Sunday, July 09, 2017

How Private Entrepreneurs Provided the First Effective Fire Departments

Stuart K. Hayashi

Consistent free-marketers champion what can be called a constitutional liberal republican Night Watchman State. That is a republic with a constitution that delimits the functions of government to defending individuals against the initiation of the use of force. That means that most of government is confined (a) to the police to defend civilians against violence domestically, (b) the military to protect the realm from foreign governments that initiate force, and (c) the courts to settle disputes over who is initiating force against whom. A corollary to this is that tending to the needs of the poor is an activity performed not by the State but by any free individual who takes the initiative to do something about it.

I wrote those sentences and think they should catch on: Government is a weapon, not a charity.

"Public Goods"
Another issue to be addressed is forms of infrastructure that are considered "public goods." A "public good" has two qualities. (1) Its ability to confer benefits upon people is contingent upon the fact that people provide capital for its creation, maintenance, or both. (2) Once it exists and operates, it confers benefits upon every single household within a certain geographic region, even benefiting someone who might not have provided any financing for its creation or upkeep.

The argument goes that such public goods are necessary to maintain society, but that they cannot exist in a purely voluntary society. In a purely voluntary society, it is said, everyone would benefit from the public good whether they paid for it or not, and this makes every person prefer that someone else, rather than himself, pay for the public good. Someone who benefits from the public good but doesn't pay for it, is called a "free rider." And because everyone would want to be a free rider, no one would finance the public good's maintenance consensually; the public good would not be built or maintained. Paul Samuelson and John Stuart Mill thus proclaim that the need for public goods thus necessitates that the State extort tax money to pay for the public good. This ensures that if something benefits everyone, then its upkeep is financed by everyone.

The most famous example of a supposed "public good" is roads. Those of us who support the Night Watchman State have been asked "But who will build muh roads?" so often at this point that it has become a meme among us. I have addressed that in this video.

Who Will Fight the Fires?
Another public good is fire protection. Say the defenders of government control, "If we had the sort of night watchman state that Ayn Rand preferred, people wouldn't willingly create fire departments. And if someone created a fire department that only served paying customers, it would be a disaster." Due to that sort of thinking, we frequently come across unimaginative memes ridiculing supporters of the Night Watchman State on this count.

Exhibit A of a unimaginative meme from someone who hasn't bothered to consider how fire protection can be consensually funded.

A meme from someone who didn't bother to look into how there are already consensually funded fire departments in existence.

Actually, the first effective and modern fire departments were created by private entrepreneurs in London. And their demise was not the result of failures in free-market principles, but the result of government-imposed collectivism.

Gives New Meaning to a Business Executive "Putting Out Fires" at Work
I highly recommend a reading of this PDF, "The Development of Municipal Fire Departments in the United States." The one who looked into this matter was economist Annelise Graebner Anderson of the Hoover Institution, wife to the late Martin L. Anderson. You may recall during the Nixon administration, at Ayn Rand's direct urging Martin Anderson was instrumental in persuading President Nixon to end the draft. Martin Anderson later worked for the Reagan administration and was part of the efforts at political-economic liberalization.

Annelise Anderson points out that the first fire departments in London in the seventeenth century -- private companies -- were employed by insurance companies that had insured houses for fire. If I bought fire insurance and my house caught on fire, the company would dispatch firefighters to save my house, so that it wouldn't have to pay for fire damages.

During that century there was strict liability in the case of fire -- a form of liability so strict that Annelise Anderson calls it "absolute liability." Suppose your house is next to mine. Suppose my house catches on fire and then the fire spreads to your house. You could hold me civilly liable for the fire damage to your property. Understanding the absolute liability, homeowners found motivation to purchase fire insurance consensually -- that not only protected their homes and businesses from conflagrations but reduced their likelihood of being sued by neighbors.

However, starting around 1774, the British courts stopped enforcing the absolute liability. From thereon, if you bought fire insurance and I didn't, and then a fire spread from my house to yours, you could only win a suit against me if you proved "negligence" -- making the suit much more difficult for you to win. Yet your insurance company would still end up having to pay for the damage to your house. The insurance companies resented this, and thus lobbied city governments to create tax-funded municipal fire departments.  Thereon, everyone was forced to pay for fire-fighting services. The insurance company would not have to pay for fire damage when the tax-funded fire department saved your house from a fire.

Tax-funded municipal fire departments were created as a response to a crisis touted by insurance companies. But the crisis would not have originated had the system remained consistently free-market -- that is, if courts continued to interpret issues of fire damage to property in terms of absolute liability. And, as you can now know, this episode in history has been forgotten; many people now assume that the first effective fire departments only could have come from the institution of government.

The Present Situation
To this day, there are still many consensually funded volunteer fire departments in more rural parts of the United States. There are even over 200 private, for-profit firefighting services existing today, though, for the aforementioned reasons, taxpayer-funded municipal fire departments that crowded them out of the service of providing protection for homes; these firms usually make their money from organizations; they are hired to put out fires at airports and on wildlife preserves.

 One such private for-profit company that mostly serves organizational clientele is Rural/Metro, although this business actually did get its start selling fire protection for people's homes. Its founder, Lou Witzeman, lived in a part of Arizona that was so rustic at the time that it had no municipal fire department. After witnessing a home burn down in 1948, he took the initiative to start his own firefighting business, and it has become the major corporation it is at present, at one point being traded on the New York Stock Exchange.

 The history of Rural/Metro up until 1970 takes up a chapter of William C. Wooldridge's classic book Uncle Sam the Monopoly Man. The full text of that particular chapter is not on the Web, you can find other chapters from it online over here, all about the consensually funded provision of other public goods . . . such as roads and (snail) mail delivery.

Government in the Gaps
You have probably heard of the "God in the Gaps," an idea popularized by the German theologian Dietrich Bonhoffer but which was described earlier by evangelist Henry Drummond. The idea is that when people assume that if scientists have yet to give an explanation that satisfies them, they fall back on saying "the explanation for that natural phenomenon must be God." As an example, when people did not understand the cause of the tides, they said, The explanation for the tides is God; the end. (As of this writing, that seems to be good enough for Bill O'Reilly.)

 Starting from the Scientific Revolution of the 1600s -- not, by random coincidence, the period where there was a more rational system of fire protection -- scientists began to piece together the scientific explanation for the tides: the moon itself exerts a gravitational pull, pulling the Earth's water toward itself, and how high the moon is able to pull the tides depends on the moon's position in relation to the Earth. At this point, many people will scoff and reply, "But why is there any gravitational pull at all? God." You can go back and forth giving one scientific explanation after another, but your interlocutor will not be satisfied until everyone concedes that the ultimate explanation must be "God."

There is a similar mentality in political philosophy that I call "Government in the Gaps." When many people find some sort of product or service helpful -- such as firefighting -- they assume that it only could have been ultimately provided by the government. Because of the gaps in their own knowledge of how private entrepreneurs invigorated fire protection in the 1600s, and because they are ignorant of the number of consensually funded volunteer fire departments still existing at present, they assume this all must have come from the government. This same assumption is made of interstate highways and roads that connect separate cities to one another (again, I cover that here).

The "Government in the Gaps" fallacy is even invoked in conversations about products that everyone knows are provided by private entrepreneurs. When you point out how innovation occurs insofar as people are free to enterprise and innovate on their own accord, some apologist for government control attempts to hijack the conversation and bestow all the credit for the product's invention and existence upon direct government involvement. Some Young-Earth Creationists will comb through scientific literature to find any supposed gap in the scientists' knowledge about a phenomenon and, upon finding such an alleged gap, latch onto it and credit God as the ultimate explanation of that phenomenon. Likewise, many apologists for direct government intrusion will comb through the history of an industry to find any instance of taxpayer funding for some part of it, and, upon finding such an instance, latch onto it and credit direct government involvement as the ultimate source of all the benefits conferred by that industry's product (examples here and here).

When the government intrudes as much as it does on everyone's daily lives, it becomes unlikely that one can say with absolute certainty that one never benefited -- at least indirectly -- from some service that was taxpayer-funded; an apologist for government control could say that your success at your job is taxpayer-funded because you drove to work on a taxpayer-funded road. But to say "You cannot credibly argue against government intrusion unless you never benefited from any taxpayer-funded service" is a straw man.

 It is a straw man when Young-Earth Creationists posit that if there remains any phenomenon that presently remains unexplained by scientists, you have to concede "God" as the only explanation. (In this case, the word "God" is a placeholder for an explanation -- that is the very complaint of the pro-religion Henry Drummond and Dietrich Bonhoffer.) Likewise, it is a straw man when apologists for State intervention proclaim that if they are unaware of a service presently being provided through 100-percent consensual funding and not by the government, you must concede that nothing but the government can provide that service. And it is a straw man when they assert that if they can dig up some instance of taxpayer funding in the history of an invention and product and industry, then it follows that the invention and product and industry would not have existed if not for taxpayer funding.

 As I pointed out in the first meme of this blog post, the one crucial distinction between civil society (that is, everything nongovernmental) and the government is that the government has society-authorized threats of violence on its side. Therefore, the proper question to ask is not "Did this enterprise ever receive government funding?"  The question is, "What makes you assume that this enterprise never would have existed if not for someone being threatened with violence if he refused to fund it?" Any enterprise that people can undertake without threatening violence can be performed in the absence of direct government involvement. That applies to firefighting.