Harvard philosopher Michael Sandel tells us of a fire protection agency that refused to service nonsubscribers, precisely because they were nonsubscribers. Even though the property was on fire, and even though the fire agency was there, ready and able to put out the fire, the agency was unwilling.

As it turns out, Sandel’s story is selectively edited. In the full story, both private and public fire agencies failed. So his story does not tell us whether public is preferable to private. But the core of his question remains: can we trust private agencies to service nonsubscribers in need? And if not, is the private provision of fire protection desirable?

First, watch Sandel’s tale (starting at 29:20), related to shocked students with mouths agape (transcript below):

It’s sometimes thought that collective goods like police protection and fire protection will inevitably create the problem of free riders unless they’re publicly provided.

But there are ways to prevent free riders. There are ways to restrict even seemingly collective goods like fire protection.

I read an article a while back about a private fire company, the Salem Fire Corporation, in Arkansas. You can sign up with the Salem Fire Corporation, pay a yearly subscription fee, and if your house catches on fire, they will come and put out the fire.

But they won’t put out everybody’s fire. They will only put it out if it’s a fire in the home of a subscriber or if it starts to spread and to threaten the home of a subscriber.

The newspaper article told the story of a homeowner who had subscribed to this company in the past, but failed to renew his subscription. His house caught on fire, the Salem Fire Corporation showed up with its trucks and watched the house burn, just making sure that it didn’t spread.

The fire chief was asked – well he wasn’t exactly the fire chief, I guess he was the CEO – he was asked, “How can you stand by with fire equipment and allow a person’s home to burn?” He replied, “Once we verified there was no danger to a member’s property, we had no choice but to back off according to our rules. If we responded to all fires,” he said, “there would be no incentive to subscribe.” The home owner in this case tried to renew his subscription at the scene of the fire, but the head of the company refused. “You can’t wreck your car,” he said, “and then buy insurance for it later.”

The original tale comes from a 1985 New York Times article. Here is the full story, in context. What Sandel left out of his account is highlighted:

Allowing Home to Burn

Last February the Salem Fire Corporation, in Arkansas, arrived at a fire sweeping through the home of a nonsubscriber and let the home burn. The fire engines arrived only to protect neighboring houses of those who paid an annual $20 subscription fee. Anthony Brazil, owner of the home, had subscribed to the fire department in both 1983 and 1984, but failed to renew his subscription this year.

In a similar incident last April, the same fire department arrived at a fire that was sweeping through a furniture store and an antique store, in the building of a nonsubscriber. Another fire department, a public one, was on the scene but left after consultation with the Salem firefighters. Two other neighboring public fire departments had been summoned, but did not arrive, after consulting with the Salem firefighters.

“I did not tell them not to come,” said Ronnie Courtney, the chief of the Salem Fire Corporation. “I merely said that we had not requested them.”

Mr. Courtney was asked how he could stand by with fire equipment and allow a man’s home, and then two stores, to burn to the ground. He replied: “Once we verified that there was no life in danger, and no immediate danger to a member’s property, then according to our rules we had no choice but to back off.”

If they responded to all fires, he said, there would be no incentive to subscribe. Mr. Brazil sought to renew his subscription at the scene of the fire, but Mr. Courtney demurred. “You can’t wreck your car and then buy insurance for it,” he explained.

“I sympathize with the Salem Fire Department,” said Susan Fleming, City Manager of nearby Little Rock. She said the city’s Fire Department was one of the incentives offered to nearby communities to become part of the City of Little Rock. On occasion, she said, fires occurred just outside the city limits, and the City Fire Department had declined to respond.

Attorney General Steve Clark of Arkansas is investigating the Salem incidents.

“If you go to a fire, you don’t stand by and watch it burn,” Mr. Clark said. “Decency requires that you put it out.”

Temporary Policy Shift

The Salem Fire Corporation has meanwhile adopted a new, temporary rule that provides that it will charge $500 to fight a fire on a nonsubscriber’s property.

To recap.  The private Salem Fire Corporation allowed nonsubscriber homes to burn on two occasions: once in February and again in April of 1985.

In April, one local public fire agency was on the scene and left, apparently without adequate reason (the private agency said, “I merely said that we had not requested them”). Two other public fire departments likewise did not arrive at all, for the same inadequate reason. The article does not explain why the public options were unavailable in the February incident just two months prior. Presumably, they existed and were available then as well.

It is likely that public agencies, like private agencies, suffer from constrained resources. As the Little Rock City Manager explained, her Fire Department also does not service nonsubscribers in nearby jurisdictions. This explains a lot.

Whatever you think of the justice of this fact, the point is both private and public agencies are subject to similar constraints. And, in Professor Sandel’s anecdote, the public option (all three of them) failed just as much as the private option did.

(The results of the Attorney General’s investigation – mentioned in the article – is not available online. It would be interesting to learn whether he also came to the conclusion that all fire agencies failed in these cases.)

What does all of this mean for the possibility of a purely laissez-faire fire protection system?

First, it means we do not have reason to think a public option would be preferable – at least not on the basis of Sandel’s anecdote alone.

Second, the Times article hints at what might happen in a laissez-faire system. “The Salem Fire Corporation has meanwhile adopted a new, temporary rule that provides that it will charge $500 to fight a fire on a nonsubscriber’s property.” In other words, after suffering terrible publicity for its callousness, the Salem Fire Corporation implemented a less callous policy.

Thus, can we extrapolate this: is this response something to expect from agencies in a purely laissez-faire fire protection system? That depends whether we – the customers – would demand more just policies from service providers. How many of us, for example, would accept a higher premium for a fire company (or any middle man insurance carrier) that has safety net provisions like this? Would we accept higher premiums for “justice” funds that pay when nonsubscribers can’t even afford an emergency fee? Or would public outrage be so great that markets would have to supply only policies that include such funds?

In short: are reputation mechanisms and consumers’ sense of justice enough to move competitive markets?

These questions are not easy. But they are the core of the matter.