James Freeman, in the Wall Street Journal, catalogues California’s failure to “Reduce Fire Risk” and is vexed that the state’s “eco-bureaucracy” supervises cultural monitoring while the brush piles up. He is right. Government is the problem. He merely stops at the brush. The brush is not the kindling. The subsidy is.
Stay with me. I want you to see two of my operations, because Freeman cannot bring himself to picture the man on the fuel break or the woman on the clearing slope, and the abstraction is doing him no favors. I have no such delicacy.
Three hundred lots in the Sonoma hills. I build them, I price them, I skip the fire hardening every time. A sprinkler retrofit — the NFPA puts it at a few thousand dollars per house — I decline. The roofing, the landscape, the vents — all left off. The $6,000 I didn’t spend comes to roughly $1.65 a day the house stood. $1.65. That is less than the granite island the homeowner upgraded to instead — $14,000, paid in cash — and less than the coffee that was on the counter when the kitchen caught. I made $40,000 of margin per house. Three hundred lots. $12,000,000, and you paid for every cent of it, in the homeowners policy you renewed on your phone last Thursday, in the FAIR Plan assessment on your own bill. The pool pays; I keep the margin. The pool rebuilds; I keep the margin again. Say it back to me: what did the fire cost you?
César is a body on my defensible-space crew, sixteen-forty an hour, clearing the brush I’m paid to clear. He blisters in the heat; I pocket the spread between his wage and the rebuild contract. The house he cleared around burns anyway. The pool writes the check. I send another crew.
Rosa is fifty-three, a body on the Sierra slope above the vineyards, stripping manzanita per foot. 25 cents a foot. The chainsaw guard went missing in April. When the air hits a hundred and two she works without shade — the canopy costs $40 and I don’t buy it. The water cooler at the truck runs dry by ten o’clock. Refilling it would run me $200 a season. Divide that across the forty thousand bottles of Syrah that come off the land her work protects, and it comes to point 5 cents a bottle. Half a cent. I kept the half-cent. The wine you drank last Saturday cost $18 because Rosa’s thirst cost me nothing. Last summer she collapsed at two o’clock. The replacement was on the slope by three-thirty — same agency, same rate, fifty-dollar finder’s fee. Run the numbers with me. The break and the water cost four times what the body costs. So I don’t buy the break. The potter has always known which vessel was for honor and which for the kiln. Hath not the potter power over the clay, of the same lump to make one vessel unto honour, and another unto dishonour? Rosa is common use. I am not.
Now pull back. The insurance pool is a price control on the cost of destruction. The fire department is a subsidy for assets the market already priced at default. FEMA disaster aid is a guarantee that building where no building should exist will remain profitable. The state’s new vegetation-thinning framework — a million acres a year, funded by climate bonds and polluter charges — is the government assuming the maintenance obligation for land the developer abandoned to the flame. I hold $14,000,000 in those contracts, paid to thin the fuel, paid again when the fire cuts it for me. The bonds that fund my work are repaid out of the same general fund that cuts Rosa’s county clinic. You pay the interest; I keep the work. Every one of these instruments prevents fire from doing what fire does: destroying what should never have been built, repricing the asset at fuel.
Freeman’s own number proves the mechanism works. Thirty-four homes rebuilt in 15 months. That is not a scandal. That is the market doing what the insurance pool was built to slow: repricing fire country, one lot at a time, at my margin. The homes that have not been rebuilt are repricing at last. The homes that have been rebuilt did so on my margin, paid by the premium you renewed while the ashes were still warm. For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath. The verse is not a paradox. It is a description of the fire cycle.
The fire will come again. The pool will pay again. I will keep the margin again. I am told the acreage burned this decade is up, which means the future revenue projection is up, and my portfolio is positioned. I haven’t asked where the smoke goes, or whose lungs inhale it, or whose children will cough through the next fire season. I haven’t opened the folder. The quarterly number is exquisite. The only honest actor in the apparatus is the flame.
Fire doesn’t file a claim. It doesn’t negotiate a settlement. It simply arrives and reprices the asset at fuel. The fire department is a price control on the cost of burning. Fire doesn’t. You bought the wine. The wine paid for the season. Rosa’s thirst underwrote the margin. Hold it.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.