Monday, October 04, 2010

The Opt-Out Government

This case from Tennessee tells us how a libertarian system works:

Imagine your home catches fire but the local fire department won't respond, then watches it burn. That's exactly what happened to a local family tonight.

A local neighborhood is furious after firefighters watched as an Obion County, Tennessee, home burned to the ground.

The homeowner, Gene Cranick, said he offered to pay whatever it would take for firefighters to put out the flames, but was told it was too late. They wouldn't do anything to stop his house from burning.

Each year, Obion County residents must pay $75 if they want fire protection from the city of South Fulton. But the Cranicks did not pay.

The mayor said if homeowners don't pay, they're out of luck.


This fire went on for hours because garden hoses just wouldn't put it out. It wasn't until that fire spread to a neighbor's property, that anyone would respond.

Turns out, the neighbor had paid the fee.

"I thought they'd come out and put it out, even if you hadn't paid your $75, but I was wrong," said Gene Cranick.
In terms of economic jargon, Gene Cranick tried to be a free rider, to get the benefits of the system without paying for them. That can work with some public goods (such as the services of a lighthouse) but firefighting services are not a pure public good. Though they have some of its characteristics, you certainly can be excluded from getting the service as Mr. Cranick found out.

At the same time, imagine what would happen with a purely private firefighting service. Each home owner would have to figure out how many others on that street have paid for the service. If none have, for example, then your house is in much greater danger of burning down (even if you pay for the service), simply because if other houses in the neighborhood start burning nobody will interfere. So the firefighters would wait until your house is surrounded by an inferno of flames before intervening.

Fun and games.
Added: This is unrelated, except for the firefighting bit but a fun example of the incentives and their effect:

I was reading a history book which recounted the story of a group of villages in the 18th century getting together and starting a firefighting service. The men working in it were doing it only part-time but they had to be paid. So the villages decided to pay them per fire put out. You can imagine what happened next.