Economic Analysis of Social Issues 1st Edition by Alan Grant

Exercise 35

Homeowners in many rural areas obtain fire protection by voluntarily enrolling in, and paying a fee for, a rural fire service. In 2010, Gene Cranick's rural Tennessee home caught fire. The fire service sent its trucks to Cranick's neighborhood, but because Cranick had not paid his $7 5 annual fee, firefighters simply watched his home burn to the ground. When the desperate Cranick offered to enroll in the fire service on the spot, he was turned away. Would the benevolent social planner have approved of the fire service's decision to let Cranick's home burn? Was the fire department's refusal to extinguish the fire and accept Cranick's enrollment a good decision for society? Does your answer depend on whether you consider the short run or the long run? Explain.