They wouldn't even let him pay up ex post. David notes that this is a government-run fire department and thus the story is not much of a moral reductio on the market. Arguably a private company would behave the same way, sometimes, but it 's odd to claim that government failure reminds you market failure is possible and so let's damn the market. By the way, markets do pretty well at setting up schemes with a penalty for late payment; that's how my mortgage works.The reason this failure by a state agency is used as a "moral reductio on the market" is that the state agency was acting like a for profit enterprise when it collected subscriptions for service, instead of acting like a state agency funded by an equitable tax on all those who potentially need protection from fire.
It is odd for proponents of smaller states and market solutions for the provision of social goods to insist that the results of smaller states and market solutions for the provisions of social goods aren't the fault of smaller states and market solutions for the provision of social goods. Kind of like the Dilemma of Franklin's Pickle, if you are too blinkered by your idealization of smaller states and market solutions for the provision of social goods that you can't see that smaller states and market solution for the provision of social goods leads to having your house burn down when you haven't paid the subscription, idealization of your argument has blinded you to the the implication of your argument.
Let's call this one the Glibertarian Conundrum.
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