no third solution

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Fire Protection as a Public Good

April 25th, 2007

The more you look into “public goods,” the more historical evidence you find that suggests that they weren’t always as “public” as we’ve been led to believe, viz., we are taught that certain goods or services cannot be produced on the market, therefore the government must provide them, and therefore taxation is justified in securing the necessary funds to operate the programs that provide them. I previously examined the Lighthouse Problem, after coming across an interview on the subject with Ronald Coase, at Reason a while back. Tonight, I learned about another example

In 1666, the City of London burned to the ground. Shortly thereafter, an Englishman by the name of Nicholas Unless-Jesus-Christ-Had-Died-For-Thee-Thou-Hadst-Been-Damned Barbon (seriously) is generally credited with creating the first sort of fire insurance:

Afterwards, insurance companies formed private fire brigades to protect their clients’ property. Insurance brigades would only fight fires at buildings the company insured. These buildings were identified by a badge or sign.

Today, most properties are insured against fire, either by covenant or regulation, so the free-rider problem is pretty much non-existent.

So, why do we pay taxes for this sort of thing today?


UPDATE: Russ Roberts, from CafeHayek e-mailed me today to point me to one possible answer: Rent Seeking.  You can read Fred S. McChesney’s “Smoke and Errors” over at Econlib.

Thanks, Russ!

no third solution

Blogging about liberty, anarchy, economics and politics