The Tennessee Municipal Fiasco Applied

There was a recent problem in Tennessee where to have municipal fire service you must pay a $75 annual fee. A man did not pay his fee and the fire department did not put out the fire even though they arrived on scene and the victim offered to pay (at least the $75). Put aside for this conversation he had pets in the house. This was not a free market failure. I don't know too many businesses that would, in a non-monopoly position, would refuse to extinguish the fire. This was a municipal policy failure. As an aside, the quick fix would be that the fire department in this case would put out the fire but for a unsubsidised price of $5000 or cost which ever is lower. That was not a choice in this situation which I find odd.

Suffice it to say that Krugman, et. al. have said what a horrible society we would have if the above fire department policy was in practice more broadly. To some degree I agree and feel content to pay taxes to provide municipal fire and police but that is for each municipal entity to define.

For a thought experiment, let us say that not only could you not insure for the $75 payment after the fact. Presume also that a home owner could not hire and pay the cost of the fire department services in the event of a fire. Now imagine a situation where you could not hire a different department to extinguish the fire nor attempt to resolve the problem amongst neighbours by law with penalty of fine and/or incarceration - even if equipped with both knowledge and equipment. Finally, even if health or life could be in danger, alternative means of handling the fire would be illegal.

Would not that be an even more horrible society than what many critics of the Tennessee municipality claim?

Readers from Canada may recognize this as their single-payer health care system. The single payer system can actually act to bar a person from alternative or paid medical care by force of law. The analogy is not perfect but the flaw is not that you can pre-pay but that while you have coverage demand exceeds supply and thus causing queuing with mechanism to equalize. It is a system that actively prevents the resolution of the supply/demand imbalance.

Hat tip: David Henderson for the clarity http://econlog.econlib.org/archives/2010/10/krugman_tenness.html