Oh the fireman'sheart is bold and free, His motto is to save, He works without rewardor fee, Hurrah!for the firemanbrave.'


WHY does government itself choose to provide goods and services
(water, electricity, transportation, hospitals, and so forth) when private firms can produce them? The question has become increasingly topical as state and local governments reconsider legal constraints on "contracting out" with private firms or volunteer organizations for a host of municipal goods and services. Perhaps the hottest issue concerns the provision of municipal fire services. Today, different institutional arrangements are used to deliver these services: government, volunteer, and private forprofit enterprises are observed in different cities. The systems are occasionally mixed. For the most part, however, larger American cities are served solely by paid city employees, and private alternatives (either volunteer or for profit) are legally prohibited. Most smaller towns use volunteers, but several are also required to use paid civil servants. The dominance of government fire fighters is puzzling, given the
* School of Law, Emory University. Several persons commented helpfully on earlier drafts. Comments from Louis De Alessi, Robert Tollison, E. G. West, and an anonymous referee are especially appreciated, as are those of participants in the Law and Economics workshop at Emory University. George Horvath of the National Fire Protection Association provided research leads, and Kim Garman and Thomas Gannon contributed research assistance. Special thanks go to Madeleine and Elizabeth McChesney (ages seven and four); during their tours of fire stations with the author the questions addressed here first suggested themselves. ' Song dedicated to volunteer firemen, quoted in Music Had Charms, 9 Am. Heritage 58 (No. 3, 1958). [Journal of Legal Studies, vol. XV (January 1986)] ? 1986 by The University of Chicago. All rights reserved. 0047-2530/86/1501-0001$01.50




eagerness and demonstrated ability of volunteers and for-profit firms to provide fire services.2 The evidence suggests, for example, that private, for-profit production of fire services yields lower average costs than the costs of government provision, for equivalent levels of output.3 Notwithstanding the efficiency of private forms of fire protection, city governments justified their entry into fire fighting in the mid-nineteenth century as a response to market failure in the private sector: the inability to control violence by competing fire fighters. That justification apparently is accepted unanimously by historians of theyeriod. The supposed market failure terminated a period in which fire-fighting services were provided solely by private, volunteer effort. For the first two hundred years following the settlement of North America, private mutual societies and then private clubs produced fire protection services. But within some twenty years (1853-71), the claim that volunteers' "lawlessness" required public enterprise carried the day. Most large cities legislated the volunteers out of existence and replaced them with tax-paid municipal departments (a process referred to here as "municipalization"). Yet it was never considered whether violence could be controlled without dismantling the voluntary arrangements that had hitherto been employed. This article examines the conventional explanation offered for the emergence of government enterprise in fire fighting and rejects it as unconvincing. Section II presents in greater detail the market-failure view of the rise and fall of volunteer fire departments. Section III evaluates the conventional hypothesis from a property-rights perspective. Focusing on Cincinnati (where the first and most celebrated shift to a salaried department occurred) and New York (the largest city to go public), the paper offers an alternative hypothesis, that public enterprises emerged in city after city because they were advantageous to firemen, insurance companies, and politicians. Public enterprise permitted firemen to earn rents by receiving pay for work formerly done at zero wage. It increased insurance companies' profits by relieving them of costs they otherwise would have had to bear. Finally, municipalization gave city officials new patronage positions to bestow. To hasten the shift to public control, politicians had an incentive to tolerate and even to encourage violence, a strategy they pursued by refusing to define and enforce private property rights in fire fighting. The absence of numerical data makes rigorous testing of the conventional and the alternative hypotheses impossible. Sec-

See Jim Peron, Blazing Battles, Reason, November 1983, at 39. 3 Rogers Ahlbrandt, Jr., Efficiency in the Provision of Fire Services, 16 Pub. Choice 1 (1973).



tion IV instead presents considerable qualitative evidence in favor of the alternative interpretation, that the gains to various interest groups accounted for the rise of government fire fighting.



Until the twentieth century, large fires due to carelessness frequently razed entire neighborhoods, even cities.4 Losses in many instances were so great that neither the individuals at fault nor their insurance companies could compensate the victims. The Great Chicago Fire of 1871, for example, began with a single small blaze but burned for three days, destroying 17,500 buildings. Losses from the Chicago fire were almost $200 million. Only some $50 million was repaid by the 201 insurance companies with property at risk, many of which became insolvent as a result of the blaze.5 The Chicago disaster was hardly atypical. The first recorded fire in America destroyed nearly every building in Jamestown in 1608. One third of Boston was lost to fire in 1653; devastating fires recurred there in 1673, 1679, 1711, and 1760. New Orleans was gutted by fire twice in seven years (1788 and 1794). Fire wiped out almost all of Detroit in 1806. Half of Savannah burned down in 1820. The Great New York Fire of 1835 destroyed seventeen blocks of lower Manhattan, in "the most destructive non-military fire the world had known since London was turned to ashes in 1666.",6 Fire destroyed nearly all of San Francisco in 1851, and nearly all of Sacramento in 1852. Flames gutted the ports of St. Louis in 1849 and Charleston in 1861. After 1900, changes in building materials, city design, and fire-fighting technology sharply reduced the number of urban conflagrations. The fire disasters of this century have struck single crowded buildings, such as Chicago's Iroquois Theatre (602 killed in 1903) and New York's Triangle Shirtwaist factory (146 killed in 1911). In earlier times, however, the
4 This section presents the conventional view of the emergence of volunteer and, later, governmental fire fighting in American cities as generally accepted by historians today. That view is summarized in Paul C. Ditzel, Fire Engines, Firefighters: The Men, Equipment and Machines, from Colonial Days to the Present (1976); and Dennis Smith, History of Firefighting in America: 300 Years of Courage (1978). Different accounts give varying dates for some of the events discussed in this section. 5 A Synoptical History of the Chicago Fire Department 55-56 (Benevolent Ass'n of the Paid Fire Dep't of Chicago, 1908). 6 Smith, supra note 4, at 41. Some historians claim the Great New York Fire of 1835 had national consequences. "The losses suffered, and unwise loans made to try to restore them, led to the Wall Street Panic of 1837, which resulted in the most serious depression America had suffered up to that time." Id. at 46. See also Robert S. Holzman, The Romance of Firefighting 31 (1956); John V. Morris, Fires and Firefighters 127 (1953).



possibility of more widespread devastation led homeowners, insurance companies, and city governments to evolve several techniques to reduce the probability and severity of fire-related losses. A. The Early Colonial Period

The danger of fire in the wooden, thatched-roof cities of early America was so great that the first colonists commonly provided for fire protection before they organized police services or the municipal water supply.7 In 1631 Boston became the first town to pass regulations against wooden chimneys and thatched roofs. New Amsterdam (New York) followed suit in 1648, but unlike Boston also appointed fire wardens to inspect homes for compliance and fine offenders.8 In New Amsterdam volunteers were also appointed to patrol the streets at night. They carried rattles to sound the alarm for fires; gathered buckets, hooks, and ladders; and directed the bucket brigades. Boston, however, adopted no enforcement or fire-fighting measures, relying solely on building regulations. As one student of the era remarks, "If fires could be legislated out of existence, Boston would have been spared."9 Instead, Boston's inferior organization of fire protection was demonstrated frequently. "The fire precautions succeeded in protecting New Amsterdam, and later New York, from a major city fire for nearly a century. Boston, however, was less fortunate, and over the next two centuries it repeatedly suffered major fires."'o The two colonial cities were similar in one respect: voluntarism was the primary source of labor. Understandably, in view of the results, the Boston city government's regulations "did not much diminish the fears of many Bostonians anxious to protect their goods and property."" In the early eighteenth century, then, Bostonians began to join together in "Mutual Fire Societies" of about twenty people, formally agreeing that
7 Ditzel, supra note 4, at 6.
8 "Householders at the time were fined twenty-five florins if fire occurred in their homes, and these fines were used to buy and maintain ladders to reach fires on roofs, hooks to pull down burning buildings or buildings in the path of a fire, and fire buckets. All of this equipment was to be 'in readiness at the corners of streets and in public houses, for time of need.' To even better insure fire protection a later ordinance called on citizens to fill threegallon buckets of water at sunset and leave them on their doorstep." Smith, supra note 4, at 5. The importance of hooks indicates the external costs created by a neighbor's fire. Hooks were often used, not just on burning buildings, but to pull down houses the flames had not yet reached in order to create a fire-break. Similarly, other inputs to the production of fire services during this period were chains and gunpowder. 9 Ditzel, supra note 4, at 22. 1o Smith, supra note 4, at 5. ' Id. at 11.



each person would come to the aid of the other to fight fires and stop vandalism and looting. Out of these Mutual Fire Societies grew the familiar system of organized volunteer fire companies. B. The Era of Volunteer Fire Companies

Benjamin Franklin was familiar with Mutual Fire Societies when he moved from Boston to Philadelphia. There, in 1736, he established the colonies' first volunteer fire department, the Union Fire Company. Unlike Boston's mutual societies, the Philadelphia volunteers answered not only their own calls but those of any citizen in the neighborhood. Entry into the industry was free, and new volunteer companies of thirty to forty men were soon established in other neighborhoods. The first fire insurance company was also established in 1736 in Charles Town (Charleston), South Carolina (its Articles of Agreement noting that English firms would not insure colonials). But a 1740 fire that destroyed wharves, warehouses, and 300 houses in Charles Town also bankrupted that firm. Other American insurance firms were established but likewise perished financially after large conflagrations. In 1752 Franklin and others established the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. As did English insurance firms, the Contributionship adopted a "firemark," or plaque, to be attached to buildings to identify policyholders. A second Philadelphia firm, the Mutual Assurance Company, was established in 1786 because the Philadelphia Contributionship refused to insure tree-fronted properties. Trees obstructed firemen and their equipment and also helped spread flames. Owners of the Mutual Company agreed to insure their own treeshaded houses at a higher premium for the additional risks they faced. (Why the Contributionship did not simply increase its premiums for treelined properties is unclear.) It was, at least in part, the success of Philadelphia's string of volunteer fire companies that permitted establishment of the two insurance companies and, unlike Charles Town's company, their financial survival.12 Philadelphia's example did not go unnoticed in other cities, which also took up the organized system of trained, specialized volunteers. The typical volunteer fire department was nonprofit and labor managed. Each had its own constitution and bylaws, and firemen selected their own officers. The willingness of labor to donate its services is noteworthy, as
12 "The volunteer firemen were mostly responsible for the organization and establishment of the first fire insurance companies in America." Alwin E. Bulau, Footprints of Assurance 4 (1953).



firemenfaced considerabledangerand were actually expected to pay for the privilege.13 Memberspurchasedmuch of theirown equipment,including large capital items. For example, George Washingtonpurchasedthe fire engine for his volunteercompany.14 One famousNew York volunteer fire fighter, Zophar Mills, estimated that he personally spent $3,000 on behalf of his fire club in seven years as a volunteer.15 Fire companies instituted strict rules-with financial penalties-for the provision and maintenanceof equipment and performanceof duties. Volunteers tried fellow members for breaking rules, and fines paid by the guilty helped finance company social events and the purchaseof capital equipment.16 To avoid delays in respondingto fires at night, when firemenwould be home asleep, volunteers rentedrooms nearbyor simplybroughtbunksto sleep in the station itself.17 Indeed, "bunking"became commonplaceas cities grew. 8 Not all the volunteer units' activities were self-financed. First local governmentsand then insurance companies established bonus systems, paying the first company or companies to "get water" on a fire."9Firemarksaffixed to policyholders'houses identifiedthe insurancecarrierto whom fire companies would apply for payment. "[T]he marks virtually guaranteedthat [firemen]would receive a bonus for holdingdamageto a minimum."20 Still, the costs in money, time, and dangerthat volunteers incurredwere considerable.
13 "More firefighters are killed in the performance of duty than are the members of any other occupation-more than miners, construction workers, and police officers. The severity rate of injuries among firefighters is the highest in the country." Smith, supra note 4, at 173. "One firefighter is killed on the average of about every three days, and around half the nation's firefighters are injured every year." Ditzel, supra note 4, at 6. 14 Holzman, supra note 6, at 13, 16-17. "5 George W. Sheldon, The Story of the Volunteer Fire Department of the City of New York 20 (1882). 16 "A stranger present at the regular or special business meetings might have been excused for supposing that a principal function of these [volunteer] organizations was the imposition of fines." Id. at 128. Failure to pay fines led to suits and expulsion. Id. at 133. 17 Ditzel, supra note 4, at 64. 18 Sheldon, supra note 15, at 148. '9 According to Herbert T. Jenness, Bucket Brigade to Flying Squadron 136 (1909), bonuses were awarded as early as 1739 in Boston. As this apparently antedates the private insurance system, cities must have taken the lead in paying bonuses, with insurance firms following suit as they were later created. 20 Ditzel, supra note 4, at 37. There is disagreement whether volunteers would put out fires in uninsured homes. John Bainbridge, Biography of an Idea: The Story of Mutual Fire and Casualty Insurance 45-46 (1952), claims that "volunteer fire companies were pledged to respond to every fire." But see Insurance Co. of North America, American Fire Marks 10 (1933): "But let the brigades find a burning house barren of a Fire Mark of any description! Then, with a sigh of 'false alarm,' they turned back, leaving the discomfited householder to his buckets."



There were compensatingbenefits. Volunteers were generallyexempt and fromjury and militiaduty21 sometimesfrom taxes.22Moreimportant, though, was the camaraderie.Volunteercompanieswere, in effect, prestigious fraternities or clubs.23 Provision of services by nonprofitclubs does not imply inefficiency, but heterogeneous clubs "can always be shown to be less desirablethan homogeneousones."24This is illustrated by the compositionof volunteerfireclubs, which were organizedhomogeneously along ethnic or professionallines. In Chicago,for example, members of fire clubs were predominantlyEnglish and German. Savannah's volunteers were divided into white and black companies (slaves being paid by the hour for fightingfires). St. Louis clubs, such as the Union Company(businessmen)and the LibertyCompany(foundryemployees), formed along occupationallines.25 By providingfire services to the city in returnfor bonuses, the clubs were able to finance amenities and activities not available to others.26 They organized sports for members (one of the country's first baseball teams consisted of volunteerfiremen)and undertooknumerouscharitable activities.27 The volunteercompanyprovidedmemberswith social events such as dinners,parties, and parades.28 Perhapsmost important,they also club memberswith useful social connections, includingpolitical supplied contacts. "The camaraderieof early volunteer fire companies provided to springboards betterjobs-not to mention political office. Firefighters could be expected to vote as a bloc for a fellow volunteer; their votes The helped elect seven mayors in New York and eighteenin St. Louis."29 clubs is attested and political value of membershipin fire-fighting prestige to by the list of volunteersfrom the late colonial era: Franklin,WashingHolzman, supra note 6, at 3; Sheldon, supra note 15, at 61-62. In Chicago, for example, volunteers were exempt from payment of the road tax. George D. Bushnell, Chicago's Rowdy Firefighters, Chi. Hist., Fall-Winter 1973, at 234. 23 See generally Mancur Olson, Jr., The Logic of Collective Action: Public Goods and the Theory of Groups (1965); James M. Buchanan, An Economic Theory of Clubs, in Readings in Microeconomics (William Breit & Harold M. Hochman eds., 2d ed. 1971). 24 Todd Sandler & John T. Tschirhart, The Economic Theory of Clubs: An Evaluative Survey, 18 J. Econ. Lit. 1481, 1492 (1980). 25 Bushnell, supra note 22, at 234; John E. Maguire, Historical Souvenir: Savannah Fire Department (Firemen's Relief Fund Ass'n 1906); A. B. Lampe, St. Louis Volunteer Fire Department 1820-1850, 62 Mo. Hist. Rev. 235 (1968). 26 "The firehouse was [the volunteer's] private club. Firefighters carpeted their bunkThere rooms and meeting rooms, planted gardens, put in libraries, and hung pictures.... were more amenities at the local firehouse than in their drab homes." Ditzel, supra note 4, at 74-75. 27 Holzman, supra note 6, at 44-47.
22 28 29 21

Id. at 35.
Ditzel, supra note 4, at 6.



ton, Jefferson,Revere, SamuelAdams, Jay, Hancock, and Hamilton-as well as Aaron Burr and Benedict Arnold.30 In short, the benefitsof fellowship and politics led individualsto organize private clubs. The clubs offered excludable benefits, both social and professional, adequate to generate labor inputs at zero pecuniarywage. To finance their activities, clubs supplied fire services. As a by-product they also supplied votes. Indeed, their ability to produce votes made volunteerfire clubs perhapsthe single most important groupin municipal politics. "Local governments trembledbefore the mighty political force that was the volunteer firemancollectively."31Perhapsno other good or service has ever been so widely producedby privatevolunteerclubs. No barrierto entry preventedother forms of fire-fighting companies(including for-profitfirms)from providingservices. Yet no other form of organization emerged until the volunteers were legislatively replaced by publicly paid fire departments. Especially noteworthywas the choice of private insurancecompanies not to organize their own fire brigades, as they were free to do and as English insurance companies in fact did.32 American insurance firms worked quite closely with the volunteercompanies. In additionto paying bonuses, insurance companies purchased uniforms, fire engines, and other items for donation to the volunteers. They "came to all fires to encourage the volunteer firemen to greater efforts."33They organized "fire patrols," squads of salvage men who removed portable valuables from burningbuildingsand covered immobilepropertyto guard it from smoke and water. (Fire patrolsoften consisted of volunteersalso.)34 They rendered a number of other educational and consulting services.35But insurancecompanies never found it necessary to incur the costs of integratingverticallyinto organizationof theirown fire services; they left that to the volunteer clubs.

Smith, supra note 4, at 18-19. 3 Holzman, supra note 6, at 3. 32 For a discussion of the English fire brigades, see John Kenlon, Fires and Fire-Fighters 226-27 (1913); Robert Considine, Man against Fire: Fire Insurance-Protection from Disaster 91-93 (1955). One writer claims that some American insurance firms maintained their own fire companies. Kathleen J. Kiefer, Flying Sparks and Hooves: Prologue, 28 Cincinnati Hist. Soc. Bull. 83 (1970). She does not document her claim, and this author has discovered no other reference to any such company. Possibly Kiefer confuses the fire clubs with insurance companies' volunteer fire patrols, discussed in text accompanying note 34 infra. 33 Holzman, supra note 6, at 166. 34 For discussion and a list of fire patrols established by insurance companies, see Jenness, supra note 19, at 95-99. 35 Holzman, supra note 6, at 170-71.




The Rise of Municipal Monopolies

Following the Revolution, and as the country spread westward, frontier outposts organized volunteer companies along the same lines as had been found efficient in the East.36 However, the character of the volunteer clubs was changing. The elite, homogeneous clubs of part-time firemen with full-time professions elsewhere gradually gave way to more heterogeneous outfits. Increasingly, clubs included men with little else to do but loll about at the firehouse. Club rolls began to include fewer latter-day counterparts of Franklin and Washington and more of the unemployed and various hangers-on.37 From all accounts, it was the cash bonus system that began to corrupt the elitism of the clubs. Fire clubs increasingly recruited professional boxers and common thugs to battle other companies in order to be first on the scene and win the bonuses. The result was a general rise in violence incident to fires. Sometimesas soon as a company heardan alarm,they would send a smallboy runningaheadto the scene of the fire while they got in harnessto pulltheirengine through the streets. The fleet-footed boy's job was to cover the water supply nearestthe firewith a barrel,or in some otherway obscureit, so that his company could get firstwatereven thoughthey were not firston the scene. Orone company racingdown the street and findingitself behindanothercompanymightjumptheir engineup on the sidewalk,at the perilof pedestrians,and pass theirrival. .... Fist fightswere not uncommonbetween companiesvying for the honorof "firstin."'8 Violence was apparently at its worst in New York and Philadelphia39 where the wealth to be protected and hence the bonuses were greater and competition for the payments was thus increased. Violence by fireman in Philadelphia in the early 1840s was particularly destructive.40 But the most celebrated incident of violence occurred during a fire at a Cincinnati planing mill in 1850. As the story goes, a dozen companies arrived at the fire and a riot ensued for the right to extinguish it. As the firemen brawled,

36 For example, see Bushnell, supra note 22; Lampe, supra note 25. 37 "As time went on, [volunteer clubs] attracted to their ranks a sizeable number of men

who can only be described as loafers, bullies, drunks or thieves." Bushnell, supra note 22, at 238. 38 Smith, supra note 4, at 39-40. 39 See, for example, Morris, supra note 6, at 131-49. In Cincinnati, riots at fires were known as "the Philadelphia system" because of the violence problems for which Philadelphia volunteers had become famous. Geoffrey Giglierano, A Creature of Law: Cincinnati's Paid Fire Department, 40 Cincinnati Hist. Soc. Bull. 79, 84 (1982). 40 Morris, supra note 6, at 139-41.



the fire completely demolished the mill.41 The Cincinnati city government reacted by disbanding the volunteer companies and putting America's first paid fire department into service in 1853. Volunteer clubs resisted extinction, the story continues, but citizen demands for full-time, professional fire departments were too strong to ignore. Other cities followed suit, municipalizing fire services over strong resistance from the part-time volunteers. By 1871, when Philadelphia disbanded its volunteer contingents, most large cities had outlawed private clubs in favor of tax-paid fire departments. Authorities on the subject agree that violence was the cause. More than anythingelse, it was excess rowdyismthat broughtaboutthe knell of the volunteer fire departmentsin the largercities. ... [D]iscipline, it was felt, requireda professionalfire department,underauthority.42 Brawlingwas common . . . and rivalries between companies were keen. ... Businessmen and citizens began to demand a paid, professionallytrained fire

Historians are also in agreement that the "rivalries and jealousies existed primarily because fire insurance companies paid a bonus for putting out a fire in an insured dwelling."44 It is noteworthy that the principal complaint about the volunteer clubs was the violence that accompanied their services. The problem, that is, was not the clubs' efficiency at fighting fires, but violence over the right to fight them. To be sure, the fire-fighting efficiency of the volunteer clubs may well have diminished, for several reasons. As wage rates rose generally, voluntarism might attract lower-quality workers; changes in technology and city size might also make full-time professional forces more efficient. But these changes would only explain why, with no barriers to entry, other private institutional forms would emerge to compete with the volunteers. In fact, no competing organizations did emerge. Even if fulltime professional departments were more efficient, this does not explain why government chose to define the exclusive rights to organize such departments in themselves, and especially to outlaw private competition.
41 The episode of the Cincinnati planingmill brawlappearsin almost all historiesof fire fighting.For example, Smith, supra note 4, at 57. 42 Holzman,supra note 6, at 60-61. 43 Bushnell, supra note 22, at 237-41. 44 Kiefer, supra note 32, at 87. See also Holzman, supra note 6, at 60-61 (insurance companiesresponsiblefor much volunteerrivalrybecause of bonuses).





The economic theory of propertyrights offers several insights into the problemsthat volunteer fire clubs increasinglyfaced, insights that differ from the conventional conclusionsjust discussed. Freedomof entry and competition for bonuses created a classic "commons"problem for the volunteers, one that resulted in increased violence to define rights. Private definitionof property rights to avoid the inefficiencyof violence is sometimes possible.45Private definition of rights may be inefficient or even impossible, however, if the numberof resource claimantsis large. As the numberof claimants grows, private agreementsare increasingly beset by free ridingand Prisoner's Dilemmaproblems.46 Withoutforce, numbers of claimants may doom any effort to define and enforce large propertyrightassignmentsby privateagreement.Its monopolyon the use of force thus may makegovernmentthe only possible definerand enforcer of propertyrights. Traditionalanalyses have tended to view government as a public-interestmaximizerof social welfare, definingand enforcing rightsin their highest-valueduses. In that vein, the conventionalexplanation of city-owned fire departmentsasserts that public-spirited politicians banned volunteers to solve the inefficiencies of violence created by the bonus system. But the public-interestexplanation is incomplete, at best. It fails to consider several apparentinefficienciesstemmingfrom municipalization. Abrogatingthe system of payment to private clubs by insurance companies (and so ultimately by policyholders) created a moral hazard, as
individuals who started fires in their homes no longer paid the direct costs

of extinguishingthem. Perhaps more substantialwere the welfare losses from the new taxes needed to hire laborinputs.47 Ceterisparibus,Landes

45 For example, California miners avoided violence over the limited gold territory by altering contracts to use of the land. John Umbeck, A Theory of Contract Choice and the California Gold Rush, 20 J. Law & Econ. 421 (1977). Contracts, however, must always provide each party with at least as much as he could have obtained by use of violence. John Umbeck, Might Makes Rights: A Theory of the Formation and Initial Distribution of Property Rights, 19 Econ. Inq. 38 (1981). 46 See Terry L. Anderson & Peter J. Hill, Privatizing the Commons: An Improvement? 50 So. Econ. J. 438 (1983). For a discussion of how livestock associations' private agreements to use of Western range lands failed, see Gary D. Libecap, Locking Up the Range: Federal Land Controls and Grazing 18-20 (1981). 47 See John D. Wilson, The Excise Tax Effects of the Property Tax, 24 J. Pub. Econ. 309 (1984), and the references cited therein.



when sufficient and Posner note, it is more efficientto rely on voluntarism labor is forthcomingat zero wage than to tax to pay for hired labor.48 There are several more fundamentalreasons to question the conventional explanationof municipalization.It is importantto note that when they establishedtheir own fire departmentsand bannedcompetitionfrom of changes in the organization privateclubs, cities made two fundamental fire services. They definedgeographicterritoriesfor their own municipal was not companies, and they stopped paying bonuses. Municipalization necessary to alter the first-come,first-servedpropertyrightsstructureor to end the bonus system. Cities could have reorganizedthe provisionof the fire services while leaving rightsin privatehands, as they have done in other industries(taxis, for example). Alternatively,if the bonuspayments were the principal cause of violence, local governments could simply have put an end to the system that they themselves institutedand maintained. Instead, local governmentstook these steps only after municipalizing. Under the conventional explanation also, insurance companies seem to have behaved irrationally.They continued to pay bonuses that engendered counterproductiveviolence costly to the firms themselves, and they continued to make in-kindpayments of fire engines and other items to clubs that impeded efficient fire fighting.
B. Self-interested Definition of Rights

The public-interestview is also inconsistentin viewing firemenas selfinterested definers of rights, while regardinggovernmentofficials as actors in the public interest. A more consistent hypothesis would examine the costs and rewards from definingpropertyrights faced by all actors, includinggovernment officials themselves. Like free-ridingusers of the commons, government officials do not bear the full costs of suboptimal resource use, nor do they share directly in the gains from definingrights optimally. A rational (wealth-maximizing)official would predictably choose among aspirantsto propertyrightsaccordingto the relativecosts and rewardsto him personally.Officials'definitionof rightswoulddepend not on their disinterested calculation of social welfare increases but on their expected personal gains. In particular,governmentofficials might find it advantageousto define rights in themselves-to establish govern48 See William M. Landes & Richard A. Posner, Altruism in Law and Economics, 64 Am. Econ. Rev. Papers and Proc. 417 (1978); William M. Landes & Richard A. Posner, Salvors, Finders, Good Samaritans and Other Rescuers: An Economic Study of Law and Altruism, 7 J. Legal Stud. 83, 95 (1978) ("a legal system concerned with maximizing efficiency would refuse to grant compensation in rescue situations where altruism provided a strong inducement").



ment, ratherthan private, use of resources. Even if nonoptimalsocially, public ownership would emerge when it offered greater net benefits to governmentdefiners of rights. In effect, governmentmust be includedamong the aspirantsfor scarce property rights. From the self-interestperspective, when their net gains are greater from defining private rights, government actors will define them. Whengreatergains are availablefromdefiningrightsin themselves, government officials will so define them. Under the self-interest hypothesis as applied to municipalfire companies, the question is whether some persons found that conversion to governmentownershipworked to their advantage, and whether it was worthwhilefor politicians to effectuate it.49

fire Three groups gained from the shift to taxpayer-supported fighting. The insurance companies, which paid private volunteers per fire extinguished and purchasedfire engines, uniforms,and other things for donation to the volunteer clubs, benefited from having local governments alone pay for both labor and capital. In addition, if volunteer labor was relieved the insurancecompanies becoming inefficient, municipalization of the costly organizationand operationof their own fire brigades.Under ordinary circumstances, the various savings to insurance companies would increase profits temporarilybut would not be a source of permanent rents: as costs fell in a competitive industry, so would premiums. The shift to government fire fightingwould be a source only of limited quasi rents. The mid-nineteenthcentury was not an era of vigorous competition among insurancefirms, however. Priorto the Civil War, local rate-fixing agreementswere concluded amonginsurancefirmsin variouspartsof the country, includingCincinnatiand New York, which proved largely inef-

49 "Individuals with a comparative advantage in the use of political power have an incentive to use the state to redistribute resources toward themselves. At the same time, politicians have an incentive to provide services to buy political support. Under these conditions government ownership may be used partly to mask wealth transfers." Louis De Alessi, On the Nature and Consequences of Private and Public Enterprises, 67 Minn. L. Rev. 191, 199 (1982). For example, public ownership of urban transit emerged as the number of transit users, and thus the potential beneficiaries from any subsequent subsidies, increased. B. Peter Pashigian, Consequences and Causes of Public Ownership of Urban Transit Facilities, 84 J. Pol. Econ. 1239 (1976). A priori, it is unlikely that the same model explains the shift to public fire fighting. Direct income redistribution via government enterprise is only possible when the group using the service differs from that paying for it. In fire fighting, all households are protected by the public fire department, but all pay for the service through their property taxes. A shift from private to higher-cost public fire protection services simply means that everyone pays more taxes than had been paid when the service was provided privately.



fective.50 But a new organization, the National Board of Fire Underwriters, was established in 1866. Its purposes were publicly stated (a generation before the Sherman Act) as the establishment and maintenance of "uniform rates of premium" a "uniform of compensation and rate to agents and brokers."''The NationalBoardestablished475 local collective rate-settingboards, representing90 percent of insurancepremiums and 95 percent of total fire insurance capital.52 "Rates were raised and and rate enforcement was vigorous: "During 1875, standardized,"53 'Schoolmaster' Montgomeryand his assistants, the supervisingagents, had used the birch ratherfreely upon fractiouspupils in the local boards. There had been twenty-nine trials; one hundred and twenty-one local agents had been convicted of violating rules and tariffs; fines had been imposed to the extent of more than six thousand dollars, and, what is The ability of the National remarkable,most of it had been collected."54 Boardto compel collective action and the coincidence between insurance company and firemeninterests were illustratedin 1874, when the Board demandedthat Chicago's city governmentestablisha specialfirepatrolof at least 100men, improvethe firedepartment,andinstituteotherchanges. When the governmentinitially refused to do so, the National Board ordered its membercompanies to cancel all fire insurancecontracts in the city, which they did. City officials then capitulated,and the boycott was lifted.55 The National Boardcartel survivedfor a decade, duringwhich business Local agreementsfinally colbecame more "assured and profitable."56 lapsed, but state government enforcement of rates fixed by the rating

50 Werner Sichel, Fire Insurance: Imperfectly Regulated Collusion 25-26 (August 1964) (unpublished Ph.D. dissertation, Northwestern Univ.). "[T]he [cartel] regulations set down were often not adhered to." Id. at 26. "5 Harry Chase Brearley, The History of the National Board of Fire Underwriters 13 (1916). "The deadly cutthroat competition of the insurance market place, forcing premium rates down and agents' commissions up," allegedly was "choking the profit from the fire insurance industry." A. L. Todd, A Spark Lighted in Portland: The Record of the National Board of Fire Underwriters 8 (1966). National rate fixing was established privately only after efforts at federal legislation failed. Brearley, supra, at 5. It is interesting that consumer groups at the time supported establishment of the national rate-fixing system, though they later complained of the rates set. H. Roger Grant, Insurance Reform: Consumer Action in the Progressive Era 74-76 (1979). 52 Sichel, supra note 50, at 27; Brearley, supra note 51, at 37. 53 Brearley, supra note 51, at 24. At one point, for example, the Board increased rates 30 percent for smaller towns and 50 percent for larger cities. Id. at 35. 54 Id. at 52. 55 Todd, supra note 51, at 28-29. 56 Brearley, supra note 51, at 24.



bureausthereafterreplacedthem." Thus the lower costs that municipalization offered representedmorethantransitional gainsfor insurancecomAs their costs fell, even greater cartel profits would result, first panies. rate underprivate rate agreementsand then undergovernment-enforced fixing. Another group stood to earn substantialreturnsfrom a shift to public fire companies: firementhemselves. Public ownershipoffered them several advantages. Work previously donated without direct compensation now was remuneratedat a civil servant's salary. The inabilityto call on volunteers duringmoments of peak demandfor fire services also necessitated an "inventory"of fire fighters to be maintainedat the station; firemen were paid even when there was no work to be done. The city relieved firemenof expenses they had previouslypaid themselves (equipment, food, and bunks). Not all firemengained. Goingpublicforced the part-timevolunteerwith a full-time profession to choose between the two. But throughoutthe nineteenthcentury the ratio of employed volunteers to those with lower (or zero) opportunitycosts in forgoneemploymentsteadilydeclined, particularlywith the additionof rowdies and even criminalsto the ranks of once-patricianclubs. To an increasing percentage of volunteers, then, a going public promised net benefits. Still, the political costs of requiring powerful group to choose between two desirable occupations gave city choice governmentsan incentive to try to avoid forcingan all-or-nothing on incumbentfiremen. The final group of beneficiariesfrom municipalization were city politicians. Openings for new public employees offered new possibilities for votes and patronageappointmentsand so providedadditionalsupportfor political organizations. Additional tax revenues needed for fire department labor and equipment also gave governmentofficials greater command over resources and new ways to influence voting patterns.58 is It no coincidence that most largecities shiftedto publicfiredepartprobably ments duringthe era of "machine" "boss"city government.Patronage, or the use of municipalemploymentto furtherpoliticalgoals, was character57 State fixing and regulation of insurance rates began at the start of the twentieth century. See Kent H. Parker, Ratemaking in Fire Insurance, in Property and Liability Insurance Handbook (John Douglas Long & Davis W. Gregg eds. 1965). "Regulation" simply meant state enforcement of rates set by insurance rating bureaus. A detailed study of state fire regulation is found in Sichel, supra note 50, who concludes that regulatory agencies did not solve problems of private collusion among fire insurance firms, but instead furthered monopoly. Over time also, fire insurance regulation was increasingly beneficial to mutual firms, at the expense of stock firms. 58 See James Q. Wilson, The Economy of Patronage, 69 J. Pol. Econ. 369, 378-79 (1961).



istic of "boss"government.59 about this time, local governmentbegan At to produce services other than fire fightingthat were already available privately, such as education.60 The move to publicenterprisewas not costless politically,as it required levying taxes. Although the output of fire departmentsis highly visible and so easier to justify politically,61 will voter-taxpayers resist politicians' creationof new patronage jobs if the service is alreadyavailableprivately at zero price. Taxpayers' resistance will diminish,however, to the extent they are convinced that existing services are somehow inadequate.Fireman violence thereforecould be useful to politicians. It is easier to argue for less violence and better service thanit is to arguefor morebureaucrats and highertaxes. Violence furnisheda useful argumentfor local government monopoly,just as greater safety affordeda usefuljustificationlater for suppressingprivatejitneys' attempts to compete with municipalities'
streetcar monopolies.62

In other words, politicians had an incentive to foster some confusion, violence, or other illegality among private-rightsclaimants in order to advance their own claims for government ownership. Its monopoly on force enables governmentto defineand enforce rights.Governmentcould tolerate violence by refusingto define rights, increasingfiremen'sincentives to try to define rights by self-help and, if necessary, violence. Libecap noted the same phenomenon in the federal government'shandling of Western rangelands,where the government's"inconsistencyof enforcement" created "general confusion regarding property rights," which in turngave ranchersan incentive to fence federallands illegallyto define their own rights.63Likewise, public officials had an incentive to withhold police protection from private actors faced with violence by other firemen or vandals and looters. Resulting chaos and violations of law all would furnisha defensible reason for publiccontrolof fire-fighting services.
9 Gerald Gunderson, A New Economic History of America 416 (1976).
60 E. G. West, The Political Economy of American Public School Legislation, 10 J. Law

& Econ. 101 (1967). "' See Cotton M. Lindsay, A Theory of Government Enterprise, 84 J. Pol. Econ. 1061 (1976). Lindsay notes that government enterprises delivering a service also produced privately have an incentive to overproduce those aspects of the services that are most visible and underproduce the service's invisible attributes. 62 Ross D. Eckert & George W. Hilton, The Jitneys, 15 J. Law & Econ. 293, 307 (1972). Likewise, public officials would have an incentive to increase the demand for their services by misrepresenting the amount of illegality by private actors. West, supra note 60, notes a similar phenomenon in the rise of public education, whose supporters argued it was needed for all children to attend school-when education was already universal under a private education system. 63 Libecap, supra note 46, at 33.





The public-interestand self-interesthypotheses have competingimplications. They thus provide opportunitiesfor testing against the available historicalevidence. Attempts to explain the politicaleconomy of government growth typically must rely on descriptive ratherthan quantitative evidence.64This study is no exception; no systematicdataexist for the old volunteerfire clubs. But the qualitativeevidence on volunteercompanies in several cities still permits some comparisonof the two competing hypotheses on government fire fighting. On balance, this evidence casts and tends doubt on the public-interestexplanationsfor municipalization to supportthe propositionthat the privategains of variousinterestgroups account better for the shift. The self-interesthypothesis does not account for every aspect of municipalization,65 it does squarewith the availbut able evidence better than its rival.
A. Violence

has As noted, the conventional explanationfor municipalization been the need in the nineteenthcentury to control firemanviolence. The argument that violence itself, ratherthan gains to various interestgroups, led to municipalizationis unsupportedby the pattern of departmentsgoing public. If violence caused municipalization,the cities with the most violence should have gone public first. Fire-relatedviolence was a biggerand earlierproblemin the largerEastern cities than in the West. A review of contemporarynewspapers and fire company records in Cincinnatifound no indicationof violence until 1845or later,66while problemsin eastern cities begana generationearlier.Yet Cincinnati(1853)was the firstcity to go public. New York and Philadelphia,where violence was worst, were the last (1865and 1871,respectively). In general,althoughthe largercities of the East were most plaguedby violence, "[s]mallercities were the first to reorganizeinto paid departments."67 correlationbetween the inciThe
64 Of these explanations, Borcherding notes: "Unfortunately, almost all have one thing in are purely qualitative and do not permit imputing even in the roughest common-they numerical terms their impact on government spending over the period in question." Thomas E. Borcherding, The Sources of Growth of Public Expenditures in the United States, 19021970, in Budgets and Bureaucrats: The Source of Government Growth 57 (1977). 65 The self-interest hypothesis presented here does not explain why government ownership was chosen rather than creation and regulation of private cartels, the course cities have taken to intervene in the taxicab industry, for example. See Ross D. Eckert, On the Incentives of Regulators: The Case of Taxicabs, 14 Pub. Choice 83 (1973). 6 Giglierano, supra note 39, at 97. 67 Ditzel, supra note 4, at 106-7.



dence of violence and the timing of going public seems negative, rather than positive as the public-interesthypothesis would predict. Though it tends to refute one implicationof the public-interestmodel, the negative correlationbetween violence and municipalization does not prove thatthe interest-grouphypothesis is correct. Indeed, a principalweakness of the self-interest model is its inability to generate testable implications on the timing of municipalizationacross cities, which would first requirea suitable measure for violence. The self-interestmodel predicts that individualclubs would take some steps to control the violence and definetheirown propertyrights.Thereis scattered evidence to that effect. Firemen adopted uniformsand badges to separate themselves from bystandersat fires and so reduce lootingonly uniformed firemen would be allowed inside police lines to enter For burningbuildings.68 similarreasons, New York firementook to wearing red shirts.69New York volunteers tried to end fights over access to water hydrantsby forming"hydrant companies,"which were to supervise hydrant use.70 Several Philadelphiacompanies agreed to use different streets when respondingto an alarmto avoid potentiallyviolent confrontations.71 Apparently,none of the privateagreementssucceeded for long, doubtless because of the incentives to cheat on the cooperativesolution. More instructiveperhapsis the municipalresponse to violence. Even if volunteers tried to define rights so as to control violence by their own members,the self-interesthypothesis predictsthat city hall had an incentive to let violence persist, or even to further it. There is considerable evidence, in fact, that lack of cooperation and active interferencefrom police and politiciansplayed a large partin municipalviolence. One company in Boston solved the problemof violence over access to sources of water by equippingan engine to carryits own water. The city government outlawedthe innovation.72 In New York efficientfirefightingrequiredcooperation between firemenand the police, as the latter were responsible for detection of fires and maintenanceof order at the scene. Police, however, simply refused to turn out for fires, apparently with impunity. "[P]revention and detection of looting and thievery at fires [in New York], as well as the preservationof order at fires, were primarily police
Sheldon, supra note 15, at 65-70. Supposedly this inspired Garibaldi, who was living in exile in New York when the new uniform was adopted, to use the same uniform in Italy for his revolutionary army. Holzman, supra note 6, at 38. 70 Ditzel, supra note 4, at 66. 71 Morris, supra note 6, at 78-79. 72 Ditzel, supra note 4, at 62.
68 69



functions. A fire alarm was a signal for the sheriff, deputy sheriffs, constables, and marshalls, just as it was for firemen, inhabitants, the mayor, the recorder and alderman. . . . Yet the city's magistrates were hard put to enforce this provision of the law: the fact was that constables and marshalls continued to resent and evade this duty."73 New York's chief engineer, Alfred Carson, complained persistently to city hall about the lack of police protection, as did his predecessors,74 but the politicians were unresponsive. I have had many of these villains arrestedfor upsettingour engines, cutting the hose, beatingour firemenalmost to death, etc., but they were no soonerin prison than the captains of police, the Aldermen,andjudges of police would discharge them, to commit fresh attacks on firementhe following night. ... Some means shouldbe devised wherebythe firemenmay be able to performtheirduty without incurringthe dangerof having their limbs broken, or their lives jeopardized, by these desperadoes.It is useless to look to the policejustices for the remedy. THEY is influence thesevillains so great.75 of DARE NOT APPLY the political IT, Similar problems existed in Cincinnati. In March 1853 the Cincinnati Daily Enquirer wrote, "These rowdies ... are beyond the reach of moral suasion, and seemingly as far beyond the reach of civil restraint. ... Why is it tolerated? everybody asks. Where are the police? exclaim others. Ah, it is election times, others respond, and the paid guardians of the city will do nothing to hazard their chances for votes! ... [The rowdies] are dealt with tenderly and mildly."'"76 Sometimes the political interference was more direct than mere refusal to enforce the law. Chief Engineer Carson once expelled William (later "Boss") Tweed from the fire department for leading his company in an attack on another. But "Tammany knew a good man in the making and he was quickly restored to his post."77 Here, then, is an important implication of the self-interest hypothesis corroborated by the evidence. Volunteers faced substantial problems from city police and politicians' toleration and even encourgement of violence. B. Hiring

Also probative is the evidence on hiring for the paid positions. Under the public-interest hypothesis, cities would use some form of merit selec73 Stephen F. Ginsberg, The Police and Fire Protection in New York City: 1800-50, 69 N.Y. Hist. 133, 140-41 (1971).
74 75

Id. at 149.

Reports of New York Chief Engineer Alfred Carson, quoted in Morris, supra note 6, 138-39, 141. 76 Quoted in Kiefer, supra note 32, at 102. 77 Morris, supra note 6, at 142.



tion to attractthe best firemenand screen out the violent and unfit. The self-interesthypothesis predictsthat instead volunteerswould be allowed under "grandfather"clauses into the paid system, and that even some violent volunteers would find employment. No case has been found in which a city used meritcriteriafor the new of positions. Grandfathering volunteers was routine. An editorialin the in MemphisDaily Appeal in 1858,surveyingmunicipalization othercities, noted that when a department went publicit was the volunteerswho were selected for the force, and that they were paid well.78 In Cincinnati,following the decision to go public, "[a]ll the volunteer companies were eager to become paid organizations."79 In New York, "all the engineers and firemen,and nearlyall the privatemembersof the new companies ... hadbeen membersof the VolunteerFire Department."80 In city aftercity, the new paid fire chief was also a former volunteer.81 Arguably, hiring of former volunteers is not inconsistent with the experience can be a proxy for public-interesthypothesis, as fire-fighting if quality rather than patronagewas the reason for grandquality. But fathering,the paid spots would be rationedaccordingto length of volunteer experience. There is no evidence that seniority as a volunteer was ever a factor in awarding the more limited number of new municipal positions. Other aspects of the hiringprocess offer perhapsmore persuasiveevidence against the public-interestmodel. As the patronagemodel would predict, paid New York firemen were requiredto be city residents-a criterion seemingly unrelatedto one's fire-fighting ability but important for voting purposes.82In New York, the position of Fire Commissioner was explicitly designated a patronage appointment.83Chicago's new municipaldepartment"was exploited by politicians,beinglooked uponas part of the spoils system," as even the paid firemen themselves admitted.84Further, even the most violent firemen also got government jobs. As new chief of Cincinnati'spaid department,the city "chose one of the mightiestbrawlersof the volunteer system."85
78 The editorial is cited in James Boyd Jones, Jr., The Memphis Firefighter Strikes, 1858 and 1860, at 53 (East Tenn. Hist. Soc. Pub. 1977). 79 Kiefer, supra note 32, at 105. 80soSheldon, supra note 15, at 463. 81 For example, James Boyd Jones, Jr., Mose the Bowery B'hoy and the Nashville Volunteer Fire Department, 1849-60, 40 Tenn. Hist. Q. 170, 181 (1981); Jenness, supra note 19, at 86 (Philadelphia); Lampe, supra note 25, at 255 (St. Louis). 82 Kenlon, supra note 32, at 250. 83 Id. at 259. 84 Benevolent Ass'n of the Paid Fire Dep't of Chicago, supra note 5, at 59. 85 Holzman, supra note 6, at 69.



The public-interestexplanationof municipalization emphasizes that it occurredover strongoppositionfrom the volunteers. But the facts appear otherwise. Acquiescence, not obstruction,was the rulein city aftercity.86 The volunteers' acquiescence is all the more remarkable, given that some would certainly have preferrednot to lose their full-time professions in order to remain firemen. But here too, the hiring patterns reflect the volunteers. Despite claims that municipalidemandsof the grandfathered zation was needed to ensure a professional, full-timeforce, cities often began by paying firemenpart-timefor work that earlierwas volunteered and allowed them to keep their full-timeprofessions. For example, CinFiremen concinnati hired firemen only part-timefrom 1853 to 1873.87 tinued their full-timejobs but received an annual salary to provide services they previouslysuppliedas volunteersat zero price. Savannah'sfire departmentwent paid in 1875, but was not limited to full-time firemen until 1890.88 Boston began by paying firemenper fire extinguished,then switched to salaried part-timelabor before finally moving to a full-time paid system.89 On two occasions, however, volunteers successfully resisted cities' attemptsto assert control over fire fighting.In Cincinnatithe City Council ordered confiscation of the equipment of one company involved in the planing mill brawl, effectively disbandingthe club. The volunteer company successfully sued and had the City Council's orderinvalidated.90 In 1836 New York City passed a resolution installing a paid maintenance crew in each company and setting a $500 salary for the assistant engineers, who were to supervise the maintenancemen. The City Council also fired the volunteers' chief engineer. The firemenreacted with a general strike, then went to the polls and voted out enough of those backing the resolution to secure its repeal.91 In both the Cincinnati and New York rebuffs to attempted political control, volunteers defeated plans that did not include provision for salaried firemen. The New York press of 1836 noted that the assistant engineers"cheerfullyconcurred"in the resolutioncreatingtheir salaries,

86 For example, Jones, supra note 81, at 180 ("instead of striking, volunteers acquiesced" in Nashville); Lampe, supra note 25, at 257 (St. Louis volunteers disbanded, sold equipment, and gave proceeds to charity); Giglierano, supra note 39, at 90 (Cincinnati volunteers "disbanded in a fairly orderly manner"). 87 Kiefer, supra note 32, at 105. 88 Maguire, supra note 25, at 34-37. 89 Giglierano, supra note 39, at 80-81. 90 Kiefer, supra note 32, at 92, 106 n.5. 91 The New York incident is discussed at length in Stephen F. Ginsberg, Above the Law: Volunteer Firemen in New York City, 1836-1837, 67 N.Y. Hist. 165 (1969).



but there was nothing in it for the rank and file.92 Indeed, the resolution specified that the paid maintenance crew could not be firemen, but only outside government appointees. When municipalization was attempted a second time in 1865, the New York volunteers reacted docilely (despite predictions of violence and destruction). Rather than striking as in 1836, they quietly inventoried all their equipment for delivery to the city. Unlike the 1836 resolution, however, the new legislation provided that firemen themselves were to be paid, not just the engineers. No merit standards were used to select the paid firemen, although New York eventually adopted rigorous mental and physical examinations to select new firemen.93 Instead, as noted above, the new paid force was simply appointed from the ranks of the volunteers. C. Insurance Companies and Bonus Payments

The public- and self-interest models have competing implications for bonus payments. The conventional view sees city governments as intervening to halt a wasteful and destructive system of private insurance bonuses. This public-interest model cannot explain why governments continued, or even increased, their own bonus system during the volunteer era, if it was the source of violence. The self-interest perspective notes that some violence was actually beneficial to patronage-minded politicians but not to insurance firms. Thus one would expect to find that city-paid bonuses were of increasing prominence during the period of violence, and that private firms were actually reducing or ending the payments that fostered violence. One would also predict that insurance firms would reduce in-kind contributions to volunteers, but that municipal contributions would increase. The evidence on bonus and in-kind payments is meager, but what is available supports the self-interest hypothesis. First, the relative importance of private bonuses appears slight. In Boston volunteers successfully struck in 1823 to have the city's bonus raised from $15 to $65 for the first company to reach a fire. At almost the same time in New England the regular bonus payment of the Hartford Fire Insurance Company was only five dollars.94 Nor were the insurance companies indifferent to the incentive effects of bonuses. The case of the nation's first firm, the Philadelphia Contributionship, is revealing. for It had been the custom of the Contributionship many years prior to 1845to distributeamong approved volunteer units sums of money totaling a thousand
92 93


Id. at 172-73. Kenlon, supra note 32, at 251-54. Hawthorne Daniel, The Hartford of Hartford 50 (1960).



dollars a year for their encouragement.As the years passed and the volunteer companiesmultiplied,.. . [a]lltoo often rivalcompaniesmeetingat the scene of a fire fought each other instead of the flames. Efforts of the Contributionship to correct the situationby publishingregulationsfor their conduct did not appearto have much effect. In [1842],the committeechargedwith distributing customthe ary thousanddollarswas cautionedthat the money shouldbe given only to those companies characterizedby orderly conduct. In the following year, 1843, the Mechanics Engine Company in applying for financialaid stated that they had "never been engaged in any of those riots which have lately thrown so much odium on the Fire Department." The next year . . . found the fire companiesunusuallyrestive and disorderly, and opposed to reformslaid down in an ordinancepassed for the betterregulating of their conduct. Their behavior at this time broughtmattersto a head, and the discontinuedits programof financialassistance.95 Contributionship Similarly, the importance of private, in-kind contributions seems to have declined over time. While insurance firms provided many of the early hand-pumper engines used by volunteer clubs, their role once the volunteers switched to steam engines was slight compared to that of municipalities. For example, the first steam engine used in New York City was donated by insurance companies, but thereafter new engines were purchased by the city.96 The role of the insurance companies in municipalization itself is also consistent with the self-interest model. Insurance companies worked (sometimes covertly) to introduce paid fire departments in many cities97 and played an especially active role in the municipalization of New York firemen. "As the new legislation for a paid department was debated, fire insurance companies combined forces to expose as many derogatory facts and rumors against the volunteer system as they could uncover or exaggerate."98 Insurance companies had a $50,000 fund for lobbying in favor of municipalization and were also accused of bribery to secure passage of the municipalization act.99 Apparently, then, municipalization did offer substantial rents to insurance firms, at least some of which were dissipated in rent-seeking behavior to secure passage of legislation.

95 Nicholas B. Wainwright, A Philadelphia Story: The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire 116-17 (1952). 9 Sheldon, supra note 15, at 87-88; Morris, supra note 6, at 171. 97 Holzman, supra note 6, at 171. Insurance company support of municipalization is said to have been surreptitious in order to avoid problems with volunteers. See, for example, Wainwright, supra note 95, at 143-44 ("agitation in favor of a paid department was favorably looked upon by the Contributionship despite the fact that it could take no open part for fear of offending the volunteers"). 98 Morris, supra note 6, at 193. 99 Id.





The interpretivediscussion here is not conclusive. In the absence of a fully specified model of municipal government behavior, which would include all the potentialcosts and rewardsto public and privateactors of different systems of propertyrights, the researchercan only note weaknesses and contradictions in the currently accepted explanation for municipalizationand illustrate the improvementsfrom applyinga property-rightsmodel. Further,lack of systematic data on the old volunteer fire clubs makes any rigorous test of the competing hypotheses impossible. Still, the model used here does provide some illumination.For over a century, historians and students of municipalfire departmentshave ascribed the rise of paid departmentsto marketfailure remediableonly by firms. On both theoreticaland emgovernmentownershipof fire-fighting pirical grounds, the public-interestrationalefor municipalenterprise is weak. Redefinitionof propertyrightsshort of governmentownershipapparentlycould have resolved most, if not all, problemsof violence. Public ownership was advantageous, however, to volunteers, insurance companies, and politicians. The available evidence suggests that the emergence of paid fire departmentsmay be better explainednot as a response to marketfailure but as a source of political patronage.

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