A Note to Krugman: Don’t Be So Stupid

Krugman links to a story at Think Progress about how firefighters let a house burn down because the owner didn’t pay the fee. Paul, baby, next time do a bit of fact checking. This isn’t the market failing, it was a government run fire department. You can tell from this part of the Think Progress article,

We asked the mayor of South Fulton if the chief could have made an exception. “Anybody that’s not in the city of South Fulton, it’s a service we offer, either they accept it or they don’t,” Mayor David Crocker said.

[…]

A local newspaper further pressed Mayor Crocker about the city’s policy, which has been in place since 1990.

Not exactly a failure of the market when it is the local government run fire department that is at fault here.

Here’s another hint to the daft and dense: a private firm might very well have gone out and put out the fire for a fee, probably one higher than the $75 annual fee, but after all that is the cost of moral hazard.

FILED UNDER: Economics and Business, Government, Quick Takes, US Politics,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Brummagem Joe says:

    What has Krugman to do with this other than linking to it. Did he comment that this was the result of evil capitalists in which case it was a stupid thing to say. This blog constantly links to sundry craziness. Does this make Jim stupid?

  2. Tano says:

    It was a government run fire department in a town run by Republicans.. No one claimed that it was some private fire department – you are just making stuff up. In fact, the linked article begins “As ThinkProgress has noted, there are currently two competing visions of governance…”.

    Got that? Governance.
    Everyone but you seems to understand the argument here. The issue is the reigning philosophy – that of libertarian conservatism, vs. liberal/progressivism. The house burned down because of a slavish adherence to market values by conservative government officials. Values that ignore basic common sense and human compassion – the core problem with ideological libertarianism.

    Don’t be so stupid Steve.

  3. Brummagem Joe says:

    “The house burned down because of a slavish adherence to market values by conservative government officials.”

    Is this true? I never read the story. If so maybe it isn’t Krugman who is stupid but someone else.

  4. Steve Plunk says:

    That’s the truly irritating part of the story, the guy offered to pay for services and they still would put the fire out. Cruelty is the only way to describe what happened.

  5. Steve Plunk says:

    Tano, If the homeowner offered payment but they refused it’s not slavish adherence to market principles it’s just being cruel and stubborn. The adherence to market values would have them set a price for putting it out. It may have been high but a price would be offered.

  6. mantis says:

    It’s no wonder Verdon doesn’t link to Krugman’s post, which is from ten days ago. Why not, you ask? Because it would reveal how much straw Verdon had to use for his own post. Anyway, here’s what Krugman wrote:

    Think Progress reports on a case in which firefighters allowed a house to burn down because the family hadn’t paid its fee; it also reports on the near-universal support of conservative writers for the fire department’s position.

    This is essentially the same as denying someone essential medical care because he doesn’t have insurance. So the question is, do you want to live in the kind of society in which this happens?

    Where exactly does Krugman call this a failure of the market, Steve?

  7. Brummagem Joe says:

    “So the question is, do you want to live in the kind of society in which this happens?”

    Obviously Messrs Verdon and Plunk do.

  8. Brummagem Joe says:

    Steve Plunk says:
    Friday, October 15, 2010 at 16:43
    ‘Tano, If the homeowner offered payment but they refused it’s not slavish adherence to market principles it’s just being cruel and stubborn.”

    This of course would assume that all blind adherents to market principles are not also fairly stupid as a rule.

  9. John Burgess says:

    “Hello, GEICO? I’m stopped at a traffic light and there’s an 18-wheeler gonna smack into me in about 5 seconds. Can I please have an insurance policy?”

    “Hello, All State? I fell off the Empire State Building. I’m fine, but I’m only down to the 44th floor. Can I please buy a million in life insurance?”

    “Hello, US Gummint Health Care? I’m about to get gassed for my heart transplant. I’d like to purchase some of that guaranteed health insurance, please.”

    Cruel? Stubborn?

  10. Brummagem Joe says:

    John Burgess says:
    Friday, October 15, 2010 at 17:10

    “Cruel? Stubborn?”

    Comparisons? How about Idiotic?

  11. taiko drum says:

    “That’s the truly irritating part of the story, the guy offered to pay for services and they still would put the fire out. Cruelty is the only way to describe what happened.”

    I’m no lawyer but couldn’t this contract be considered to be made under duress and therefore invalid in the eyes of a court? So this house was outside the coverage area of the city fire dept for which city residents pay taxes to fund. This resident refused to pay the fee for fire services. Wouldn’t other county residents begin to refuse to pay the fee if they knew that the fire dept would put the fire out anyway? Would city residents, who pay taxes to fund the FD, be able to opt out as well? As far as I’m concerned, the homeowner took his chances and lost.

  12. Andy says:

    @Verdon,

    Not all markets are private. By making a public service optional, the government creates a (monopolized) market for it, in which citizens decide whether to purchase the service or not. Unfortunately, in this case the market was somewhat imperfect, and all goods were not available at all times. Thus the house burned down even though by all accounts a blank check was offered.

    Krugman’s point may be (I hesitate to speak for a Nobel Laureate) that the existence of a highly imperfect market tends to be worse for society than the absence of any market. Perhaps eliminating the market- taxing people for fire service and then providing it to everyone- would make those people, on average, better off.

  13. Ben says:

    “This resident refused to pay the fee for fire services. Wouldn’t other county residents begin to refuse to pay the fee if they knew that the fire dept would put the fire out anyway? Would city residents, who pay taxes to fund the FD, be able to opt out as well? ”

    That is the exact definition of the freerider problem. And it is also the problem with preventing health insurance companies from denying coverage for prexisting conditions (unless you require all people to have already bought coverage).

    And as much as it pains me to say this, Plunk is right above when he said that this outcome is NOT a failure due to market principles. Any private business would have went out and put out the fire and then charged him like 10 grand for it. No business would have just sat there and watched a guaranteed, desperate sales opportunity burn to the ground. This case has NOTHING to do with market principles.

  14. Andy says:

    taiko,

    The homeowner took his chances and lost, there’s no question. A valid question might be whether the FD should be required to offer to put the fire out (at the last second) for a much higher fee, similarly to how “distressed hiker” charges work. Pay $75 and not worry about it or pay $0 and risk paying $1500 later, not risk your home.

  15. Andy says:

    Ben,

    The market principle is the decision, on the part of the consumer, on whether to participate.

  16. mantis says:

    You all seem to be missing the point that nobody said this had anything to do with the market. At the very least, Krugman didn’t say that, which makes Steve’s entire post just another wingnut struggle with a man of straw.

    I should also note that the reason this story has gotten so much play is that the firefighters were there, standing around in front of the burning house, doing nothing. It’s not like he called and called and couldn’t get them to come out because he wasn’t a “subscriber.” They were already there, and just watched the house burn down. This has nothing to do with the “market,” and everything to do with basic decency.

    It does point out how inadequate a privatized firefighting force would be, and why it’s important for government to provide some basic services for everyone paid for through taxes, but no one is claiming this story is a failure of the free market, just a failure of this fire department to behave in a decent way.

  17. Brummagem Joe says:

    “And as much as it pains me to say this, Plunk is right above when he said that this outcome is NOT a failure due to market principles.”

    Of course technically it’s not due to a failure of market principles. It might however reflect a little inflexibilty (not to mention monumental stupidity) in their application.

  18. taiko drum says:

    Oh, I don’t believe this is a market failure at all, or that was what Krugman was stating.

    “Thus the house burned down even though by all accounts a blank check was offered.”

    Wouldn’t such a contract or agreement be considered to be made under duress, since his home was burning down at the moment of agreement, and therefore be invalid?

    “Pay $75 and not worry about it or pay $0 and risk paying $1500 later, not risk your home.”

    That definitely sounds like a reasonable option if it was policy beforehand but I wonder about the cost of recouping the debt if the homeowner refuses to pay, or is unable to pay, after the fact? I also wonder if there were stipulations in the fire dept insurance policy regarding injury/damage coverage sustained in homes which paid the fee vs homes which didn’t.

  19. PD Shaw says:

    I was thinking about the insurance policy as well . . ..

    Not sure how it fits into the overall discussion, but seems like a logical point of motivation.

  20. sam says:

    Perhaps Plunk will explain to us why health insurance companies cancelling the policies of sick people is just a peachy keen application of market principles.

  21. anjin-san says:

    I am trying to imagine any circumstance where an able bodied man would stand by and do nothing while someone’s home burned down.

    For some reason this story made me think of Roger Olin, who jumped into the icy Potomac River to attempt to rescue Air Florida Flight 90 crash victims. Or Arland Williams, who survived the crash and repeatedly handed a rescue line to to others, sacrificing his own life.

    Then I think back to South Fulton Mayor David Crocker defending this indefensible action, with a chorus of conservative pundits supporting him, and I pretty much want to puke.