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| A thing of the past? | |
In the wake of the government's failure to
protect people and property in Canberra last Saturday perhaps it is appropriate
to examine more closely the role of government. Imagine what would happen if the government issued a decree that
- After the end of the month it would no longer support fire-fighting services.
- All fire-fighting assets would be auctioned off at end of the month to the
highest bidder.
- Buyers could do whatever they liked with their new assets.
Readers who want to imagine hundreds of people watching their homes burn
down without a fire-truck in sight won't have to try hard - it happened in
Canberra last Saturday even under the highest taxing government in Australian history. Such fire-fighting assets would be bought by the insurance companies. Why?
As soon as a company sells you insurance, they
have an interest in not having your house burn down. As soon as a company sells
insurance to a high-rise lessee insuring people in their premises, they have an
interest in those people not burning to death, or dying of smoke inhalation. If your house were burning, it would be in your insurance company's
interest to send around someone to try to put it out - they wouldn't have to
pay out on the insurance. If you were in a burning high-rise building, it would
be in the lessee's insurance company's interest to send someone around to
try to rescue you - they wouldn't have to pay out on the insurance. All people would have to do if there were a fire is to let their insurance
company know, and leave it to them. While there may be some free-loaders who ring up and say "I don't have
insurance, but my neighbor's place is insured for 1 Million, and it's likely
to go up too, you might like to dump some water on my house", but so what?
There may be some confusion about which insurance company to call, but it
wouldn't matter. Insurance companies know that fires spread, and it would be in
their interests to let the appropriate insurance company know. Putting out
bush-fires would also be in their interests because extinguishing fires before
they reached city suburbs would be in their interests. In practice insurance companies may even pool their resources and use the
same fire trucks and stations, so they would get the same (or better) economies of scale as
the government. Why would this be better than the existing system? Because multiple
insurance companies would compete, and individuals
could choose the one which gave them the best value for money. The problem with
a government juggernaut forcing people to pay taxes and handling all services is
that the what-if experiments can't be run in parallel. A politician can simply waffle
on about 'unforeseen circumstances', 'the improvements we are
currently implementing' and 'it could have been worse with a different
system', whereas private companies would be compared on the value they
were actually returning to their clients. And all without forcing anyone to
join if they didn't want to. An efficient system which saves lives and property without initiating or
threatening force against anyone? Nah - the government would never let it
happen.
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