In this lesson, we will use the topic of fire protection to explore the ideas of public goods, free riding, and externalities. Fire protection is often provided by local governments and funded through county property taxes and other surcharges and fees. In rural areas, fire protection is sometimes funded through special fire protection district taxes or offered on an optional basis to residents of unprotected counties by nearby counties with organized fire protection programs.
In the past few years there have been several news stories about people either forgetting or refusing to pay fire taxes (usually around $75), then watching their houses burn down because the fire department would not assist them when their homes caught fire. This lesson uses those scenarios to explore the ideas of public goods (like security services), free-riding (how do those services get funded if people don’t pay for them?), and externalities (how does your consumption of fire protection affect your neighbors?).