How Free-Market Solutions Could Have Alleviated The SoCal Fire

Dangerous wildfires aren’t new to Southern California, but this year’s catastrophe in Los Angeles hit particularly hard. As of this writing, at least 25 people have died, and whole neighborhoods have been destroyed, amounting to 12,000 structures overall. The state’s actions made the crisis worse, both in terms of the negligence that led to the fires and the poor response. Voluntary and market-based practices are proving more agile and resilient. The difference shows how inefficiencies riddle even the most fundamental task of government—public safety—and how privatizing more of these functions can help.

Private Firefighters

During the ongoing crisis, those who can afford it are hiring private firefighters. For instance, a fire company from Arizona hired by prominent local developer Rick Caruso successfully protected his Palisades Village mall. (Caruso, a former mayoral candidate, also used private firefighters to protect his own home in 2018.)These firefighters are more responsive compared to public firefighters, and can protect specific properties with precision. For instance, private teams use advanced fire retardants, high-pressure water systems, and aerial resources tailored to the unique risks of individual properties. Critics have slammed these actions as inequitable, even immoral—private firefighters serve those with means, while the general public and especially the poorest must rely on overstretched public firefighters. But in doing so, they reduce the strain on those same public resources while serving as a model of what public fire departments could do if better organized. And protecting the mall, which employs people (or any other edifice for that matter), will lessen the long-term economic damage from the fires. 

Insurance Regulations

California’s regulatory environment, namely Proposition 103, has distorted the insurance market, particularly regarding wildfire risk. To prevent price gouging by insurers, the state’s price controls mean that insurance rates don’t reflect the risk of building in areas where risk is high—defeating the whole purpose. The price controls, in effect a subsidy for risky behavior, makes property owners less likely to take preventative measures, and insurers have given up. State Farm and Allstate are among firms that no longer issue policies in the Golden State thanks to unsustainable losses.Without these price controls, insurance would take its natural effect and providers would price premiums based on the danger of wildfires and other natural disasters. To reduce their cost, property owners would face incentive to fireproof and engage in better mitigation. They would be more likely to build with fire-resistant roofing materials, which can reduce the likelihood of property damage by up to 70%. Homeowners would also be impelled to locate in less fire-prone areas (more on that below).  Deregulation would open the door for premium discounts for proactive risk reduction. Whereas the political impulse to protect homeowners from higher cost reduces resilience measures.

The Role of Zoning 

California is infamous for its strict limits on density in urban areas, particularly along the coast. On the other side of the coin, many cities, like San Jose, have urban growth boundaries aimed at preventing sprawl. Collectively these laws put residents in greater danger, because they push development further out into land that is more vulnerable to wildfire and less capable of receiving service extensions. As of 2023, 11 million Californians, or 28% of the state’s population, resided in “wildland-urban interfaces,” where fire risk is greatest. A free market in construction would mean more construction could occur in existing urban centers and suburbs, reducing demand in fire-prone regions and placing housing where it could (theoretically, at least) be better served by fire departments.

Public Land Failure

Government mismanagement of public lands has exacerbated wildfire risks. For decades, poor policies have caused forest overgrowth. As of 2020, over 15 million acres needed active management,  according to the state’s Legislative Analyst’s Office, to control overgrowth. Additionally, bureaucratic delays and environmental regulations often impede controlled burns and other proactive measures that could reduce fire risk.Private landowners, whose livelihoods depend on maintaining land and preventing catastrophic fires, tend to better care for their land. Timber companies, for instance, regularly thin and trim their land. Such approaches have been taken by forest owners in Montana, who strategically conduct burns. Thus, selling land that is now publicly held (the federal government owns 45% of land in California) would encourage better management, meaning fires happen less, and are less dangerous when they happen. 

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Even a well-run fire management regime would have trouble up against the fires now engulfing Southern California. But their severity in recent years makes clear that the current paradigm of publicly-run and hyper-regulated land and services has failed. Texas (unsurprisingly) has the opposite approach. Over 90% of land there is privately owned, and landowners partner with fire departments to mitigate risks, leading to fewer wildfires across less acres of the state.To his credit, Governor Gavin Newsom indicated that he’s open to cutting red tape during the rebuild. That would hasten the recovery, and shouldn’t have required a natural disaster to be implemented in the first place. But Newsom’s idea must extend to broader reforms combating the waste intrinsic in public management and monopoly of fire risk. Cover image use authorized under the Creative Commons Attribution 2.0 Generic License.