Home uninsured. Firemen let it burn. Crazy capitalism?

In Tennessee, a fire department refused to save an uninsured home because the homeowner didn't pay the insurance.

By , Guest blogger

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    This Sept. 29 photo taken off of video shows Gene Cranick near his burning home in South Fulton, Tenn. Local firefighters let Mr. Cranick's mobile home burn to the ground because Cranick didn't pay an annual $75 fire protection fee, authorities said. Critics say capitalism failed.
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Do you want to convince someone that anarcho-capitalism is the solution? Then you had better have a response to this very real situation:

In the absence of government, fire protection is provided by private companies that charge a monthly insurance premium. A recalcitrant acting man decides to decline market protection and assume the burden of protecting his own property. One night, his house catches on fire. The fire is too big for him to handle so he calls the local fire protection company asking for help. The company declines. He offers to pay the monthly premium. The company still declines. His house burns to the ground.

Is this scene a vision of the anarcho-capitalist solution: a man’s tear falling on the smoldering remains of his home?

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This is a key question to address since a similar event occurred in Tennessee, an event that is being met with the usual anti-market scorn – the market failed. But did it?

It is important to note that the homeowner whose home burned made an offer to pay his premium if the fire company would put out the flames. He even offered to pay “whatever it would take.” The company refused both offers.

It is also important to note that other homeowners in the area purchased fire protection in exchange for a premium. And when one of the protected homes was threatened by the spreading fire, the fire company responded.

Most area homeowners bet that, should a fire start, the cost of premium payments will be less than the cost to pay for service when needed, as well as the cost of damages due to fire. The fire protection company bets that the sum of premiums will exceed the cost associated with providing fire protection. The company is able to offer and price its service based on the number of clients and the likelihood of a fire on any given property. So the fire protection company pools premiums and provides its service. Everyone involved is happy.

Of course, no one has the right to force others to risk their property and lives, for any reason. Fire protection is capital intensive and dangerous. Fire engines, protective gear, firefighter training, etc, are expensive, but the fire company has contractually committed to risk its equipment in exchange for a premium. That said, they can decline to fight a fire if the danger is greater than the risk they want to assume – they can unilaterally break their contract with a homeowner.

The firefighters can also unilaterally break their employment agreements. They work for the fire protection company only until either finds the agreement not in their respective best interest. That means a firefighter can quit whenever his view of the risk of a given situation exceeds the value he assigns to his salary – no one can force him to fight a fire he does not want to fight.

Both instances are bad form. Breaking a contract carries implications, both legal and reputational. But no one can be forced to act against his better judgment.

Now it is important to note that government fire departments are not legally obligated to provide the services you desire. There is no contract to break. They can defend your property against fire. Or they can simply let it burn to the ground. So even though a property owner has paid property taxes to support the fire department, in the end, the decision to provide or not provide services lies with the fire department alone.

Therefore, government provides no more guarantee of security than private companies.

In the Tennessee fire, the homeowner decided that he did not want to pay for protection. And he is within his rights to not pay. But when a fire starts, he should not expect services to be rendered. But the fire started and he asked for services. The company refused and now the homeowner appears to be the hapless victim of the cold-hearted vagaries of the free market. But, wait. There’s more to the story.

It turns out that the fire company was not privately owned – it was run by a nearby city. Failure of the market? No. Failure of government? Yes.

So it was not the cigar smoking capitalist smirking with indifference at the site of the homeowner and his burning home. No, it was the local mayor – a public servant through and through – smirking from the comfort of his government office.

You see, if the market was involved, the owner may have gotten a freebie. Or the company may have negotiated a service rate then and there. Why? A private company has a reputation to uphold. Being lambasted in the media as heartless and uncaring is not good for business. So it makes sense to help out as much as possible. And if the homeowner is willing to pay the full cost, why not provide the service. Why not, indeed? But that is a question that should be directed to the local mayor, not supporters of anarcho-capitalism.

Certainly, there are counter examples from California where private fire protection companies only sprayed fire retardant on the houses of customers. That said, I have not heard of any instance where a homeowner’s late offer to pay full price was rejected out of hand. It may have been rejected due to the company’s responsibility to its paying customers, but I am not aware of an offer was rejected out of cold-hearted spite.

We have all heard questions such as this, “Do you still support the free market even though it destroyed the housing market?” That’s a hollow question since there was no free market before the housing boom, or during it. We live in a hampered market that is becoming more hampered every day. So defenses of past interventions will never satisfy arguments against freedom.

And defenses of government-run fire departments will never satisfy the arguments against anarcho-capitalism. But gently reminding the questioner that the failures noted are due to government may redirect the line of inquiry to where it belongs.

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