everyone - Especially Ourselves
There is an alternative. Put out the fire and then have the owner of the house pay the fire department. The price charged should be higher than the cost of the fire department and lower than the value of the house so that everybody benefits from putting out the fire. This way both the home is saved and the firefighters get to do what they would have done if it would have not have been the financial manager telling them what (not) to do.
@Anton:
This. Honestly, if they’re going to act like ruthless, pitless “no freebies on the free market” ideologues, they might as well have the good business sense to do the job they’re on-site and equipped to do and THEN just charge an exorbitant fee for it. Any arguments about “discouraging bad behaviour” also apply because if they suddenly have to pay $3000 or more to save their house instead of the $75 bucks a month, THAT WILL HAVE A DETERRENT EFFECT.
It’s ironic how an incident about government failing to assist a person is somehow used to illustrate that companies in the free-market would be equally unethical and heartless.
Only a government bureaucracy would refuse to put the fire out even for a premium fee (as the homeowner offered) to make up for the unpaid insurance.
Rural-Metro is East Tennessee does just that.
“Homeowners living in most of the county where Rural/Metro serves are asked to pay for yearly fire protection coverage.
The fee is determined by the size of the home.
For example, a home that is between 1,500 and 1,999 square feet will cost $251 each year.
A homeowner who does not subscribe to Rural/Metro will be charged $1,200 dollars an hour per fire truck if their home is on fire.”
http://www.wate.com/Global/story.asp?S=13281135
I hate to admit it, but it seems Julien Couvreur is right. The Obion County firefighters who let the house burn were employees of nearby cities. A nearby private organization would have saved the house for a fee. However, as you can see from the attached article, that can also cause some problems (ie a $19,000 service fee not covered by insurance).
This seems like the best middle ground on this particular issue.
Anton,
As a physician I can tell you that will not work. I am obligated to care for patients that arrive in the Emergency Room who need surgical care but have no insurance or form of payment. Countless patients get life saving surgery performed by myself (and countless surgeons around the country.)
When the patient recovers and comes back to the office for followup, over 90% never pay any portion of my bill for services provided.
Ron:
I don’t think you can extrapolate the cause of a serious problem the medical care system faces to fire protection services. It seems very apples and oranges to me. The services are different in many ways.
The frequency of service for customers is different. People get sick frequently, but very rarely have their houses burn down.
A large portion of fire department funding is spent on idle time. Doctors (as I am led to believe) have very little idle time.
The cost of deploying a truck is probably relatively low compared to maintenance cost. I’m not sure the ratio of maintenance/equipment cost to the cost of providing service in the medical field, but I bet it’s not as low as in fire protection.
Medical bills can easily mount into tens or hundreds of thousands of dollars quickly. $15,000-$20,000 seems to cover the cost of putting out a fire according to Rural-Metro’s pricing in my area and my friends who are fire-fighters.
I’m not sure the comparison is valid.
As a physician, do you take in to account the unisured that do pay their bills, where as medicare and medicaid receipts get a hugely discounted bill, either because you as a MD are only going to get what medicaid gives you, and then you have to bill the rest which never happens. Uninsured generally don’t get a discount so they generally pay more where the others as stated above pay much less or nothing at all for the same service and generally the uninsured are tax paying citizens that probably need medicaid but don’t qualify. Just like your opinion, this is my opinion unless you can come up with factual studies that say 90% of uninsured don’t pay their Dr. bills.
I have never understood the hero worship revolving around fire fighters. If we want to worship someone who does a dangerous job that provides a public service, we should look to garbage collectors and late night convenience store clerks, who face much higher risk for much less reward. I suppose it is admirable that firefighters prepare for entering dangerous situations, and that is to be admired. But mostly they sit around doing nothing in a field that generates HUGE amounts of unquestioned revenue. Same for police. They get way too much respect for what they “do”.
Firefighters, by the way, started out in the 19th century by showing up at fires and making low ball offers to buy the house or business. If the owner refused the lowball offers they would let the building burn, and lower the offer until the owner consented… or just let the building burn. The modern public departments are a vast improvement, we still spend a HUGE amount of money to have a bunch of weightlifters sit around eating chili and snapping each others’ asses with towels.
Saying that today’s fire departments is an improvement is simplistic.
A number of things indicate that monopolistic fire departments are behaving like any monopoly: increased cost and decreased quality.
“Modern building materials are relatively fire-proof, while clothing and other fabrics are flame-retardant. Municipal codes increasingly require sprinkler systems, smoke detectors and other devices to reduce the incidence and costs of fire. So today’s fireman has much less to do.4 The number of home and building fires has plunged 40 percent in the past two decades.
With fewer fires to fight, one would expect to find fewer fire-fighters—in a private firm, anyway. But not in a public agency. Despite the 40-percent decline in fires, in the past twenty years the number of paid city fire-fighters has increased by 20 percent. Only in government firms does employment go up as demand and output decline.
Swelling the paid union ranks as fires decrease does create a problem for firemen, though. Taxpayers are unlikely to support budget increases for fire departments if they see firemen lolling about the firehouse. So cities have created new, highly visible jobs for their firemen. The Wall Street Journal reported recently, “In Los Angeles, Chicago and Miami, for example, 90% of the emergency calls to firehouses are to accompany ambulances to the scene of auto accidents and other medical emergencies. [...]“”
excerpted from http://www.econlib.org/library/Columns/Mcchesneyfire.html
There is something fundamentally wrong, morally I guess, with the picture of firefighters standing idle while a building goes up in flame. Anton’s solution seems to me very applicable and certainly more moral.
In Israel, car insurance covering bodily damages is mandatory, and yet the state assumes that sometimes the car will be un-insured, and has set up an insurance fund (karnit) for that purpose, to care for passengers and even the driver. There are certain things where free citizen choice should definitely be limited.
Consequences… we need people to learn to think through consequences of actions… Consequences of bail out = reward risky behaviour; consequence of no bail out = homeless kids who suffer even though they didn’t take the original risk… Catch 22…
I think you’re forgetting the obvious solution. The approach that most cities take is to setup a fire department that is paid for and serves everyone.
Isn’t this exactly how insurance companies began? In London, houses that had paid insurance displayed the sign of their insurance company, and firefighters employed by that company would put out the fires of their policy-holders only.
Nudge by Richard Thaler explores this topic in great detail. He discusses why we make the choices we do (even referencing some of Mr. Ariely’s work) as well as the ethical dilemmas that arise when designing Choice Systems.
This looks just like what you would expect when a community refuses to tax itself. Welcome to Libertarian world!!
What is libertarian about a monopolistic government service, exactly?
What’s libertarian is the assumption that a community cannot come together to provide a service, for which all will be taxed, for the common good.
“What’s libertarian is the assumption that a community cannot come together to provide a service, for which all will be taxed, for the common good.”
If a community indeed comes together, there is no need for taxation (which is by definition coercive, ie. not voluntary).
In general, I caution against vague “common good” arguments, as they imply universal or unanimous individual preference scales. But such a claim has no foundation.
Basically, the issue is that only individuals have preferences and can make decisions, fundamentally. If all individuals agree, there is no need for taxation. And if they don’t, then how can you say it is common good? Pre-empting a possible answer (“they should vote”), I’ll refer you to Arrow’s impossibility theorem.
So the firefighter is the friend that was willing to move the couch but now with money from my neighbor?
So here we have the same “evil” that should move me to work. One offers money and the other no.
But in some sense a burning house should motivate the rescue. Here if you were for free you are a hero; a “toyota prius” driver. Why didn’t you do it?
I wonder what the insurance situation is in this community. When I take out homeowner’s insurance, they ask how many feet my house is from the fire hydrant, assuming that there’ll be a fire department to rush to that hydrant, hook up a hose, and put out a fire. Do people in this community pay more for homeowner’s insurance if they don’t pay the fire department fee? In any case, this is a perfect example of why taxes make sense (as long as you agree with the things your taxes are being spent on. Imagine a world where every road in every town is a toll road, where you can drive on the road only if you’d paid the fee up front.
An issue that I haven’t seen acknowledged is that it takes money just to keep fire fighting equipment at the ready to rush out and put a fire out.
If fire departments had to move to a pay by instance model, would there be enough fires often enough to make sure the fire engine still runs and didn’t need the routine maintenance that all mechanical equipment requires?
Which raises the question: would this motivate someone to go around and start fires to increase the fire departments profits?
Insurance is the most difficult decision for people to make especially in situations of debt burdens.
How many people would not have a prober meal on Sundays to be able to pay for a future event which may never happen? The mind often justifies this decision with it wouldn’t happen to me. Or I will pay again once I can afford it. What is the point at which we can truly afford to pay for the future which may never be?
This example is great and straight forward. But all of us make such decision constantly. Life insurance if not forced on you by mortgage lenders, retirement funds – I still have 30 years before retirement, medical insurance top, dental etc. – since I wasn’t sick for the last 5 years and take care of myself.
The question posted on incentives to the fire department of having more fires to get more pay is basically civic duty or not? Tax payers have no choice to pay their taxes and don’t see where the money goes. It may not be the most efficient system, as most politicians ensure waste, but it is still more effective, rather than giving people the choice to pay for basic civic services.
Wow. I had no idea about this sort of subscription to fire-services fee. I feel really bad for these people to lose their home and belongings. I realize that depending on where people live, fire fighters may never be able to save a home, and fire departments should never be at fault for that, they can only do their best. Where I live we have volunteer fire-fighters, people who drop everything to fight a fire in their community, with community trucks and known locations of water supplies. They are trained to do this, but are not paid. Fundraisers generate the cash required for the operations and maintenance of the equipment. Public safety is a passion for these individuals, and safety is the root of the matter, not what possessions are lost.
If you live in a city it’s pretty clear that there should be automatic opt’in.
If you live in some time that’s far from the next firestation there comes a point where it doesn’t make sense to pay the firestation to come to your rescue when the house burns.
In this case there are three tiers:
1) People next to the firestation have automatic opt’in via taxes that they pay to their city government.
2) People in some distance that the firestation defined can choose to pay 75$/per year for the services of the firestation.
3) People who live too far away probably can’t buy any services at all.
I don’t think that has to be a bad system.
As a sidenote when we talk about badly designed systems. It doesn’t make sense to have a submit button to be white on white background and put it left. Unless this is some experiment about how much you can discourage commenting with screwed up decision, please fix it.
I would have helped them regardless, lost my job and made a controversy that took the county office and higher up to task for the stupid bylaws. And then run for a seat with that as a platform. There should be a levy and fines if you do not pay for insurance and the firefighters need to come to your house.
In the case of the mortgages SOME homeowners and Some banks are in the wrong. It is difficult to take sides when you pay your mortgage and other’s are not. However, because some banks used illegal practices to offer loas, abused Hamp for their own purposes and not homeowners, rushed foreclosures, kicked out people who owned their homes, destroyed mortgage notes, didn’t follow procedure, forged documents and had Robo-signers sign legal papers of title, I am certainly more on the side of the homeowners being helped then the banks who are bleeding with another stimulous! (I am from Canada, we have legislation and Bank regulation still to protect us… Brilliant hmmmm?)
Julien, being you seem to be a Libertarian, I shudder to think what you would say if the homeowners had been stuck in the home and not rescued.
And there is plenty of proof some people just shouldn’t have kidsm and when they abuse that priveldge they are taken away. And we deny those who are incarcerated the right to vote so it can be taken away.
We as a society allow it because it is ‘for our own good’ just as it is to have House and fire Insurance.
hsvkitty says, “I shudder to think what you would say if the homeowners had been stuck in the home and not rescued.”
From this post and your recent one, you seem to assume that libertarians somehow don’t value life. Why?
Could you to explain what do you think would happen if fire departments were not run by government, to allow a productive discussion?
Also, please explain why you think that a government-run department would behave better than privately-owned one.
To answer your implicit question: I shudder about such a possibility too, but luckily I think that a free-market fire department would not let a person burn alive, unless it is literally infeasible to save that person.
Futher, even in the current incident, non-government fire fighter would have done a better job and saved this man’s house. It should make you pause that a government-owned and operated fire department let this happen.
There is ample evidence that before the municipalization of fire departments, voluntary fire fighters were very eager (sometimes even too much so) to save life and property, even absent insurance.
In the free-market, heroic and charitable people don’t simply vanish into thin air. Instead, they continue their laudable actions in a framework of voluntary cooperation (ie. no unprovoked aggression). The free-market does not change people into materialistic pigs, it just insists than *nobody* should use un-peaceful means (by default). Libertarians recognize that government does not fit that criteria.
“… it is ‘for our own good’”
Let’s be honest here, it is for what *other people* think is good for me.
If that is what I perceived as good for myself, then we would not be having a discussion.
I sympathize with your point-of-view (you’re trying to help, which I do too), but under what moral authority do you act and substitute your judgement to mine?
Do you get to do this as an individual deciding on behalf of an other individual (say, your neighbor)? No, this is generally not considered ethical.
Then how does the group (or a representative government) derive such an authority, which is generally not available to the individuals that compose it?
For an analogy, stealing is considered wrong, but somehow when it is done on massive scale by a group, it is supposed to be right?
The libertarian answer is that what is wrong for the individual remains wrong for the group, as the group has no special authority (only that delegated to it by its members).
Therefore, if I think my neighbor is making a mistake (but not involving aggression), I will try to educate and convince him. But I have no authority to force him otherwise, even if some friends and I personally think he is wrong.
hsvkitty, to stimulate your thinking on the topic, I would encourage you to look up the studies on emergency responses to Katrina, as an example.
It is interesting to see that private individuals and organizations (even “for-profit” companies such as Wal-Mart and Home Depot) provided effective relief, even as FEMA was famously lagging.
Again, my main point is that the unique feature of government is it’s ability to use coercion, but it is dubious how this actually improves society.
If most people are “good”, which I believe, then government is not needed and voluntary cooperation is desirable. If most people are “bad”, then government only makes things worse by making the use of force apparently legitimate (it’s like giving out loaded guns in the middle of a bar fight).
@Julien Couvreur
I learned some time ago that libertarians think of themselves first and foremost and within that context, allow other people in it if they served some purpose. I am happy you aren’t arguing he would deserve to die for not paying his $75
If the fire Dept was run independently, then those who run it might be tempted to start fires to ensure payment, or withold service, as was done in the past. And yes, whether there were people or animals inside.
Although you are right this was a local Government Department who withheld service, no is denying there ARE badly run Governments. It is very few who feel a need to abolish Government entirely and more who think that notion is foolhardy and that even a (somewhat) badly run Government is better then no Government.
You are right that the charitable and good people do not vanish and would continue to be so. I just wouldn’t agree there would be many Libertarians, given the credos your live by, among them. Sorry
The question is, if we do not let people make the decision themselves, who should make the decision?
Usually most arguments along these lines lead to a belief that a large organization, staffed with upper-middle-class white people, should make said decisions, because we all know that educated upper-middle-class white people never make irrational decisions.
Imagine if people in communities where fire response was guaranteed were given the option to give up their right to fire protection in exchange for $75. How would people respond to that offer? I would take the cash
@eatingalot.com Definitely an interesting idea. I wonder what would happen there.
For those that are interested, I had a longer response, but posted it to my blog instead: http://allyourcode.wordpress.com/2010/10/24/not-all-personal-liberties/
“Advance Protection Fee” sounds a bit mobsteresque…. Still, it tarnishes the image of the firefighter as the selfless hero, doesn’t it? You didn’t pay the protection, burn baby burn…. Here in Colorado we have wildfires where firefighters from many different jurisdictions work together to save homes, even those where the owner has made it difficult to fight the fires, in a way the antithesis of Olbion County, Tennessee. Most of us pay our protection fees as taxes and that seems to be a bit more accepted than firefighters refusing to fight a fire because of a missed $75 fee. Homo Economicus would certainly act as these firefighters did, burn baby burn but Homo Sapiens? A lot of people would make a lot of stupid decisions over that $75 (or smart, if they could calculate the expected cost of a home fire, depending on point of view). I, for one, would not have let the home burn and probably would have been fired, I’m certain the penalty for unauthorized use of department resources.
With a system like that, don’t firefighters get an incentive to actually start fires on people who don’t pay? This would create more motivation to pay the advance fee, thus adding to the resources of the firefighters. With such an intensive, any time the fire department starts running low on cash, all they have to do is to start a few fires. This would have the added advantage of knowing where the fire is (without having to be notified), enabling them to be present once the fire starts threatening other homes.
This man actually paid all of his taxes but did not pay the $75 fee. He deserved to have his house saved or attempted to be saved. One thing that gets past most of the msm in this story is:
“But last December, a county commission on which every member is a Republican voted to rescind a resolution passed years earlier that would have established a countywide fire department.”
Ayn Rand would be proud of these firefighters…
We have the same problem currently in NZ after the Canterbury Earthquake last month. People that own a house but don’t have house insurance (totally irresponsible if you ask me, and no idea how they can get a mortgage with out insurance) are being bailed out by the red cross, using funds from a public fundraising campaign for victims of the earthquake. I’m giving my donations to Pakistan in preference to my own country!
Community compulsion isn’t always bad. If everyone contributed to the fire service the $75 fee would probably be less than $20 and more people would be able to afford to pay the fee.
In Australia fire prevention costs are around $100 per annum per household. However, the cost of this fire prevention is reduced by donations and volunteer fire fighters.
The stupidity in Australia is that fire service levies are charged on house insurance policies. So the 60% of householders that insure their homes have to pay for fire prevention for the 40% that don’t.
I do not think it is a valid comparison. Fire is a well known commodity. You do not look back through the history of matches and say, “sometimes they burn like a roman candle and sometimes they just fizzle” like you do with the housing market.
I doubt these folks burned their hose down in order to defraud someone but lots of folks in the mortgage racket did just that.
The question is very valid. Where does government intervention stop being helpful and start being theft? I do not really know but these examples are not going to get us much closer to the answer.
Even if it’s not a perfect comparison, the two cases have certain similarities. I believe you’ll agree they both have to do with the role of government when “bad things” happen.
The mortgage situation is definitely very confusing, but I think the fire case is pretty straightforward. As this story illustrates, an opt-in system is dysfunctional. eatingalot.com brought up the idea of an opt-out system. I don’t really see how that solves the problems with the opt-in system. Unless your community’s population is very sparsely distributed, the fire department should serve everyone, and everyone should have to chip in.
“And maybe we shouldn’t have to make that difficult decision ourselves.”
I’m eagerly awaiting your post on how we should not let people vote, have kids, or choose a line of work.
Based on reading and listening to other work by Dr. Ariely, I think he is proposing that the fee should be opt-out rather than opt-in and the county should just add the fee to it’s taxes unless the homeowner sends in a waiver. In this story the home-owner claims he didn’t know about the option, which may or may not be true, but regardless it would be a non-issue in an opt-out system.
From what I read the owner knew exactly what he was doing. He had the same situation before, but the department didn’t deny service (only asked for 75$).
In any case opt-in or opt-out is a red herring. The problem is a coercive monopoly funded by taxes (mostly). Introducing variations on the fees and conditions is no more than a band-aid.
As far as I know there isn’t a law preventing private fire services in the area, therefore there is no coercive monopoly. Apparently firefighting in that area is not profitable. However, firefighting is (arguably, I suppose) good for the community as a safety-net to share the cost of risk. Sharing risk may cost more than bearing it alone, but it reduces risk of each individual involved. Julien, is it never ok for the government to provide a social service which would not otherwise be provided? What about a co-op? Is that permissible?
Tyler Givens says: “therefore there is no coercive monopoly.”
If you are an entrepreneur, does it make any sense to open a fire department in an area where people are already taxed to finance a government-run department?
There need not be a law explicitly forbidding private firefighters to create a monopolistic and anti-competitive situation by power of law. The “public” department is a monopoly because only government has taxing power.
“Apparently firefighting in that area is not profitable.”
It is unprofitable at any price? No, only at the price (“free” in some places, 75$ insurance fee in the present situation) which government can uniquely afford to charge (again due to a monopoly on taxation).
It is only un-profitable because the “public” department gets the majority of its funds not from customers, but from taxpayers.
As an analogy and historical comparison, when government opened tax-funded libraries, most or all private libraries had to close.
“Sharing risk may cost more than bearing it alone, but it reduces risk of each individual involved.”
This is correct. But there is no need to recourse to coercion and taxation to build economies of scale with co-ops and other pooling mechanisms (insurance businesses are a typical illustration).
“is it never ok for the government to provide a social service which would not otherwise be provided?”
Which service would not be otherwise provided?
Absent a specific example, I would answer that it is never ok, in principle. The reason is simply that if such a service can be provided at all, government will provide a worse service (monopoly) than a voluntary alternative (competitive forces) and yield overall less satisfaction for the people (coercion as opposed to voluntary cooperation). I have yet to see a service which breaks this pattern.
Re: Re: Tyler Givens says: “therefore there is no coercive monopoly.”
In this case, county residents are not taxed for fire protection. They MAY pay $75 annually for it from the city. As it stands, the county IS a free market without coercion. The city is not.
Re: “It is unprofitable at any price?”
I concede that if the city fire service nearby did not exist there would be more room for a private company to serve the whole area, city and county both. But apparently the private sector cannot beat $75 per person for service in that area.
Re: “Sharing risk…” “But there is no need to recourse to coercion and taxation”
Did the city fire department displace a private fire department? Or improve upon a volunteer service? Was it founded at the same time as the city? Maybe taxation was the only way to get quality, modern fire protection in the area. You cannot state with certainty that a government fire service was not needed for this community.
Re: “I have yet to see a service which breaks this pattern [of government being worse than private companies)”
Utility deregulation. Telephone service deregulation. Building code enforcement. Banking and finance. I almost wish the government would get into automobile repair. Many government service are terribly ineffective. So are many private ones.
Utility costs increased across the board in Texas under deregulation and there is still no (or very little) competition there.
Services that non-tradesmen don’t understand also leave consumers very vulnerable without government intervention. Builders, plumbers, and electricians all happy to leave you swinging once you sign the check. City inspectors help that. and before you say competitive forces will drive the bad ones out of business, I submit that that hasn’t happened and government is not propping any of them up.
It has become very obvious recently that the financial sector is full of people who do not exactly have their clients best interest in mind. Unfortunately, the government bailed them out. Their worst transgressions also seem to be the result of relaxed government regulation.
I guess I diverted somewhat when talking about regulation instead of actually providing the service, but I think that is still germane to this discussion.
Dang, my editing on that last post was bad. Sorry.
Tyler, thanks for the thoughtful reply. For some reason I can’t reply in the right position in the thread though… anyways…
“As it stands, the county IS a free market without coercion.”
Making a government service non-mandatory does not make a free-market situation, because the government service is anti-competitive by virtue of its taxation power. Yes, some of the funds are taxed from the city (and not the county), but such funds are coerced (no free-market competitor can get such an advantage).
“Maybe taxation was the only way to get quality, modern fire protection in the area. You cannot state with certainty that a government fire service was not needed for this community.”
Of course fire services are needed. Many things are needed. I need a new car, a new house, a vacation, a secretary, more time to study economics, better ping-pong skills, etc.
.
That’s the reality of scarcity. So saying something is “needed” doesn’t mean that it should be provided at any cost. Nothing has infinite value (if it did, we should stop all other activity immediately
Two problems to illustrate the point:
(1) I build a house on top of a mountain or the middle of the desert, should the taxpayers provide “quality modern fire protection”?
(2) Since the costs are really not born by the consumers of the service and government has very little built-in incentive to become more efficient, it is only natural for people to start building houses in bad spots.
David Friedman has a short chapter on the topic of “need” in his book/pdf, The machinery of freedom (available online). Great read which I recommend.
“Many government service are terribly ineffective. So are many private ones.”
Agreed, the development of a productive economy is a never-ending problem. But with private enterprise, competitive pressures at least push things in the right direction. Also, the profit-motive encourage competition and experimentation in the areas of most inefficiency first (ie. easy profit).
Note that profits are not important in my mind because I’m such a materialistic pigs (;-), but rather because they are the signal that value is created in society. People don’t pay more than what they perceive to get in exchange. The entrepreneur’s profit reveals a benefit to society and a productive use of resource (create more value out of available resources). Government unfortunately doesn’t work that way, instead it leads to endless debates about conflicting needs without offering a peaceful and effective way of resolving necessary trade-offs.
“Utility costs increased across the board in Texas under deregulation and there is still no (or very little) competition there.”
I don’t know the specifics of Texas, but at least in California (which I am a bit more aware of), the deregulation was famously not deregulation, but rather the dominant players picking the rules that favored them. In other words, it is common for politicians to use the label “deregulation” but mean something different (which helps their friends, surprise).
Also, I would caution you against naively looking at competition as “number of providers for a well-defined commodity” (kinda the standard economic textbook definition). You could have no competitor in a field and be very competitive (because if you start using monopolistic pricing, a new entrant will take over your marketshare).
“It has become very obvious recently that the financial sector is full of people who do not exactly have their clients best interest in mind.”
Conflicts of interest are a valid problem. Ariely was pointing out dentists recently.
Given that wishing that conflicts of interest simply disappear will not make it so, the question is: would you rather have a conflict of interest in an agent of the free-market or in a government official?
Given that the government official has unique coercive power, I would suggest that you choose the free-market actor. If conflict of interest is a major problem, then you or some innovative entrepreneur may find a solution, such as a warranty, some signal, some contractual guarantee. Of course, those have costs (in the general sense), but solving any problem does.
Sorry, my reply above was supposed to be attached to Julien
A fire has negative externalities to your house. Your house burning will put other houses and people in danger. In fact, you could imagine that if you want fire protection you pay $75 and if you don’t want it, you pay $30 to protect people form the damage your house costs.
Given:
a) the complexity of what fair costs for payers and not, the cross contamination of fire…
b) there are a few areas where I don’t care too much about efficiency and if I pay twice as much as some optimal solution, to have my house protected, I’d do it.
As such, I’d prefer this basic service be less than optimal but be simple and inclusive.
The problem here is that of local governments trying to pretend they’re not raising taxes by inventing extra-billing for services that *ought* to be communal responsibilities, paid for by means of income or property taxes. One wonders what the insurance claim by the second homeowner– the one who paid for fire protection– for fire, smoke and water damage, was worth in the end? Or how much that homeowner’s premiums will now rise because s/he’s actually made a claim? Making fire protection optional allows people to delude themselves that they’re saving money in the short term when they’re actually putting themselves and their neighbours at risk in the long term. I hope the politicians who dreamed this one up are given the electoral boot in short order. But the “I am not my brother’s keeper” ideology of rampant individualism in the money-worshipping USA will undoubtedly keep these fools in office.
This case actually wasn’t an extra fee. The fire departments are paid for by city taxes. The areas in the county which are outside city limits are not taxed for fire services. The city offers fire services to homeowners outside the city limits for a $75 fee. Citizens inside city limits, who pay city taxes, do not have to pay an extra fee.
We live outside a city limits. Counties still tax everyone, and our police and fire services are from the county.
Sorry, Tyler– my comment about bone-headed officialdom stands. There isn’t any level of goverment, city, county or otherwise, who should be permitted to get away with providing basic services to some citizens and denying them to others. Either the city provides fire services to everyone outside city limits, or to no one; and tosses the ball back to the county, where it belongs. None of this opt-in, opt-out, give-us-$75-and-we’ll-protect-you-but-not-your-neighbour craziness.
David:
I was referring specifically to this city/county. Yours may very well be different. Sorry I wasn’t clear about my specificity.
Alix:
You could use the same argument to say that New York should pay for Massachusetts’ fire protection. The city shouldn’t be held responsible for people or property outside the city. The county government is the one which has failed here and the city is offering to pick up the slack for $75 a head. The alternative is for the city to provide NO fire protection outside the county and only stay in city limits. I don’t think your suggestion of the city “toss[ing] the ball back to the county, where it belongs” is a viable course. Until the county got it’s affairs in order, the city would be without fire protection. Ideally, in my opinion, the city would have put out the fire and charged the residents directly for the service (e.g. $2000 per hour per truck) since they didn’t subscribe to the service. Also, the guys on the truck should have put out the fire as a matter of human decency. But, it is unfair to have one tax base give another a free-ride as a matter of policy.
A thought:
“Direct property loss due to fires is estimated at $8.6 billion annually.”
http://www.fema.gov/hazard/fire/index.shtm
Population, United States
307,006,550 – Jul 2009
Source: U.S. Census Bureau, Population Division
That makes fire protection worth roughly $28 per year on a national average.
Of course the $8.6 billion dollar figure is likely lower than it would be without fire departments. If you had a good economic analysis that said fire protection was over priced by $50-$100 annually, would you still buy it?
Property damages is only part of the picture. Let’s say your stuff is work $300k. Would you be willing to have it all destroyed for $300k + $1? Property damage analysis says you’re coming out ahead, but you’re probably not going to do it for very good reasons.
Perhaps the most important thing you’re not taking into account is the value of stability and peace of mind. People are better off when they don’t have to worry so much about all the bad things that could possibly happen. In this day and age, we basically take the fire dept for granted, but as as late as a hundred years ago, it was not uncommon for huge swaths of a city to burn to the ground. Just search for “great fire ” in Wikipedia (if you do that, remember that the Western US was not as developed). Today, whole cities catching on fire would be unheard of, modulo natural disasters.
I would take the $300K + $1 deal in a heart beat (assuming you’re talking replacement cost and not present value). I’d love to have a newer car/motorcycle/house/TV/wardrobe.
That said I’d pay for fire protection even if it was moderately “over-priced.” But my main incentive there is that my insurance doesn’t cover me if I don’t have fire protection. If I was covered regardless, I probably not pay if I took the time to do a rigorous analysis. However, I doubt I would invest the time to do a rigorous analysis and default to following the example of my neighbors or the advice of figures who seem to have authority and pay for the service.
Some people may value stability more or less than others.
What frightens me is your asking the question, “should we actually let people decide whether they’d like to pay the advance protection fee, or is there something ultimately flawed about letting people decide for themselves?” Only under Tyranny do people not have the opportunity to decide for themselves. The difference between Free & Despotic societies is the freedom to succeed … or in some cases to fail. Freedom is not a magic wand, rather a walking stick to aid us in moving through life. Take away the stick, & Everyone falls.
While I understand and appreciate your sentiment, I think you’re applying one general principle and ignoring others.
“do no harm”. By not protecting your home there is are real negative consequences to your neighbors. Presumably you wouldn’t think your notion of “freedom” should allow your neighbor to build nuclear bombs, in dangering your neighbors. The freedom to be irresponsible must be balanced by the potential harm to others.
I have to say, I avoid most online commentaries, as they are vitriolic and full of ignorance. This discussion, however, is one of the most thoughtful and illuminating I have come across. I thank you all for contributing dialogue of the highest caliber on a particularly difficult topic. Kudos!
According to Plutarch, the Roman Marcus Licinius Crassus (born circa 115 BCE) acquired an enormous fortune through “fire and rapine.” Crassus took advantage of the fact that Rome had no fire department, and filled the void. He created his own brigade which would rush to burning buildings at the first alarm. Upon arrival, however, Crassus’ fire fighters did nothing until he had negotiated the price of their services with the (burning) property’s owner. If a satisfactory price was not reached, his men simply let the structure burn. Usually, once it was gone, Crassus would offer to buy the real estate. There were rumors that when business was slow, Crassus’ men would set the fires themselves…beware perverse incentives!
The question focuses on whether some forms of state action should be paid for out of taxation as opposed to voluntary assessments. The question is whether the Policy Powers of the state, which include the health and welfare protections (police, fire, safety) should be part of the mandatory obligations of citizend to fund through taxation or a voluntary “opt-in” provision. The action of Obion County specially assessing fire service is incompatible with the health and welfare duty of the state. The opt-out invites individuals to “self-insure” by creating private fire departments or risking the lives and property of their neighbors. The reality is that the administrative budget authority were effecting false economy through the “opt-in” process of fire assessment. What is next, pay per call police and pay per illness health departments?
This is a very interesting way to look at this. Losing your home, whether you could afford it or not in the long run, must be like having to watch it burn to ash. People have different talents and weaknesses. No one person can possibly assess it ALL and make rational choices. More frequently than many of us would like to admit, our choices need to be limited for our greater good. I think the issue lies in who makes the decisions, how frequently are they assessed and reassessed for their effectiveness, what is the process, can the process be redesigned, how quickly can they be changed? Furthermore, now especially, trust is so damaged. A certain level of humbleness is also missing. Instead of everyone having THE answer, we must start with not knowing because with so many variables, this is closer to the truth. We are all responsible for the mistakes that have been made, the consequences are painful for many and we don’t currently have a solution. Now what?
An interesting idea, but I think we all know this analogy doesn’t hold up.
-Tim
you kind of do pay per health illness at clinics don’t you if you don’t have insurance? volunteer fire services being the opposite on the other end of the tale. 35 bucks for a flu shot 100 bucks for a shrink visit 150 if they prescribe, 350 for a physical. 20 for blood tests 30 to administer x 110 for x itself.
sounds very impetuous to me personally. what kind of heathen would just let some person’s house burn down over 75 bucks? I’d fire the fire fighters, but then I’m not a fire chief. At the same time our village left a notice up saying it had expended money for pest control in the wetlands surrounding our subdivision. no one came all summer except a bunch of people mowing lawns and blowing the 4 leaves on the street from trees that are barely grown yet, and certainly didn’t drop any leaves in mid July. I’m completely unsurprised by this news.
btw bad mortgages paying extra for fire protection and letting it burn equals getting shot for mafia blockbusting. 75 pieces of paper or even 75000 pieces of paper should never equal someone geting burnt out of their house. that’s a violation of the fair debt collection act, double taxation —i mean if a city can’t afford to provide basic services do they allow for it to be recognized as such? america has an obligation to the people. that means not extending service to dillapidated areas because they don’t pay out is a constitutional violation. this analogy dosnt ork either: letting it burn as an illegal search and seizure. bad mortgage and a fire protection tax? DA check your sources. that’s an outrage.
With these fire departments that only put out the fires of paid-up members, I am interested to know what happens when someone’s life is in danger? It’s one thing to stand there and let a building burn, it’s another thing to stand there and let a building burn with people in it.
In my Australian state of Victoria, the ambulance service is what the first commenter suggested – you can have a cheap subscription (around A$140 a year for a whole family) and then the service is free on the day if needed. Those who don’t subscribe, they’re still treated – they just get a hefty bill afterwards.
A simple call-out for an asthma attack (measure vital signs, give oxygen and reassuring words) might be $300, but if you crash your car somewhere in a rural area and need to be flown to hospital in intensive care, it might be $10,000.
However, if the person holds a concession card – they’re a student, unemployed, or on some kind of government pension – the service is free.
Thus, the only ones who pay a lot are those who don’t plan ahead AND who are well off enough to afford it.
This whole Tea-Party fad of calling everything government does ‘tyranny’ is getting old. Being forced to pay for fire-service through your property taxes is good for everyone, end of story. Maybe using that $75 to buy more plastic crap at Wal-Mart is the tea-party ideal of what freedom is, but my neighbor burning down their house and putting my family in danger through burning embers, radiant heat, and toxic smoke doesn’t work for me. Grow up and accept that their is a cost to living the good life as we do here in the US. If you think zero government regulations is the end-all of human experience, move to Somalia you tea-bagged and let the rest of us live our lives.
Also, why is the military ($2000 cost per citizen) always exempt from tea-party anti government nonsense? How is that any better than $75 fire, search, and rescue services from your local fire department. Just another hypocritical stance that can’t be explained by the anti-government crowd…
In a case where ordinary people cannot evaluate the risks and chances involved in paying/not paying the fire tax – a rational tax method should/could be employed, base on decision making principles:
The avarage number of houses burned a year in the county, times the total number of houses in the county (i.e. probability) times the cost of sending firefighters to the scene and put out the fire – that cost should take in account annual wages for the fire department crew for the current annum, cost of equipment, maintenance etc.
The decision of wheater to pay/not pay the fee should not be left for the irrational citizen but rather be collected automatically, accompanied by an intenssive campaign (also calculated in the fee) that explains the importanceof paying such a fee in communities and how it’s been calculated – feeding the citizens with info in a process equivalent to “Presell” in marketing.
Just a thought.
Over here in the United Kingdom we have developed a true Nanny state. Any and every misfortune which can befall you is probably covered one way or another.But i wonder does the lack of this “cover” over in the USA help to promote the huge number of lawyers you have? People will always make wrong choices and if the state doesn’t help out is the logical extension to turn to law.
For the case in question i would have thought a $75 opt in or a fixed fee, when the crew arrive, if you aren’t insured was the way forward. People have a clear choice and they know that whatever happens the fire fighters will help.