Fred S. McChesney

Smoke and Errors

Fred S. McChesney*
"The displacement of volunteer fire companies by paid union firemen is a comparatively recent development."
In the rest of the world, those ignorant of history may be doomed to repeat it. In acadème, those ignoring history often just misrepresent it.

Following last September's horrifying events, polymath Paul Krugman informed readers of the New York Times that he had "identified a government agency that, by the usual criteria, should be a prime target for downsizing—maybe even abolition." That agency's work could be outsourced to private companies, with "no question" that the costs of using private companies would be lower. "In fact, many of the agency's employees are paid considerably more than people with equivalent qualifications in the private sector." That agency? The New York City Fire Department.

But all this was just a tease. For Krugman, government is good, so more government is better. (Krugman was just using the fire department to argue his main claim, that government should take over airport security.) Lest Times readers think he was serious about downsizing the public sector, Krugman immediately indicated why in fact fire fighting should not be privatized. "The basic answer is that the city can't write a contract to cover all eventualities, and so a private firm would always have an incentive to pinch pennies at the expense of public safety."

Those of us who caution students against the nirvana fallacy, the logical error of comparing the performance of actual private firms with that of a hypothetically perfect government, always welcome new examples. Today's students, working on their self-esteem, can't help but feel better about themselves when new examples of the fallacy come right from Princeton's tenured ranks. Of course a city cannot write a fully-specified contract with private fire-fighting firms, any more than it writes one with the unionized firemen now found in most big cities. I doubt whether Professor Krugman works with a fully-specified contract, but his Ivy League institution manages nonetheless to soldier on without becoming a government agency.

So why do big cities put firemen on the public payroll? An interesting question, because there are at least two alternatives observed in the marketplace. Many towns employ private firms to provide fire-fighting; economists have studied their performance, with favorable conclusions.1 More prevalent, however, are volunteer fire departments, which used to dominate America, even in large cities, and still are the principal fire-fighting force in most smaller cities and towns. (They also are commonplace in many European countries.)

In fact, the displacement of volunteer fire companies by paid union firemen is a comparatively recent development. For most of our history, only volunteers served American cities.2 Even at zero pecuniary wage, voluntary labor was plentiful, given the more than sufficient compensating differentials: camaraderie, adventure and consorting with the best and brightest. Almost all the Founding Fathers were volunteer firemen.

But with the rise of municipal machines after the Civil War, city politicians discovered in volunteer fire companies a ready source of patronage appointments who thereafter were reliable voters. ("Boss" Tweed, for instance, was a former volunteer fireman.) Simultaneous with the rise of public education and its teacher unions, volunteer companies were legislated out of existence in favor of public fire-fighting units. City pols were not the only heavies in these episodes. The volunteers themselves typically connived in the shift, since those who chose to go on the public payroll were grandfathered into the new municipal unions. Thus, they henceforth would be paid for labor they had previously provided for free.3

Convincing voter-taxpayers that they should pay for something available for free naturally requires some political legerdemain. Arguing that "public service" motivates unionized paid firemen was and remains a standard ploy. Krugman, for example, writes that private fire-fighting is "just not acceptable when the stakes are so high, and in particular when what we need are proud public servants, prepared to do whatever it takes to protect us—people like New York's heroic firefighters—rather than employees who feel that they are paid as little as possible by a company focused on the bottom line. In short, there are some things that governments must do."

Yes, the performance of the New York firefighters September 11 was heroic. But no more heroic than that of Chicago's firemen who fought vastly larger fires for days, not hours, in 1871. Or that of New York's own volunteers in the massive conflagration that destroyed seventeen blocks of lower Manhattan in 1835, well before unionized public firemen were around.

In short, good old-fashioned rent seeking accounts for the rise of public fire-fighting. It explains as well the survival of an entity that, more and more, is losing its raison d'être. Modern building materials are relatively fire-proof, while clothing and other fabrics are flame-retardant. Municipal codes increasingly require sprinkler systems, smoke detectors and other devices to reduce the incidence and costs of fire. So today's fireman has much less to do.4 The number of home and building fires has plunged 40 percent in the past two decades.

With fewer fires to fight, one would expect to find fewer fire-fighters—in a private firm, anyway. But not in a public agency. Despite the 40-percent decline in fires, in the past twenty years the number of paid city fire-fighters has increased by 20 percent. Only in government firms does employment go up as demand and output decline.

Swelling the paid union ranks as fires decrease does create a problem for firemen, though. Taxpayers are unlikely to support budget increases for fire departments if they see firemen lolling about the firehouse. So cities have created new, highly visible jobs for their firemen. The Wall Street Journal reported recently, "In Los Angeles, Chicago and Miami, for example, 90% of the emergency calls to firehouses are to accompany ambulances to the scene of auto accidents and other medical emergencies. Elsewhere, to keep their employees busy, fire departments have expanded into neighborhood beautification, gang intervention, substitute-teaching and other downtime pursuits." In the Illinois township where I live, the fire department drives its trucks to accompany all medical emergency vehicles, then directs traffic around the ambulance—a task which, however valuable, seemingly does not require a hook-and-ladder.

And my town is typical, apparently. According to the Wall Street Journal, "Over the years, firefighters have been designated as the emergency 'first responders' in about 60% of U.S. communities, a niche that many fire departments have carved out for themselves as the incidence of fires has declined." Firemen unions are currently working hard for a mandatory four-fireman minimum any time a truck is sent out.

To get those kinds of rules, firemen must be active politically, and they are. The International Association of Fire Fighters is among the twenty largest labor unions in the country. Through its political action committee (FIREPAC), it has given millions to political candidates, and millions more in soft-money dollars to political parties.

Fire-fighter feather-bedding is no more surprising here than it would be in any other union. But those shenanigans are hard to square with Krugman's claims about "public service," and why we need the current municipal system of paid union men. His explanation of public fire-fighting as avoiding "penny pinching" by private firms rings especially hollow. Penny pinching is not the problem, but the solution to unionized public fire-fighting.

Eventually John Q. Public will understand this, the same way he now sees what motivates other city "public servants" like the teacher unions. But special pleaders can delay the day of reckoning by blowing smoke in taxpayers' faces about what the real issues are. Social scientists trained to examine human behavior in terms of rational advancement of personal interest should see through this, though. More particularly, they should understand the nirvana fallacy. Arguments along the lines of "government should supplant private firms because those firms are imperfect" are indefensible.

These points take away nothing from heroism. And to repeat, New York City's firemen last September were heroes. But heroism ex post in a particular locale on any given day has little to do with the desirable design of civic institutions ex ante.


E.g., Roger Ahlbrandt, Jr., Efficiency in the Provision of Fire Services, 16 Public Choice 1 (1973); see also Jim Peron, "Blazing Battles," Reason, November 1983. The availability of private firms to provide fire-fighting service is another example of the phenomenon noted most famously by Ronald Coase. "Public" services or goods, such as lighthouses, need not be provided by government; government need only solve the free-rider problem by making beneficiaries pay private providers for the benefits received. R. H. Coase, The Lighthouse in Economics, 23 Journal of Law and Economics 357 (1974).


Fred S. McChesney, Prohibitions on Volunteer Fire-Fighting in Nineteenth Century America: A Property Rights Perspective, 15 Journal of Legal Studies 69 (1986); reprinted in The Foundations of Regulatory Economics, vol. III (R. Ekelund Jr., ed.). Cheltenham, UK: Edward Elgar, 1998.


A number of "public interest" arguments were raised at the time to justify municipalization of volunteer fire companies.. Many of these arguments were strikingly similar to the arguments Krugman raises—that is, the need for "public servants" rather than those serving some other master (even though the volunteers were unpaid). But others bespeak an intention that public agencies replace private institutions. For further discussion, see McChesney, note 2 above.


These technological developments also reduce the force of the externality argument typically offered for having municipal fire companies. In the era of wood houses, a neighbor's fire had a high probability of sending sparks onto your roof, which then would ignite your house. Municipal fire fighting thus resembled today's battles against forest fires, as firemen would use ladders to douse roof fires and hooks to pull down houses and create fire breaks. But by the twentieth century, most fire disasters were confined to single buildings, such as Chicago's Iroquois Theater (602 killed in 1903) and New York's Triangle Shirtwaist factory (146 killed in 1911).

* Fred S. McChesney is Class of 1967 / James B. Haddad Professor, LawSchool, and Professor, Department of Management & Strategy, Kellogg School of Management, Northwestern University. His email address is f-mcchesney at

For more articles by Fred S. McChesney, see the Archive.
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