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The recent case in Olbion County, Tennessee , where municipal firefighters watched a house burn to the ground because the residents had not paid a voluntary $75 fee to the neighboring South Fulton Fire Department demonstrates once again that government is far less flexible than the private sector in delivering vital services. Let me explain why.
Anyone who has seen Gangs of New York will think they know all about the days when insurance companies had responsibility for firefighting. They know that houses without “fire marks” indicating a policy held with the appropriate company were allowed to burn to the ground. They know that competing fire crews fought with each other while fires burned. And they know that this was all due to the greed of the insurance companies.
In fact, this is all myth. Histories of firefighting in both America and England (where the practice of insurance companies fighting fires began) show that such things never happened. Indeed, the reason insurance companies began to get out of the fire fighting business and passed the hot potato to municipalities was precisely because of the free rider problem – their fire brigades were routinely putting out fires in buildings that held no policy with the company.
This was widespread policy among insurance companies from very early on. As G.V. Blackstone says in his History of the British Fire Service, “One company (ALBION) publicly stated in the early 19th century (1809) that…its firemen were enjoined to render the utmost assistance to all who needed it. . . . The houses of the poor — who could not afford insurance anyway — were dealt with out of charity and for the good name it brought to the company.” Moreover, a burning uninsured house could easily spread the fire to an insured house. Given that fire insurance sprang up after the Great Fire of London, when 80% of the city was reduced to ashes, fighting fires wherever they began simply made economic sense until the free rider problem grew too severe.
So it is hard to see a fire brigade employed by a private insurance company simply sitting by and letting a house burn to the ground for the sake of an unpaid $75 fee. If it had, the company would have been accused of greed. What other word should we use to describe the motivation of a municipality in such circumstances?