The decision by a Tennessee fire agency to deny service to a family with a burning house because the family had failed to pay the agency’s subscription fee (the agency was operated by the city of Fulton but provided service to non-residents on a subscription basis) has prompted sustained discussion throughout the blogosphere, with repeated claims that the incident demonstrates inherent difficulties with the fee-based provision of fire services. Implicitly, then, statists are inclined to see the incident as supporting an argument for state provision of such services, and thus for statism more generally.





The story is complicated, as such stories always are, by the facts. The incident happened, it appears, because the homeowners’ grandson started a fire too close to their home. The decision not to provide service was evidently a long-standing city-council voted policy, and the fire-fighters’ insurance apparently wouldn’t cover them if they provided service to a non-subscriber. On the other hand, the homeowners had apparently received fire service on a previous occasion when their service subscription was similarly unpaid (they evidently paid the day after they received the service), and so might reasonably have expected that they would in this case, too. It would be easy to become engrossed in the details of this particular story; but I’d like to take a step back and think about the big-picture issues it raises. I don’t believe it has to be seen as offering any support for statism.





Fire Service Is Not a “Public Good”





Characteristically, statists maintain that the state needs to deliver a good if it is “public” or “collective”—roughly, such that, if it is provided to anyone in a given public, it is effectively available to all the members of the public, including those who opt not to pay. The standard public goods argument for the state suggests that public goods will be undersupplied on the market for this reason.





There are all sorts of interesting things to say about this argument, but the important thing to notice is that it doesn’t apply here. Fire service is, in general, a private good: providing it to one person doesn’t entail providing it to everyone. So it’s not clear why it shouldn’t be provided on the market, even on the statist’s own preferred criterion.





Fire Services Should Not Be Tax-Funded





The statist answer, in this case, seems to be that the consequences of not providing service are so devastating that it is better to de-link fee payment and service provision. For the statist, this means funding services via taxation.





There are three obvious objections to the statist’s solution to the problem. First , the extraction of taxes at gunpoint by the state is itself unjust. Second , even if tax extraction to fund fire service provision were legitimate, a state powerful enough to extract taxes to be used to support fire service provision would obviously be powerful enough both to extract taxes for other, less desirable, purposes and to engage in other sorts of mischief. Third , if funding for fire service provision is delinked from expressed consumer demand for fire service provision and is instead set politically, funding levels are likely to be inefficient and unrelated to actual need or demand.





Why It Might Seem Reasonable to Deny Service to a Non-Subscriber





If fire service is not funded by taxation, does that means that it needs to be funded by subscriptions? And, if so, must a subscription-funded agency deny emergency service to non-subscribers?





Tom Knapp has made a very plausible case for denying service here and here . (Art Carden’s comment on the story is not altogether conclusive, but might be read as a case for something like Tom’s view.) Tom argues that subscribing to a fire service is like placing a hedged bet. If the odds are low that one will need the service, it will always be tempting not to pay one’s subscription. However, providing fire service is a capital intensive business (trucks and fire houses are expensive) and one with ongoing operating costs (firefighters need to spend long periods on-duty, even when they’re not fighting fires, so they’ll be available when fires actually occur). If people don’t subscribe to a fire agency, the agency will lack the resources it needs to function in a consistent manner on an ongoing basis. And the only realistic way to ensure that they will subscribe is consistently to deny service to non-subscribers.





Duties and Consequences





This approach raises concerns of two kinds.





( a ) It seems to involve support for arrangements in accordance with which firefighters will stand idly by and allow their neighbors’ homes to burn, thus violating what would generally be regarded as a moral responsibility to eschew indifference to the vulnerability of others to harm.





By referring to this responsibility, I’m not suggesting that there is a general duty to prevent any and all harms. Rather, my claim is that, per my preferred version of the Golden Rule, I ought to prevent or end a harm to you in a given set of circumstances if I would resent your refusing to help me in similar circumstances were our roles reversed. Also, to be clear: I’m also not arguing that force may be used to require people to fulfill the duty of limited beneficence that follows from the Golden Rule or to punish them or secure compensation from them if they do not do so.





( b ) It obviously leads to a terribly undesirable result: someone’s home is destroyed, even though the cost of saving it is significantly less than the value of the home itself.





It is, of course, possible to respond to ( a ) by noting that there is a duty on the part of firefighters in the imagined situation to all those in a position to benefit from the provision of fire service and willing to pay subscription fees. It might be maintained that one would be ill-serving paid-up subscribers if one rendered assistance in this case, since doing so would increase the odds that potential subscribers would fail to pay their subscriptions, and so limit the ability of the agency to meet its capital and operating needs and protect existing subscribers. Paid-up subscribers willing to pay subscription fees might well have reason to resent the provision of service in this case if it prevented them from receiving service when they needed it. Firefighters might recognize, in turn, that their reaction would be the same as that of the subscribers, and that they would therefore act unreasonably if they provided services to non-subscribers.





This is not a silly argument, and I do not want to treat it dismissively. It is surely right that obligations to all subscribers might trump the responsibility to show limited beneficence to non-subscribers in danger of suffering severe fire damage. However, it is possible to imagine arrangements that would not require fire agency personnel to stifle their compassionate responses and to refuse to prevent immediate, proximate potential loss but that would simultaneously ensure adequate service to those willing to pay their fair share of service costs via subscription. And such arrangements are surely preferable to those that make adequate service levels possible while requiring a firefighter to suppress her or his desire to help someone else in serious danger.





Competition as a Guarantor of Emergency Service to Non-Subscribers





Perhaps the firefighter need not be concerned, because another fire agency would step in were one agency to decline to provide service. Roderick Long and Bob Murphy both see market competition as a crucial source of security here. And it surely would be as regards subscription fees, for instance. On the other hand, it seems as if a competing agency would confront the same incentives as the agency initially contacted by the fire victim: if the competitor agency operates with a subscription-based funding model, it runs the risk of discouraging the subscriptions it needs for ongoing, consistent operation if it opts to respond to a call from a non-subscriber. So it, too (if Knapp’s argument about the economic challenges faced by a solo agency is correct) might find it counter-productive to provide on-the-spot services to non-subscribers.





Imposing High On-the-Spot Charges as a Way of Ensuring Regular Subscription Payments





But perhaps this criticism assumes that the non-subscriber pays only the subscription fee. Trey Givens , David Henderson , Long , Murphy (see here and here ), and Jacob Hornberger all suggest that an economically rational fire agency would have been willing to deploy and extinguish the fire for some appropriately high on-the-spot service fee—one significantly in excess of the standard subscription rate. Long suggests that the victim be asked to “pay full price.” Murphy proposes “a penalty rate.” Givens suggests “a premium for on-the-spot requests” and notes that “[t]he firefighter who negotiates a decent rate for . . . [on-the-spot service] would get praised for his initiative.” Henderson endorses an approach featuring an on-the-spot charge that is “a high multiple of the annual fee.” And Hornberger maintains that “a private fire department would have the incentive to have pre-written contracts in which an owner who had failed to purchase fire protection would be asked to agree to pay, say, double the costs of putting out the fire.”





I think it is possible to be more precise than this. If Knapp is correct, as I believe he is, that the hedged-bet analogy is appropriate, then a homeowner will be inclined to avoid paying the subscription fee as long as she estimates that it will be more efficient for her to pay the on-the-spot fee. The question, then, is: at what level should the on-the-spot charge be set to discourage homeowners from declining to pay the subscription fee? The answer seems relatively clear: at a level such that the on-the-spot charge, when discounted by the actuarially determined likelihood that a given homeowner will need fire service , exceeds the subscription fee. A safe estimate of this likelihood might be 0.25% (thanks to Tom Knapp for dialoguing about this and related matters). If this estimate is correct, the on-the-spot charge would need to be over $30,000. A rational consumer would judge that paying $75 on an annual basis would make more sense than paying, say, $32,000 in the event of a fire.





(An aside: it appears that one reason the Fulton fire agency stopped providing service to non-subscribers outside the city limits was that it was difficult to get them to pay after the fact. I think Hornberger is right that “pre-written contracts” would help; and I share Nathan Byrd’s view that a contract providing the fire agency with a lien or other security interest in the property would help to ensure payment.)





The Claim That Letting a Home Burn Would Ensure Regular Subscription Payments More Effectively than Levying a High On-the-Spot Charge





Knapp’s objection to this analysis is, if I understand him correctly, that the odds of losing $32,000 will seem so low in a case like this that people simply won’t pay the subscription fee. Thus, the only way to ensure that subscription fees are consistently paid will be refusing to protect a non-subscriber’s home pour encourager les autres . I don’t want to deny the obvious motivational power of the image of a neighbor’s home burning. But there are at least two reasons why one might not necessarily accept this conclusion.





First , recall that the suggestion is that someone would judge paying a fire-agency subscription unnecessary in view of a possible $32,000 on-the-spot charge because of her estimate of the probability of actually needing fire services. But notice that she’s going to make the same estimate of the probability of a home fire without the possible availability of an on-the-spot alternative to a subscription. What’s going to change, of course, is her estimate of the cost of the fire. If her house is worth $320,000, the potential value of the $75 investment in fire service certainly increases. However, the potential pay-off for making that investment is still enormous even given the availability of an on-the-spot fee, and many of those not willing to make the investment in one case can thus be expected not to make it in the other.





Non-subscribers obviously fall into two groups: the lazy and forgetful on the one hand and rational calculators on the other. Someone who’s lazy and forgetful—who would have purchased a subscription but has simply neglected to do so—is not going to be affected by incentives. Ex hypothesi , she’s simply not thinking about the problem. Learning that someone else lost a house by not paying a fire agency subscription might awaken her from her neglectful slumbers, but so might learning that someone else had had no choice but to pay $32,000 because of having declined to pay such a subscription. By contrast, a genuinely rational calculator would certainly make the judgment that paying $32,000 in the event of a fire is less efficient than paying a $75 annual subscription.





Second , setting the on-the-spot fee at the level I have envisioned would enable the agency to cover its costs even if significant numbers of people chose to avoid the subscription fee and gambled on not having to pay the on-the-spot charge. Of course, this might mean that cash-flow was not as consistent as it would be in the case of subscriptions (and it is not clear that this is so, given that subscriptions would likely be paid at different points throughout the year, and perhaps somewhat erratically). But it would be considerably easier, with substantial payments by non-subscribers in hand, for the agency to opt for debt-based financing. It could borrow against its expected income, including income from on-the-spot charges. And it could build the cost of interest payments into the on-the-spot charges (perhaps increasing them from $32,000 to $35,000).





Alternatives to Subscription- and Debt-Based Funding for Fire Agencies





The conversation to-date has operated on the assumption that subscription and debt were the only mechanisms available for an envisioned fire agency to fund its operations. The fire agency has effectively been envisioned as ( i ) a member-funded cooperative (a reminder that “the market” need not mean the realm of for-profit commercial transaction ) and ( ii ) a free-standing entity delivering only fire-related services. It is possible to envision at least three other options. Selecting any of them (and they could in some cases be combined) could make a fire agency that offered services to people who had not paid subscription fees more viable.





1. The agency could explicitly incorporate a charitable component in its operations. Community members able to do so could be asked to either to ( a ) cover the costs of subscriptions for particular persons or to ( b ) contribute to a fund designed to cover the emergency provision of services to non-subscribers. (Presumably ( a ) would be less subject to abuse, since it would be possible to assess genuine need on a case-by-case basis and exclude free-riders.)





2. The agency could bundle services of various kinds (insurance more generally and protection against violence are obvious examples) and could obtain needed operating funds in connection with its other services. This might allow it to have larger cash reserves and, in effect, to borrow from itself rather than from an interest-charging lender, “paying itself back” from on-the-spot fire service charges. (Thanks to Kevin Carson for outlining a version of this option to me.)





3. The agency could operate on a for-profit basis, obtaining funds, therefore, not only from customers but also from investors. The investor-provided funds could obviously cushion the agency in cases in which subscriber payments were low.





In principle, it seems as if any of these options, or several in combination, would make it possible for a fire agency to provide on-the-spot services to non-subscribers (perhaps for less than the sort of on-the-spot charge I have discussed here) and still maintain the resources needed to cover its capital and operating costs.





Conclusion





Private fire agencies like this one (CHT David Henderson) operate successfully in today’s economy. But critics of the market have argued that the behavior of the Fulton fire agency, even though government-operated, is evidence that the market cannot be trusted with the provision of fire services and that these services must be entrusted to the state. There are good reasons to avoid giving the state responsibility for fire services or anything else. But anarchists must still acknowledge that statist critics are right to note the morally troubling nature of the denial of service to a fire victim who had failed to pay a fire service subscription.





There are, roughly, two possible, contrasting responses anarchists can offer to the charge that the market-based provision of fire services leads to morally disturbing behavior. On the one hand, they can argue that the actions of a freed-market fire agency that behaved like the Fulton fire agency would be morally justified, even if harsh, because only by denying service to non-subscribers could the agency ensure that it received the subscription payments it needed to operate successfully. On the other, they can maintain that freed-market fire agencies would have alternatives other than denying service to non-subscribers and trying to operate with wild cash-flow fluctuations.





While I believe that the first option could be a morally responsible one, and while the assumptions about human behavior that underlie it may be correct, I have sought here to argue that we are not required to accept it and that other alternatives may be preferable in that they might make it possible for a freed-market fire agency both to provide emergency services to non-subscribers and to maintain a satisfactory financial position. Charging sufficiently high on-the-spot emergency services fees could be sufficient to incentivize rational calculators (and at least some of the otherwise lazy and forgetful)—who might under other circumstances be inclined to gamble that they would be better off not subscribing to a fire service—to pay low annual subscription fees. Charging high on-the-spot fees would also make it possible for agencies to maintain operating reserves and would render it easier for them to cover their costs effectively with debt-based financing if they needed to do so. Delivering some services as a charity (supported by appropriate fundraising) would enable a fire agency to provide emergency on-the-spot services to non-subscribers while enhancing its reputation. Bundling fire and other services would make it easier for an agency to assist those charged high on-the-spot fees without losing needed operating funds. And adopting a for-profit business model would enable an agency to secure needed funds from investors, and so to depend less on subscriptions—rather than on-the-spot charges—for financial stability.



