There are many reasons Ezra Klein’s blog is indispensable. The first and most important is that he has a Stakhanovite work ethic. Another reason is that he does a good job of capturing the normative sensibilities of well-informed egalitarian liberals:
The South Fulton Fire Department was right to let the Cranicks’ house burn. You can’t sell fire insurance but let people pay after the flames have begun. If you do, people will sign up after their houses catch on fire, rather than before. That’s a bad business.
Which is why we don’t generally run firefighting as an insurance business (this, actually, was a weird case where a city’s fire service sold protection in a rural area outside the city’s limits). We run it as a collective good. People have to pay, and firefighters never let someone’s house burn. We’re comfortable letting people make bad financial decisions when it comes to their television purchases, or the car they drive, or whom they date. We’re not willing to do it when the consequence is that they and their children quite literally die in a fire. But that’s what free-market firefighting would require.
I feel fairly confident in saying that the South Fulton Fire Department would not have allowed a child to die in the blaze, and I’m guessing that no one would want to see that happen, regardless of how tough you are on the moral hazard question. Ezra uses this case to explain why there will be stiff political resistance to repealing the new health law, and that’s a fair assessment of the political facts on the ground. The story of South Fulton will no doubt be used to great polemical effect.
But I’d like to delve into the firefighting question a bit. As Ezra observes, the home in question was not in South Fulton. It was in an area outside the town, where the South Fulton Fire Department offered fire protection on a subscription basis. Note that homes in many rural parts of the country don’t enjoy the kind of public fire protection I enjoy in Downtown Manhattan, where density makes fire protection an unambiguous public good. (Of course, it’s also true that private developers have to adhere to strict building codes that internalize much of the cost of fire protection. Never let it be said that I don’t think there’s a place for prudent regulation.)
But we may as well take the argument head-on: what kind of firefighting regime makes sense?
One thing I feel pretty strongly about is that hard-to-defend homes in certain high-risk areas are not necessarily entitled to public fire protection. Consider houses in regions of California that are prone to wildfires, where we’ve nevertheless seen the construction of extremely vulnerable sprawling properties. As I wrote in 2007 (sorry about all of the nostalgia in these parts), a number of insurers provide fire protection above and beyond the level provided by local authorities:
So the question is, should we legally prevent wealthy individuals from spending large sums to provide an additional level of protection to their properties?
To my mind, the idea that publicly-funded Fire Departments would expend substantially more effort defending a vast, sprawling estate against fire than a small ranch home seems inegalitarian. The expectation that public resources ought to be deployed in an equitable manner strikes me as valuable and important, even basic. And yet imposing a ceiling on the level of protection seems (a) difficult to enforce and (b) pointlessly punitive.
This represents a clash of two egalitarianisms, and it is a conflict that arises in many social democracies. If a wealthy person wants to pursue exotic medical treatments on her own dime, does she have a right to do so? Or should she be legally prevented from doing so on grounds of offense against equality?
I like the idea of leveling up. I don’t like the idea of leveling down. And of course the now-rare technologies and techniques deployed by AIG’s Wildfire Protection Unit will become steadily less expensive over time, so much so that they will become increasingly commonplace. At some point in the future, my guess is that publicly-funded Fire Departments will deploy similar resources. But that’s only because a handful of ultracautious pioneers were willing to fund the relevant innovations.
I have a hard time seeing this as a bad thing.
This, of course, is not precisely the issue that Ezra is raising. But I think it’s fair to say that the U.S. health system pre-reform would save a child from the burning building, i.e., medical providers would prove life-saving medical care to an indigent person in need. We just don’t do a very good job of managing the attendant risks and costs. That is why I, like most conservatives, favor health reform. I just don’t favor the president’s approach, for many of the reasons Mark Pauly has outlined.
To return to the question of fire protection, the wildfires that rage across Malibu are part of a broader phenomenon that Matthew Kahn describes in his new book Climatopolis:
In 1993, a major flood in Missouri, where the Mississippi, Illinois, and Missouri rivers meet, caused roughly $15 billion of damage and fifty deaths. Tens of thousands of people were evacuated. At least 10,000 homes were totally destroyed, and hundreds of towns were hit hard, with at least seventy-five towns completely under flood waters. And yet today, more than $2.2 billion worth of new development in the St. Louis area stands on land that was under water during the 1993 flood. Between 1993 and 2003, offices, shopping centers, and highways covered at least 4,200 acres of Missouri flood plain, most of which were under water during the 1993 flood. Why so much development? The federal government, both through disaster relief and by providing flood insurance, has reduced risk to the point where developers felt comfortable building in a zone that is really unsafe. The building boom did bring jobs, services, and tax revenue to the region, but it could lead to more damage in future floods. Encouraging development in a flood plain is risky—but that’s exactly what the federal government’s well-intentioned actions did. And climate change will make it even riskier.
As Kahn goes on to argue, subsidized flood insurance, and hurricane insurance, etc., allows investors “to flip a one-sided coin.”
Right now, government policy is allowing businesses in the St. Louis region to flip a one-sided coin. If no flood occurs, then the investment in developing in the flood zone was a wise move. If a disaster does take place, the region’s congressional representatives and senators will claim that their constituents are the victims of horrible luck, are suffering, and need federal disaster money.
Given the political economy dynamics at work, it’s easy to see how this phenomenon has become a big and expensive problem.
At the risk of drawing too broad a conclusion, an important component of the left-right divide appears to be different levels of susceptibility to different kinds of emotive appeal. When I hear that a homeowner who chose not to pay for fire protection in a rural area saw his home burn down while a neighbor who did pay for it was protected, I don’t bat an eyelash. As a general rule, we accept that there are downside and upside risks to living in hard-to-reach rural areas. Big red firetrucks don’t suddenly materialize. They require serious, long-term investments that sparsely-populated communities can’t always sustain, just as sparsely-populated communities can’t generally sustain a world-class philharmonic.
This home wasn’t in one of these hard-to-reach areas. But it’s an area where the local voters and taxpayers have chosen not to create the kind of expensive public services that denser incorporated communities enjoy. They presumably benefit from somewhat lower taxes and perhaps they enjoy the relative isolation. In contrast, I have voted with my feet to live in New York city, a heavily taxed jurisdiction that offers a wide array of public services, some of them scandalously inefficient but others which, in my view, repay their cost many times over. It’s a trade-off. We make them all the time. And as long as the South Fulton firefighters didn’t allow actual people to get burned to a crisp, I think they did what was right and appropriate under the circumstances. Indeed, I suspect it was hard for at least some of them to exercise restraint, and I’m glad they did.
Medical care is different for many, many reasons. Yet there is a reason why James C. Capretta and Tom Miller place such heavy emphasis on managing moral hazard in their proposal to cover pre-existing conditions in a cost-effective manner. They’re making an effort to be rigorous about avoiding perverse outcomes, as they’re more inclined to think that excessive public “generosity” can create problems just as much as excessive public “stinginess.”