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Fire Safety Regulation in Northeastern Santiago, Chile

by John M. Cobin
Visiting Professor and Policy Consultant
Universidad Francisco Marroquin


This paper extends my previous study of fire safety regulation in Baltimore by presenting similar evidence from northeastern Santiago. Like the dramatic increase in Baltimore through 1994, structural fires per capita in northeastern Santiago have soared 8.9 times since regulation began in 1929 despite massive increases in building safety regulation. I also review general safety theories, relevant reports of fire tragedies worldwide (highlighting construction or inspection failures), policy proposals for safety regulation, and other pertinent data. The evidence strongly support explanations from public choice and knowledge theories about why fire safety regulation would be ineffective in both Baltimore and northeastern Santiago.

Recent scholarly work has criticized the effectiveness of building regulation aimed at promoting the public interest through alleviating fire dangers (Holcombe 1995, pp. 79-106, Foldvary 1994, pp. 114-132, 190-193, Cobin 1997, pp. 6-46). Those studies provide evidence that suggests that confidence in building safety regulation may be overrated. Indeed, it is not clear that such regulation has provided better social benefits than would be available in the market. This paper extends that research by considering fire data in northeastern Santiago, Chile, where building safety regulation has existed since 1929. Correspondingly, present theories about safety are summarized, and some apropos current events and policy issues are noted.

Most building regulation stems from concerns over fires (as was the case in Baltimore, for example), although other elements, like earthquake or hurricane safety, and the promotion of sanitation, have also been important factors (Cobin 1997, p. 7). Conformably, from its inception, building regulation in Chile has focused on earthquakes (1), fires, and negative externalities. One reason for this focus is the broad public interest appeal of safety, part of which arises as news of fire tragedies spreads. Indeed, the public is kept well-informed when fire disasters strike. Major fires make headlines, and we need only look at recent reports to see their prevalence.


I. Anecdotal evidence: a force for creating public opinion

Scientists rightly reject the use of anecdotal evidence in deriving theory, largely due to its lack of logical rigor or consistency, but also because the "facts" and events which comprise anecdotal accounts are dubious, fleeting, and often preclude replication. Nevertheless, anecdotal evidence has some importance for policy relevant research because it has a real influence on the public mind. Public opinion is transformed into vote preferences, and elected officials carry out public wishes in order to optimize votes and remain in office. Their policies generate taxes and regulations which have real affects on citizens. Consequently, one task of policy academics is to confirm or refute popular anecdotes. Moreover, policy research may benefit from analyzing anecdotal evidence insofar as it contributes to the creation of real and lasting regulations.

The following sections summarize recent anecdotal evidence which has contributed to the climate of opinion and the continuance of fire safety policies. A predominant theme among these stories is that the market has failed to adequately deal with natural disasters and negative externalities. Yet the most interesting question scientifically is not whether or not the market yields near perfection, but whether government intervention can improve on what markets do provide. Furthermore, policy research should help us determine whether the problems associated with implementing fire safety programs are a function of government failure or market failure (or both).

Due to their inherent weakness as anecdotes, the following stories cannot provide adequate answers to these important matters. However, they do provide insight into why certain fire safety regulations flourish, and perhaps grant insight into whether market or government failure is culpable for disasters. They also provide an opportunity to refute false premises concerning issues such as arson.

Fire tragedies support calls for intervention in the public mind

The public is always stirred by urban fire tragedies. Although examples could be found in many places, it may suffice to note several recent disasters from a selection of urban areas: New York, Seattle, El Paso, New Jersey, Manila, Duseldorf, Río de Janeiro, and Chile. In general, it is interesting to observe the common focus on faulty construction or some failure of the building inspection process.

A February 1993 skyscraper fire in Manhattan injured 35 firefighters and was likely "caused by bad wiring or a faulty heating device" (Queen and Ladd 1993, p. 24). A house fire in Maspeth in April 1997 killed four people, and was caused by "an illegal electrical hook-up" (Janison 1997, p. A3). The January 1986 Belmont Race Track fire, which killed 45 race horses worth $5 million (Blumenstein and Clemmons 1993) continued to impact the public mind for years. A February 1993 fire in an "unlicensed and unregistered" day care center in Queens, with a non functional smoke detector, killed two children (Queen, Simmons and Taylor 1993, p. 5). A fatal December 1994 house fire in Long Island, which killed five children, was blamed on the lack of smoke detectors and substandard construction techniques in the older home (Smith and Segumpta 1994, p. A21). Thirty severely disabled children were killed in a September 1997 house fire in Chile, which resulted from an electrical problem (Sibaja 1997). Likewise, in January 1995, a fire in an older Seattle warehouse without a sprinkler system killed four firemen (Quan 1995).

A fire in an amusement park's haunted house in El Paso in April 1994 seriously burned four people. It is not clear whether the fire was caused by either arson or accident, but it is evident that the park had never been inspected. Fire safety inspectors blamed lack of staff in regulated areas outside of the city limits. Unlike areas within the city limits, where inspections are required yearly, it is difficult for the state to do effective inspections in county areas (Collins 1994a). This disaster was not unrivaled. The facts in the El Paso fire were similar to a New Jersey amusement park fire in May 1984 where eight teen-age boys were killed. Neither smoke detectors nor automatic sprinkler systems were present in either fire (Collins 1994b). Since then, large crowds at Disneyland in Anaheim, California have raised fire safety concerns. People have complained of being "confined" and unable to move at major events (Dickerson 1996, p. D-1).

At least one hundred and sixty-one people were killed in a March 1996 midnight fire in a Manila discotheque. The building was designed to hold 50 people, but had 300 that night. It was the deadliest disaster in the Philippines since World War II. Lax safety standards, said to be common in rapidly developing nations, were blamed (Son 1996). Six owners of the discotheque were charged with "reckless imprudence" and violating the building code, and fifteen "former and current Quezon City officials" were indicted for permitting it "to operate in spite of serious flaws in the design" (Vaughan 1996 and Anonymous 1996a).

Similar concerns were raised after the April 1996 fire with sixteen fatalities due to the inhalation of toxic gases at the Dusseldorf, Germany airport. That fire started when welding sparks ignited roofing insulation (Rochelle and Alexander 1996, p. 10B). In another airport fire, the historic terminal in Río de Janeiro burned in February 1998 due to a short circuit (Anonymous 1998b, pp. A1, A5).

Overall, it seems that the sensitivity of the public mind is heightened to fear fire disasters while the apparent culprit, the failure of government to adequately provide fire safety, is almost universally deflected. Of course, one must be careful to recognize that this anecdotal evidence could hardly provide conclusive evidence that government fails all or even most of the time to adequately provide fire safety. Indeed, these stories could be exceptional. However, they do at least provide a challenge for those who support government intervention to prove that these cases are indeed exceptions and that by and large government provision of safety regulation has improved on the market.

Rigorous fire code enforcement: reports from Los Angeles that bolster public confidence

Urban safety regulation is subject to a number of important economic criticisms, especially from public choice and knowledge theories (2). Nevertheless, it continues to be a key public policy objective in many places on account of public opinion and the incentives for vote seekers that it generates. In fact, many jurisdictions are diligently endeavoring to make fire safety regulation succeed.

In Los Angeles, for instance, fire code enforcement has been particularly rigorous. The city recently formed "a unit to handle all criminal and civil cases involving properties with code violations", citing some recent indictments. The purpose of the new unit is to have "much more control to monitor the city's problem buildings under one roof" (Anonymous 1997b, p. B-4). Enforcement of code violations has been severe at times, with many charges being brought against violators during the last two years. These activities help satisfy public expectations that government is working to protect and to serve.

For example, a Van Nuys owner was "charged with poor upkeep of one his properties", fined $705, and placed on probation for a year (Williams 1996, p. B3). Another man, who was called "one of Los Angeles' most notorious slumlords" was captured after living as a fugitive for eight years. He was charged with more than 100 building code violations for which he was sentenced to 23 months in jail, although his sentence could be extended to up to 56 years on account of probation violations (Abrahamson 1996, p. B-1). An Encino man was also charged with "criminal slum violations" of 22 various fire, health, and building safety code violations. He was earlier fined $12,202, forced to make repairs, and "do 120 hours of community service" (Oliande 1997, p. B-3).

The owner of a dilapidated apartment building in Los Angeles was "charged with 53 misdemeanor violations of city and county building, health, and fire codes" (Tobar 1997, p. B-6). Some apartment owners in Hollywood faced "criminal charges for allowing slum conditions in three buildings" for "38 violations of fire, health, and building and safety codes" and because the owners refused to comply with citations issued by the building safety department. In two of the buildings, tenants were living without heat and there were holes in their walls. Inspectors had found "cockroach infestation, hazardous electrical wiring, a broken central fire alarm system, blocked broken fire doors, trash on the grounds and security bars without quick release devices, which are a fire hazard" (Anonymous 1997a, p. B-5).

Despite their purported successes, such rigorous public policies which apparently positively impress the public mind have not gone without scholarly criticism. For instance, Thomas Sowell contends that the destruction of low income housing through such code enforcement and restrictions leads to other social ills, such as homelessness. He argues that it would be better to realize that we are "inherently constrained by reality", that reality is not constrained by our acceptance of it, and that many unpleasant elements are not readily preventable as many savants would like to believe (Sowell 1995, p. 246). In short, such code enforcement may make social problems worse because they change institutional and incentives structures which lead to indirect adverse economic consequences.

Consequently, even if regulation were made more effective by code enforcement, the betterment due to conformity with the code might be offset by the other social problems generated as a result of the policy. This notion, which has been bolstered by other theorists (like Lester Lave) as well, corroborates public choice and inadequate social knowledge critiques of fire regulation.

Arson bolsters popular support for government fire safety regulation

On occasion, structural fires are the result of arson. A person can rarely be completely safe from arson -- no matter how safely his home is built -- making technological concerns of less value in preventing arson than strict law enforcement. However, some people evidently believe the hypothesis that arson is a function of under-regulation.

For instance, some have claimed that arson might have been prevented in the summer 1994 house fire in Riverhead, New York, where there are many older uninspected and unregulated accessory apartments. Town officials lamented that "they were powerless to prevent the tragedy at the structure" (Freedman 1996, p, A72). Later, with owners facing stiff fines, an amnesty program was offered whereby owners could obtain permits and thus legalize these apartments, helping bring them up to code (Rau 1996). Those officials did not make clear in their press statement why more fire safety regulation would have been able to prevent arson, which could, it seems, equally affect any structure, whether or not it complied with the fire code. Preventing arson, or at least bringing arsonists to justice, is normally the role of the police power rather than a function of building safety regulation.

Indeed, police have been busy chasing arsonists. A wave of some sixty-six arson fires in black churches in the southern United States since 1995 seems to have been spawned by racial hatred (Weintraub 1996, p. 4A). Arson was also suspected in the December 1993 burning of a renowned synagogue in Moscow, although no evidence was found to prove the hunch (Goldberg 1994). Nevertheless, building and fire safety codes do not deal with racial policy. The threat of arson fomented by racial strife has, however, produced market incentives to step up its prevention. Alarmed by the news of the church fires, many religious leaders "are reviewing insurance coverage and security measures to make sure buildings are financially and physically protected against arson" (Sharn 1996, p. 8A). Such market generated care mechanisms are not confined to threat of arson. Firms also have incentives to reduce accidents by improving electrical safety in their plants, even by rewarding good performance (Lawrie 1995, p. 62). Therefore, market provision of safety is a considerable element of fire prevention. Even when fire safety regulation fails, market provision endures to produce vital means.

In reality, arson occurs because of a variety of motivations, and these are rarely, if ever, related to the building or fire code, which are designed to promote safety from accidents primarily, rather than to prevent intentional destructive acts. For instance, arson attacks comprised part of anti-government protesting in Bahrain in March 1996 and May 1996 (Salman 1996). Fire safety regulation is not directed at curbing political violence. Thus, despite popular belief to the contrary, the hypothesis that arson is a function of under-regulation should be rejected.

Moreover, a more plausible hypothesis might be that over-regulation, or at least the provision of public safety itself at times, causes arson. In Long Island, New York, two firemen and a fire police officer were arrested and accused of arson in four fires in 1991 and 1992. It was suggested that their motivation could have been either boredom or the desire to become a hero by stopping a blaze. Other firemen in the area had been similarly charged earlier, causing concern over the pending approval of the department's budget (Witherspoon 1993, p. 22). Likewise, in Cape Town, two naval firemen were detained and questioned in connection with an explosion and fire on a naval base in Cape Argus (Anonymous 1998a). A public choice argument could be advanced that, had the perpetrators not been caught, the fires were set in order to increase public concern and therefore increase the odds of getting budgetary approval for expanded fire protection services. Fire codes will not be very effective when those employed to enforce them become code violators themselves.

Differences in popular opinion about the public provision of fire safety

Calls for more safety regulation

Bureaucrats often complain that they do not have the resources needed to discharge their regulatory tasks well. The United States Department of Transportation opined that it had a very small inspection staff, noting that they are currently not able to inspect more than 11% of regulated underground pipeline accidents. In one accident, one hundred people were injured and eight buildings destroyed when an underground pipeline exploded (Cary 1995, pp. 27, 28). In New York, a parapet collapsed in April 1993, injuring four people. Although a multimillionaire supermarket owner had been fined several times and cited for "failure to maintain a safe building", the defect was not repaired in time. Regulators noted that they only had a small inspection staff, running on tight schedules, making it difficult for them to prevent such problems (Perez-Rivas 1993, p. 6). Santiago building regulators have complained that a scarcity of trained inspection personnel has led to many tragic deaths in apartment buildings with poor ventilation (Acuña 1997, p. 34). In each of these cases, the accidents reported imply a call for expanded safety regulation, and imply the need for larger budgets. Likewise, the persistent and endemic nature of brush fires in Australia has led scholars to commend public policies aimed at improving record keeping and reporting to improve decision making, and a wiser use of subsidies, along with noting the social costs and possible inefficiencies of reliance on volunteerism to raise a fire fighting staff (Hatch and Jarrett 1985, pp. 110-112).

Lawrence Southwick, Jr. and Richard J. Butler conducted an extensive econometric study of fire department demand and supply in larger cities in the United States, considering fire losses, firefighter income, and population density (among other variables). One of their policy implications included "increasing the stringency of fire protection codes; increasing the frequency and rigour of building inspections (as they relate to detection and correction of fire hazards)" (Southwick and Butler 1985, pp. 1061). In other words, they concurred with the popular opinion above that more regulation is needed.

Public fears are heightened by reports of fires, "freak accidents, and terrorist activities" pertaining to modern skyscrapers (Sanger and Henry 1993, p. 84). In light of the Oklahoma City bombing, a New York legislator "called for the passage of legislation requiring state-owned buildings to comply with New York City fire codes" (Alden 1995, p. A23). New York City has the toughest safety codes in the United States, but this fact is no match for terrorism, as was the case in the bombing of the World Trade Center. Yet, some officials argue that there is a "hole in the fire-safety net" because such federal buildings are not subject to the city's code (Phillips and Murphy 1993, p. 29).

These pleas could represent instances where political leaders are trying to enact policy that promotes the public interest. However, it should be noted that, from a public choice perspective, such warnings are congruent with the vote-seeing motive, as well as maximizing departmental budgets and promoting public goodwill for safety bureaucracies. Policymakers have often sought to use fire externalities to their advantage, which inevitably leads to public choice problems. For instance, a century ago, the Buenos Aires fire insurance market seemed to have been adversely affected by interest group pressures or even outright regulatory capture (Jones 1984, p. 125).

Fire safety regulation is not uniform everywhere. In some industries, special fire safety regulation applies. For instance, in the Southern California movie industry, special permits are required for filming special effects and stunts that use fire (Warchol 1997, p. B-1). In St. Louis, special fire safety regulation has been sought for buildings where fireworks are sold (Martin 1993a, p. 1), although some have opposed the measure saying it will indirectly overturn the current prohibition of fireworks sales in the city (Martin 1993b, p. 3). In other words, and corresponding to Sowell's argument, some people think that the benefits of the new regulation might be more than offset by indirect social costs elsewhere.

In Clark County, Washington, regulators have expressed concern that many older buildings would collapse in a large earthquake (although they also note that this problem can be remedied), implying the importance of continuing safety regulation for the public interest (Bishop 1998, p. C1). Likewise, regulators have raised fears of fires in Cape Town, since many public buildings there (perhaps 80% of them) do not comply with fire safety codes (Barnes and Aranes 1997). Moreover, some call for uniform international standards, which would require more regulation, in order to better facilitate product and service design, construction, and equipment supply provided by international companies (Webster 1995, p. 45).

Firefighters in places like Colorado Springs object to houses being legally built in relatively inaccessible places (Foster 1997, p. 10A). Some have further argued that we must overcome special interests (e.g., developers, insurers, lenders, and residents) with respect to building in dangerous or disaster-prone areas. Each should be compelled to subordinate their own self interests in favor of a plan that benefits society, where the National Academy of Sciences decides on an appropriate plan for "building codes, insurance requirements and government roles" (Hunter 1995). Others suggest that regulation should be used to discourage people from rebuilding in hazardous areas, perhaps via stricter codes (even though residents deserve help when disaster strikes). Plus, local government should reduce the possibility of disastrous consequences by "buying out homeowners in the highest-risk areas" (Anonymous 1998c, p. B-6).

Calls for less safety regulation

Not everyone wants more safety regulation, and many voters have raised their opposition to it. For instance, an initiative to create a statewide building code in Missouri was defeated (Ganey 1994, p. 3B). The effort was spawned as a result of the unbridled expansion of the city of Branson. Although there was never any building catastrophe in Branson, some people were concerned about the town's expansion into unregulated county areas (Cobin 1997, p. 13). In Ventura County, California, local legislators favored a reduction in the regulation of farm buildings, since the costs to farmers of that regulation have been high (Chi 1998, p. B-1). In addition, major think tanks in the United States, from both ends of the political spectrum, agree that much safety regulation is inefficient and should be reformed (Marlowe 1997, p. 39A).

In his book, The Death of Common Sense: How Law Is Suffocating America, Phillip K. Howard records instances where overzealous regulation and highly complex litigation have been socially detrimental and opposed to common sense. Regulations now seem to replace thinking, judgment, and accountability (Howard 1995a). Howard notes that stringent fire rules have caused the removal of seemingly innocuous posting of artwork in schools because the code says that paper must not occupy more than 20% of the wall space and not be closer than ten feet from exits. One observer noted the rule gives schools an atmosphere like a "bomb shelter" (Howard 1995c, p. B/1).

A YMCA had completed a renovation when the fire code changed, requiring the installation of a new fire alarm system, costing $200,000. This money could have been used to "provide yearlong programs for a hundred kids" (Howard 1995b, p. 58) Howard complains, "Government acts like some extraterrestrial power, not an institution that exists to serve us" (Howard 1995b, p. 57). "We seem to have achieved the worst of both worlds: a system of regulation that goes too far while it also does too little...we have constructed a system of regulatory law that basically outlaws common sense...modern law has not protected us from stupidity and caprice, but has made stupidity and caprice dominant features of our society" (Howard 1995c, p. B/1). Indeed, corresponding to the theory that inadequate social knowledge will curtail building safety regulation, he notes that "no building code examiner can possibly know all the rules in thick government volumes" and that the main beneficiaries of the proliferation of all the regulation and legislation are lawyers, who now have "endless opportunities" (Howard 1995b, p. 58). "By exiling judgment, modern law has changed its role from useful tool to brainless tyrant" (Howard 1995b, p. 61).

II. Why we have fire safety regulation: scientific and popular underpinnings

What is responsible for building fires?

Building fires are caused by natural phenomena, accidentally, or intentionally. The most common causes are failed equipment, faulty construction, and human error. Yet, while most fires might be prevented by strong building and fire safety codes, arson -- probably the most odious type of fire -- is difficult to prevent by regulation, regardless of how well construction techniques are specified.

Fire tragedies can thus be blamed on natural disasters, faulty construction, failed codes or inspections, or malefactors and delinquents. Moreover, at times, base ideologies have also been held culpable for building fires (and other disasters), and such sentiment has weighed heavily on the public mind. For instance, "greed and ignorance" have been blamed for fatal fires in China from 1993 to 1995, in which thousands of people were killed. One businessman was jailed for two years "for ignoring fire safety regulations" after his factory burned, killing eighty-seven people (Lim 1996). Moreover, major fires can be a powerful means of influencing the public mind toward being more compassionate. For instance, some writers have used fire tragedies as a means to urge employers to take better care of their employees working in "sweatshops" where the work safety environment may not be the best (Gitlin 1996, p. M-5, cf. Der 1993 p. 27).

Theories about safety regulation

Because urban fires are widely considered to be a terrifying nuisance, their reduction is in the public interest. Some would argue that markets fail to provide adequate public fire safety and thus there is need for public provision. Jan K. Brueckner argues that fire protection has properties like a congestible public good, and that public provision becomes more efficient as a city grows (Brueckner 1981, pp. 45, 57). However, we are immediately confronted with a paradox. In the aforementioned tragedies, a dreadful fire destroyed a structure that apparently had fallen under the scrutiny of government regulation. Somehow, these buildings had passed inspection (or were granted continued occupancy), with the owners receiving building and operating permits. Consequently, there is a reason to question the government's ability to provide fire safety effectively.

In my initial study of fire safety, I compiled and arranged the thought of many scholars in order to construct four principal theories about safety regulation (see Cobin 1997, pp. 14-34, plus its bibliography of sources). Note that in some of the following classifications, an author credited with contributing to the perspective included might not have identified himself with it previously. Moreover, if his work contributes to more than one theory, he might find himself under more than one category. Indeed, not every author attempts to provide a complete theory of safety regulation. Thus, on account of the lack of a cogent and coherent theoretical framework, I attempted to contrive one by fitting together relevant theoretical pieces from several useful but often incomplete theories about safety regulation policy. While some overlap is bound to remain, for the most part these theories, summarized below, provide mutually exclusive motifs and perspectives regarding safety.

  • Regulation increases safety but perhaps inefficiently. Scholars who have made important contributions to this view (even if they would not accept it entirely) include W. Kip Viscusi, J.C. Miller and B. Yandle, Lester B. Lave, Wesley A. Magat, Richard Jay Zeckhauser, Carol Chapman Rawie, and Allen D. Manvell.
  • Regulation is an ineffective but desirable placebo. Although regulation may not positively affect safety, it might create a perception of safety which alleviates public uneasiness. Scholars who have contributed pieces that fit into this perspective (which is complied from fragments of interdisciplinary thought) include R. Wilson and A.C. Crouch, Paul Slovic, Marc Pilisuk, Susan Hillier Parks, and Glen Hawkes, J. William Spencer and Elizabeth Triche, Gabor Lorant, William Anderson, and David Bullen, Millet Granger Morgan, and, to a lesser extent, W. Kip Viscusi.
  • Regulation is a public choice phenomenon that primarily serves special interests (3). Hence, the "public interest" in safety may not be met by regulation. In addition to the large body of public choice literature, spawned by scholars James Buchanan, Gordon Tullock, and Mancur Olson, this perspective has been extended to safety issues by Robert Tollison, George Stigler, Jack C. High, Ann P. Bartel and Lacy Glen Thomas, Peter Huber, James Saltzman, John Cobin and, to a lesser extent, W. Kip Viscusi and Richard Jay Zeckhauser (along with a number of practitioners in the building industry).
  • Regulation is unlikely to increase safety efficiently, and perhaps not effectively, because it is always constrained by inadequate local knowledge. Contributors to this perspective, besides those fundamental contributions by Ludwig von Mises and Friedrich A. von Hayek, include Randall Holcombe, Michael S. Wald and Maria Woolverton, John Cobin, Peter Huber, and Albert L. Nichols and Richard J. Zeckhauser. This theory is related to, but sufficiently different from, the first theory above to warrant distinction. Note that in the first theory safety regulation "works" while according to this theory it does not work -- at least not in terms of the public interest.

Accordingly, an economic understanding of costs and incentives tends to bolster the latter two theories. For instance, it is plausible that building regulation might increase the costs of using certified and licensed technicians and thus increase the incidence of do-it-yourself installations and repairs. If so, the regulation might lead to greater incompetence in technical matters of construction and safety and thus indirectly cause more failures and disasters. Consequently, even in the absence of public choice and knowledge problems, it is plausible that building safety regulation will end up reducing overall safety. Furthermore, when public choice and knowledge problems are also present, the propensity for building safety regulation to fail would be exacerbated.

Popular opinion and public policy in fire safety regulation

It may be that few people have questioned the need for at least some fire safety regulation via government provision. However, this fact does not mean that the public interest has been best served by it. Indeed, there could be market alternatives that would provide such services just as well or better. No one claims that markets bring perfection. The issue is simply whether government regulation can serve the public interest better than markets. It is precisely this point which is disputed by public choice and knowledge theories.

Government safety regulation has proven to be onerous at times to both the private and public sector -- even to institutions that purport to serve the public interest. For instance, many educational institutions, often established with the public interest in mind, have been threatened by fire safety regulation. Fire code violations caused public schools in Washington, D.C. to close down in September 1994 (Kelly 1994, p. 6). In Rancho Cucamonga (near Los Angeles), a private school that specializes in teaching talented children more about the fine arts was threatened with closure due to failure to "meet fire and safety code requirements" (Berry 1994b). That school was later forced into insolvency "by a series of city mandated building improvements" (Berry 1994a). The opening of a new school in St. Louis was delayed in part because of problems with fire and building code compliance (Khorll 1998, p. 3) (4). However, some schools are evidently exempt from the stringent sanctions of safety regulation and continue operating in spite of deficiencies (5). As always, such exemptions (or any special privileges) are objects of scrutiny for public choice researchers. The processes of both granting and obtaining such exemption privileges would be ideal candidates.

While government provision has often left something to be desired, markets have succeeded in safety provision. There is evidence that firms, which have an incentive to please customers en route to maximizing profits, establish their own technical and safety standards and maintain their own inspection teams. Such is the case with Hilton International (Webster 1995, p. 45) and with Walt Disney World (Cobin 1997, pp. 112-113 and Foldvary 1994, pp. 123-132).

Notable complaints about fire and building safety regulation


Fire safety has not been the only failure in building regulation in Santiago, Chile. In recent years, there have been many reports of fatal or injurious tragedies in apartment buildings with inadequate ventilation. In Chile, hot water is usually obtained on demand in a "calefon" unit (i.e., there is no hot water tank). The water is heated by flames as it passes through a pipe. These water heaters generate carbon monoxide as a by-product, which can be dangerous without adequate ventilation. In addition to many suffocation cases, there have also been explosions caused by gas leaking into solid concrete apartments with no way to escape, resulting in an inferno when a spark is used to ignite the range.

Problems even arise when the building code and state-licensed architects and engineers are careful to ensure that adequate ventilation is incorporated in buildings. (Indeed, it may be that all modern Santiago buildings are designed well.) However, due to the lack of proper inspections, many contractors have been able to compromise the effectiveness of ventilation shafts by filling portions of them with pipes and cabling.

Some people are complaining that the building codes are outdated and obsolete and that there is widespread shortage of personnel capable of performing inspections. There is also the problem with maintenance, where ventilation ducts have been reported to go without cleaning for long periods 3/4 eighteen years in one case. Thus, Cuerpo de Bomberos de Santiago (which is the private fire department in downtown and northeastern Santiago staffed by volunteer firemen and a handful of salaried administrators) has recently become involved with trying to step up prevention and one mayor has proposed imposing stiff fines for non-compliance (Acuña 1997).

The local gas company has also been taking readings on the parts per million of carbon monoxide in relatively airtight places that are suspected to have problems. To say the least, the frequency of these kinds of problems has made many apartment residents uneasy. When problems are found, often in relatively newer buildings in the more affluent sectors of Santiago, people have been compelling contractors to fix the ventilation system (Rivera 1998).

Regardless of where blame is ultimately placed for these sorts of tragedies, it is clear that Santiago building regulation has failed to protect the public from hazards due to improper ventilation. Apartment dwellers have been confiding in government provision of safety to their peril.


Recent fire and flood disasters in Bangkok have been blamed on poor planning and a lack of disaster preparedness. According to some sources, there are also serious design flaws in shopping malls and department stores (where the number of fires continues to rise), and the fire brigade is incompetent. "Firemen fighting a blaze in Nonthaburi in October [1995] found their standard large-diameter hose connection did not fit the hydrants at the building site." City planners have performed inadequately as well, with recent infrastructure development being best described as "guided anarchy", where such poor planning could produce disastrous consequences (Gill 1995).

Failures of building regulation in other places Government provision of building inspection is being scrutinized all over the world. The incredible destruction of so many approved and inspected buildings in Kobe, Japan, after the 1995 earthquake raised many concerns about the adequacy of safety regulation. The same was true in Florida, after Hurricane Andrew damaged 100,000 homes and destroyed 25,000, most of which had been built to code standards and inspected by the government. Moreover, some two hundred deaths due to major government-inspected building collapses of malls in Seoul, South Korea and Kuala Lampur, Malaysia were manifestations of government failures in building regulation. The venality of the Seoul building inspector, who "confessed to taking bribes", further enlivens public choice theories about the perverse incentives that safety regulators face (Cobin 1997, pp. 10-12). Such perverse behavior also corresponds to the problems with corrupt or inept regulators and delinquent firemen in Manila, New York, and Cape Town noted earlier.

Accordingly, popular opinion and cases provide plausible support for accepting the more critical theories of safety regulation in public policy. Other evidence could also be brought forth in favor of fire safety regulation. However, rather than rely solely on speculation, a scientific analysis must consider the empirical work which has been done, such as my study of fires in Baltimore (Cobin 1997), as well as some new evidence from Santiago. Accordingly, as the ensuing section shows, available data bolster the views of Howard, Sowell, and the critiques of public choice and knowledge theories rather than the other perspectives.

III. Evidence pertaining to fire safety regulation from northeastern Santiago

Santiago, the capital city of country with a booming economy and many years of robust and sustained economic growth, provides fertile soil for examining how well building safety regulation has reduced the number of structural fires per capita. The relatively recent entrance (and use) of fire insurance products, political tensions, and the low incidence of arson adding to Santiago's appeal. Plus, a good data set on fires (which is not always easy to find) covering nearly all of the 20th century was available -- even surpassing the quality of the data set available in when I studied fires in Baltimore (Cobin 1997, chapter 1).

Objective of the Santiago building code

The first building code in Chile, comprising about two pages (6), was legislated after a disastrous earthquake struck Talca in 1928 (a medium-sized city a few hours south of Santiago). The legislation was designed to establish compulsory construction norms for minimum and maximum building height and the selection of building materials, plus a means to retard the propagation of fires and lessen risks due to earthquakes and "other phenomenon". It was also designed to improve hygiene and health conditions, as well as the exterior appearance of buildings (i.e., reduce visual negative externalities).

Fire protections services in northeastern Santiago

There are twenty-two fire departments today in the greater Santiago metropolitan area. The oldest of these, the Cuerpo de Bomberos de Santiago (CBS), was formed in 1863 in response to a tragic downtown factory fire that left two thousand people dead. Beginning in 1903, various parts of the region began to form their own fire departments, with a number of departments springing up (and breaking off from CBS) in southeastern sections of Santiago during the 1930s. Thus, today, CBS services only northeastern Santiago, including the comunas of Santiago, Recoleta, Renca, Independencia, Estación Central, Providencia, Las Condes, Vitacura, and Lo Barnechea (7). The first five of these comunas represent the central and extended downtown area of the city while the last four represent the northeastern and most affluent sectors. Together they comprise the most important commercial zones in Santiago, about half of its land area, and just over one quarter of its population.

Accordingly, the data in this study reflect fires only for those sections of Santiago serviced by CBS. That is, all of extended Santiago up to 1932, and the northeastern sector thereafter. Plus 3/4 though in decreasing numbers 3/4 various smaller comunas and outlying rural regions continued to be covered by CBS until 1963. The CBS data are the oldest in Santiago and probably the most complete available. This data set begins in 1898 (a major fire in the CBS offices in 1891 destroyed most earlier records) and continues nearly without interruption until 1997, although the fire data are missing from 1914 to 1919 and are very incomplete in 1970, the first year of famed socialist President Allende.

As with all archival research, there had to be some interpretation and interpolation in the CBS data set. For instance, the number of structural fires in the periods 1937-1978 and 1987-1994 are not exact and had to be estimated (using one of two methods) from the total fires count using coeval information. The first method simply entailed categorizing each fire according to my best judgment. The second method was to find the percentage of all calls to CBS (including non fire calls, like rescues) that were in buildings and multiply the number of total fires by that percentage. Overall, I believe this effort was quite successful, such that we can be fairly confident that the estimates produced are reliable, only having small difference in most of the figures. Only in a few years were there significant problems, such as unusually large "unclassified" or "unknown" categories, that made it difficult to create a reliable estimate. Moreover, trend or other estimates were used on a few occasions to fill in data gaps, such as the data gap from 1914-1919.

Common CBS jargon posed some difficulties at first, but these were readily overcome. For instance, all fires are not called "fires" by CBS staff. There are "incendios" and then there are "alarmas" or "llamadas a comandancia". Both of these categories are fires. However, there are far less fires in the incendios category, which consists entirely of major conflagrations, whereas the latter category counts all smaller structural or outdoor fires (8). For the purposes of this study, both fire categories were counted and reclassified according to whether they occurred in some sort of structure or not, since only structural fires are relevant to building code considerations.

One important difference between CBS (and other Chilean fire departments) and those in places like Baltimore are the means of financing and managing their activity. CBS receives considerable support from donations and other means in the private sector, although over half of its revenue comes from federal and municipal transfers. However, there are no government employees at the CBS. Its management is completely private. Another important difference is the structure of the labor force. All CBS firefighters are volunteers. Of further interest, not only do these volunteers not get paid to fight fires, they also have to pay to participate in the CBS by covering their own uniform and miscellaneous expenses (9). In addition, employers sometimes frown on hiring CBS volunteers because of the time off they have to take and because of the risks involved to the life and health of such an employee. Apparently, this overall negative net outlay is not a sufficient deterrent to would-be firefighters who apparently enjoy the "thrill" of fighting fires or receive other utility gains.

Figure 7: Volunteers (bars) and total staff (line) per 10,000 population in northeastern Santiago.
Figure 7: Volunteers (bars) and total staff (line) per 10,000 population in northeastern Santiago.

Figure 7 illustrates the number of volunteer firefighters per 10,000 population during the last century (note that the lighter bars represent trend estimates that fill gaps in the time series). The period 1898-1932 includes all of Santiago but 1933-1998 includes only northeastern Santiago (along with some other areas through 1963). These data are augmented by the total number of paid staff (line) in years when data were available. Note that in the early years, some firefighters were paid 3/4 as seen in the difference between total staff and volunteers from 1898-1913.

In 1998, CBS had an average of 1,985 volunteers on call. It also had a paid administrative staff of 130. Thus, the 1998 total staff of 2,115 corresponds to 17.0 staff members for each 10,000 people in northeastern Santiago and just over one staff member for each structural fire. By way of comparison, in 1898 there were 551 volunteers, total staff of 793, 18.9 staff members per 10,000 people, and 52.9 staff members per structural fire. In 1930, the year after fire regulation began, there were 847 volunteers (number of staff unknown), which represents 10.0 men for every 10,000 persons and 4.9 men per structural fire.

These data indicate that while firefighter participation as a percentage of the overall population has remained in a relatively narrow range over the last century, the efficiency of fire fighting has increased dramatically. It seems that fire fighting services are more productive now than ever, doubtless due at least in part to technological improvements, as evinced in Figure 8. In addition, the largely voluntary or market provision of fire safety in Santiago, might tend to mitigate some public choice and knowledge problems, but not entirely, since over half (55.8 percent in 1994) of the CBS budget is derived from governmental sources

Figure 8: Volunteers per structural fire (bars) and per 10,000 population (line) in northeastern Santiago.
Figure 8: Volunteers per structural fire (bars) and per 10,000 population (line) in northeastern Santiago.

Private fire protection services

Scholars have found strong evidence to support the idea that privatizing fire protection services brings considerable efficiency gains without compromising effectiveness. Ole P. Kristensen found that private production of fire protection services is more efficient, considering the case of Denmark where provision is partly private and partly public. Privatizing these services would also improve incentives to improve safety and lower costs (Kristensen 1983, pp. 1, 8). Roger Ahlbrandt found that the most efficient fire protection services are provided privately (and even more effective in terms of response time). A private company in Scottsdale, Arizona produced high quality fire protection services for 47 percent less cost than its bureaucratic counterparts in neighboring towns. This difference is probably due to the fact that bureaucrats maximize their budgets and minimize production difficulties, action which "may be the antithesis of cost minimization" (Ahlbrandt 1973, pp. 1, 3, 6, 14).

Robert W. Poole studied fire protection services in many places across the United States and found that there has been "an overinvestment in fire suppression and an underinvestment in fire prevention" and that the means of financing public fire departments distorts market incentives and is perhaps unequitable (Poole 1980, pp. 305, 306). In America, 91 percent of all firefighters are volunteers in 24,500 fire departments, which creates substantial cost savings, since wages are 90 percent of the total cost of a paid department (pp. 307, 308). Poole found strong evidence that private fire services are far more efficient than, and just as effective as, their public counterparts (pp. 309, 310, 314-315, 325). "The public good argument can be rhetoric that disguises a large and unnecessary subsidy" (p. 315) while private departments or even contracting out many fire department services to the private sector have proven to provide considerable cost reductions (p. 319).

Population and density

Population in the CBS service area has tripled in the last century, and has increased by fifty percent since 1929 when building safety regulation began (824,124 people in 1929 and 1,235,282 in 1997). Accordingly, but unlike Baltimore which had a decrease in population density from the beginning to the end of the study period, population density has steadily climbed in northeastern Santiago, from 434.5 people per square kilometer in 1930 to 985.6 people per square kilometer in 1997, as illustrated in Figure 9. Hence, while Baltimore's population in 1994 and 1919 were roughly equivalent, and its density is declining, northeastern Santiago's population and density have been increasing steadily.

Figure 9: Population density northeastern Santiago (post-1929).
Figure 9: Population density northeastern Santiago (post-1929).

False or unjustified alarms and intentionally set fires in Santiago

Conversations with fire officials in eastern Santiago indicate that arson is rare in Chile. The fire department in northeastern Santiago has kept a fairly good record of intentional fires during the last century, and very few cases of arson have been reported. Nearly all fires that are classified as "intentional" in Santiago have been in trash cans, in barricades or cars (typically during political protests), or in open fields, rather than in buildings. Figure 10 illustrates the data on false or unjustified alarms and intentional fires per capita for the period 1920-1932 in Santiago and, 1933-1997 in northeastern Santiago (including some other areas through 1963).

Figure 10: False and unjustified alarms (bars) with intentionally set fires (line) 3/4 typically not arson 3/4 in northeastern Santiago.
Figure 10: False and unjustified alarms (bars) with intentionally set fires (line) 3/4 typically not arson 3/4 in northeastern Santiago.

False alarms often pertain to technical equipment failures or mandatory runs to fulfill police mandates. Unjustified alarms occur when a person reports a fire but in reality there is none. It is somewhat impressive that there have been so few false alarms, unjustified alarms, or intentionally set fires in northeast Santiago. Specifically, since 1920, there have been only 5,105 false or unjustified alarms (an average of just over 66 per year), and only 4,410 intentionally set fires (an average of just over 57 per year). Only a minuscule portion of intentionally set fires have been arson, according to fire department officials (10).

Since regulation began in 1929, false alarms have increased 7.2 times, unjustified alarms 158.5 times, and intentional fires have increased 163.0 times. However, it is most impressive to consider the remarkable rise in these problems starting in 1960, and especially after 1980. Perhaps this rise can be explained by the expanded use of fire prevention technology, which creates more opportunities for equipment malfunction. Or it could be due to the political unrest in Chile during the period, or even its economic expansion.

Nevertheless, it seems clear that there must have been growing cultural and technological inefficiencies which increased the costs of fire fighting. At present, 21.2 percent of all alarms are the result of false alarms, unjustified alarms, and intentionally set fires. This figure was only 4.4 percent when fire regulation began in 1929, and only 6.4 percent in 1969, just before President Allende took power. Another thing that is clear is that arson is neither a major cause of building fires nor need it be an important concern of building and fire safety regulation in Santiago, in spite of the fact that there is much popular concern about arson in the United States.

Structural fires

The CBS data set may be used to evaluate how effective fire safety regulation has been at reducing fires during the regulated period. In 1929, the Chilean government identified a problem and sought to improve safety conditions for the public benefit by legislation. It is not entirely clear how a simple decree 3/4 putting words on paper 3/4 could improve fire safety conditions. However, it is not the task of public policy research to scrutinize the means or practice of regulating but rather to examine the causes and consequences of it.

As with Baltimore (until perhaps recently), there is little evidence to support the notion that regulation in northeastern Santiago has been effective in reducing the number of fires. Figure 11 shows the number of structural fires per capita in northeastern Santiago for the period 1898-1997. Note that bar data represent real numbers or best counts. In years where the exact number of structural fires was not known, there is a line which gives the second method estimate, while the bar shows the first method estimate (best count). For most of the uncertain years, there is little difference between the two estimates. The data from 1914-1919 are simple linear trend estimates. The 1898-1913 data are for total fires, all of which are assumed to be structural (and thus probably overstate the number of structural fires in those years).

Figure 11: Structural fires in northeastern Santiago.
Figure 11: Structural fires in northeastern Santiago.

Per capita structural fires have increased 45.4 times since 1898 in northeastern Santiago, 9.1 times since 1920, and 8.9 times since 1929. By way of comparison, per capita structural fires in Baltimore for these periods (up to 1994) rose 6.6, 4.7, and 2.6 times. Northeastern Santiago's nearly nine-fold increase may have been less than the over fifteen-fold increase in Baltimore during the regulated period through 1994, but the difference between them might be explained by a variety of things including: cultural and community differences, length of the time series (135 years in Baltimore but only 68 years in northeastern Santiago), or institutional differences, viz., that CBS is a private enterprise run in part by private resources whereas the fire protective services in Baltimore are funded entirely by government.

The increase in structural fires in northeastern Santiago has clearly been more dramatic than in Baltimore. Corresponding with this increase, the building code has grown from 2 pages to 616 pages -- without taking into consideration the additional pages of codes faced by builders from each comuna's local regulations. For example, there are over 68 pages in the comuna of Santiago, 50 in Las Condes, and 102 throughout Providencia (11). There are presently hundreds of bureaucrats involved directly or indirectly in building regulation in northeastern Santiago. Hence, there has been a lot more regulation but also many more fires.

Of course, it is impossible to say what would have happened without the fire safety regulation. Perhaps there would have been even more fires. We also must take into consideration the increase in density, although it seems unlikely that doubling density would alone cause the number of fires per capita to increase nearly nine times. Yet, it might partly explain the increase in the number of building fires per capita.

Southwick and Butler reported that "higher density cities tend to have greater fire losses" but that "larger cities, ceteris paribus, have somewhat lower fire loss rates" than smaller cities (Southwick and Butler 1985, pp. 1061-1062). However, the fact that fire losses are positively correlated with population density does necessarily mean that the number of structural fires with population density. Intuitively, it makes sense that loses from any single fire would be greater when density is higher.

Moreover, given the technological and transportation improvements since 1929 which have improved fire protection services, it seems unlikely that the density change would be the major determinant of the very large increases in the number of structural fires per capita. Nevertheless, we can say this much: there is no evidence that fire safety has been improved by building safety regulation in northeastern Santiago.

IV. Evaluating fire safety regulation

This study indicates that fire safety regulation in northeastern Santiago has not been successful in reducing the number of structural fires or improving fire safety. We might conjure up of many reasons for regulation's lack of success. It could be that there are moral hazard problems now which did not exist before, since home insurance markets have grown considerably. It could be that people are less educated about fire dangers or any other number of cultural problems. Or it could be that technological improvements have brought certain new dangers, that did not exist beforehand, and these new dangers have caused more fire tragedies.

However, none of these conjectures are particularly relevant to public policy research. Policy-relevant researchers do not ask why there are more structural fires per capita. They simply evaluate the effectiveness of a public policy that was designed to alleviate both the incidence of structural fires and negative externalities caused by them. That is, policy relevant research is interested in knowing why public policies or regulations succeed or, as in the present case, fails. Presumably, regulators would be concerned about why there are increased in structural fires per capita, and what or who causes them, before implementing their decrees. Or, perhaps their inability to know these things has been the downfall of their regulation.

This latter prospect represents the pivotal upshot of this study. There are strong theoretical reasons why fire safety regulation in the public interest is doomed to fail, just as it has failed in northeastern Santiago. Public policy is often fraught with public choice and knowledge problems which engender socially inefficient and even ineffective or bad outcomes. Accordingly, the evidence from northeastern Santiago suggest that regulation has failed to meet its stated objective pertaining to fires and the reasons for its failure might well be explained by either public choice or knowledge problems.

Should building fire safety regulation continue as it is, be expanded, or be diminished? If there were evidence to support the proposition that such regulation has indeed reduced the number of fires, or at least held them in check, then it would be in the public interest to continue it. However, since this has not been the case in Santiago (i.e., providing such regulation has led to greater social costs), and given that the number of structural fires has not been reduced, there is reason to question the continuance of fire safety regulation.

This paper has provided evidence to support policies that promote market-based, private building and fire safety regulation. The evidence of structural fires in northeastern Santiago suggest that fire safety regulation by government has failed. If it continues, it must be greatly modified so that it is better equipped to meet its goals. However, there are strong theoretical reasons to doubt that such an improvement is possible. Thus, it would be better to simply replace the current system with more effective market-based regulatory techniques.


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Appendix: An update to Baltimore findings

Evidence from Baltimore shows that structural fires per capita have gone up substantially, in spite of the fact that building and fire safety regulation has increased. Therefore, there is no evidence that regulation has achieved its objective to reducing these fires (Cobin 1997, pp. 36-46).

The primary reason that a building code was enacted in Baltimore was to "more effectively prevent the spreading of fires" (p. 35). Nevertheless, despite an overall decline in the city's density, the number of structural fires per capita from 1859 to 1994 increased over twenty-five times. Up until 1994, the increase in structural fires has been over fifteen times since the building code ordinance of 1869 was enacted. Meanwhile, the number of pages in the building code grew from one page to nearly fourteen hundred pages, and the number of inspectors climbed from one to one hundred and seventy-eight since 1869 (pp. 37, 42).

However, data received since my original 1995 research was completed suggest that a dramatic decrease in fires has occurred. The more recent data are problematic because good fire department records were not kept after 1975, which seems a bit curious given that technological improvements should have made record keeping increasingly easier and less costly. During my original investigation, I went to the Baltimore Fire Department and reviewed printouts of data from 1989 through 1994. I was thus able to ascertain the number of structural fires for those years and the number of total fires for 1993 and 1994. Upon returning to the Department in early 1999 to update the data set, I was given a figure for 1994 that was substantially lower than the original number I saw earlier, and the data for years 1995 to 1997 I received seemed quite uncharacteristic (if not questionable). I was informed that all records prior to 1994 had been destroyed, including those which I had seen previously, making a recounting impossible. Adding to the odd event, apparently there was a personnel problem in the records and data entry section at the time of my prior research, and this trouble might have led to my unwittingly recording inaccurate information (12).

Notwithstanding this possibility, one could question the most recent data. First, the data through 1975, which is available in the City Hall archives, is not lost or doubtful. If that data is accurate, then the recent data suggest that the number of fires in Baltimore per capita has been sharply reduced. Indeed, there is 63.1 percent drop in structural fires from 1975 to 1997 3/4 7,144 to 2,637. The previous numbers seemed to follow a growing trend and the latter numbers seem very uncharacteristic -- even suspicious. How could fires in the city have dropped so dramatically? Perhaps they did so, but that fact would seem unlikely or at least very surprising. Second, the recent data have a very large variance from year to year which has not occurred in most periods. Such a decline is possible of course, but then why was the 1994 Figure A1 received in 1999 dramatically different from the Figure A1 received in 1995? If that number had matched the previous number, we might conclude that the number of fires had dropped substantially. Instead, we are left with enigmatic circumstances. Third, unlike the recent data, the previous data received from the Baltimore Fire Department for 1989 to 1994 did seem to fit the trend. But even if those figures are now suspect, clearly the 1975 (and prior) figures are not. The trend alteration casts doubt about the most recent data.

Figure A1: Structural fires in Baltimore per 1,000 population.
Figure A1: Structural fires in Baltimore per 1,000 population.

Figure A2: Percent change in structural fires in Baltimore.
Figure A2: Percent change in structural fires in Baltimore.

Figures A1, A2, A3, A4 and A5 illustrate these data (note that for structural fires, the differentiated portions of Figures A1 and A3 are trend estimates that fill gaps in the time series).

Figure A3: Total fires and structural fires in Baltimore.
Figure A3: Total fires and structural fires in Baltimore.

Figure A4: Inspection force and building code size in Baltimore
Figure A4: Inspection force and building code size in Baltimore

Figure A5: Population density in Baltimore
Figure A5: Population density in Baltimore

By the end of 1993, the likelihood of at least one member of a household being affected by a fire in Baltimore has risen over five times since 1890 (p. 45). Therefore, I concluded after my initial study that "the data do not confirm the hypothesis that building codes and building inspectors alleviate negative externalities caused by fire" (p. 40). In the conclusion (pp. 45-46), I noted:

    Summing up, most scholars seem to think that it is at least possible for regulation to improve safety, if not as a major tenet of their analysis at least as a matter of presumption. Likewise, there seems to be widespread acceptance of economic definitions of risk and tradeoffs. Moreover, there is general agreement that present regulatory systems are more or less inefficient and often ineffective, except that a few go further by saying that regulation might actually be harmful. The key disagreements in the literature arise from what to do about this problem, and what areas should be regulated by the government rather than the market. On the one hand, many scholars contend that regulation can be improved by acknowledging and manipulating public risk perceptions, controlling or adapting to the influence of the media, and by employing better techniques such as cost-benefit analysis. Government should regulate all areas where market failure is present, especially when it is the most cost-effective alternative. On the other hand, some say that public choice and knowledge problems serve to defeat the good intentions of such regulation. While some level of government regulation is necessary, the market should provide most (if not all) regulation. To the extent that government does regulate, the inclusion of techniques like cost-benefit analysis and/or the expected value approach is essential.

    This study complements the theory of risk and safety regulation by extending the analysis of Huber, Holcombe, and Saltzman, as well as Nichols, Zeckhauser, Stigler, and to a lesser extent parts of Viscusi. It provides empirical results of regulatory policy which tend to confirm some important implications in them as well as Huber, Holcombe, and Saltzman's conclusions, viz. that public choice and knowledge problems make regulation ineffective and inefficient, such that safety is actually reduced. In theory, it is possible for inefficient government regulation to be effective, but the costs will be very high. However, in Baltimore, it does not appear that costly fire safety regulation has been either effective or efficient. Moreover, the Baltimore result raises comparative questions about how well market-based alternatives might do in contrast to government regulation. Perhaps market-based institutions would better avoid or ameliorate both knowledge and public choice problems, and provide a more robust paradigm for comprehending risk perceptions. The main conclusion of this study is that successful government regulation of building safety is unlikely.

However, my conclusion would have to be revised considerably if indeed the recent data were found to be accurate. For then we would see a large rise in structural fires per capita through 1975 (or 1993), and an apparent example of regulatory failure, followed by a large reduction in such fires and an apparent regulatory success. At this point, we must await evidence and for further research to be completed by the Baltimore Fire Department into the data discrepancies.

However, the evidence from Santiago is not in doubt. And in my view, neither was the original data in Baltimore. If a data problem in fact exists, it is likely with the current data set.


1 - The six major earthquakes affecting Santiago in the twentieth century are summarized in the following table. Sources: "Sismos del siglo xx en Chile", October 20, 1998, http :// and "Sismos destructores que han afectado a Chile desde el año 1939 hasta 1987 (49 años)", Anexo 3a, El Sector Salud de Chile y Su Rol Frente a Consecuencias y Desastres Naturales, Ministerio de Salud, Departamento Emergencias y Desastres, 1991. It was not clear if the dollar amounts shown are in real terms or nominative.

Epicenter or most affected areas
Mercalli scale
(12 max)
Losses (US$)
10 or 11
101,500 152,382,988
Santiago to Coquimbo
Santiago and regions 5, 6, and 7

2 - The critique of central planning by Friedrich A. von Hayek and Ludwig von Mises, commonly known as the Austrian knowledge problem, argues that planners will fail to provide public goods and services efficiently, and perhaps not even effectively, since social knowledge is dispersed and fragmented. Even the most erudite and well intentioned planners can not expect to garner enough knowledge to make optimal decisions in the public interest, and certainly not decisions that take into account the subjective preferences of all those in society. Leonard Reid, followed by Milton Friedman, further argued that no one has the requisite knowledge to make something as simple as a pencil on account of all the knowledge that goes into its production. Note that the knowledge problem is not simply imperfect information. Every businessman faces uncertainty and imperfections in information, especially regarding the future. The knowledge problem suggests that it is impossible for government planners to allocate resources or production correctly since they cannot know the pertinent information that is implicit in prices and the market. Firms, as groups of individuals specializing in certain production, can make accurate and profitable local decisions based on cost-benefit expectations. Even though their forecasts will be in error at times, it is at least possible for them to be correct (unlike planners) and, in fact, solvent firms will be correct most of the time. The knowledge problem might partially be alleviated by technology. For instance, the internet seems to be a useful means of updating and disseminating safety regulation information (Gerber 1997, p. 9). However, technology can not come close to wholly or even mostly eliminating the knowledge problem.

3 - Public choices are made when one person's decision is also a decision for another person (or vice-versa). Public choice theory has burst the once-dominant romantic vision of politics by suggesting that people are self-interested in all choices, including public choices. Hence, political actors primarily pursue their own self-interest, leading to distortions in the political process and public provision of goods, services, and regulation (see William C. Mitchell and Randy T. Simmons (1994), Beyond Politics: Markets, Welfare, and the Failure of Bureaucracy, Westview Press: San Francisco, California for an excellent overview of the theory).

4 - Not only schools are affected by fire safety codes. In Seattle, "new fire codes forced many building owners to close their hotels and apartments rather than make expensive repairs" during the 1970s (Wong and Chinn 1995), although some were renovated and now provide good quality low income housing (Del Rosario 1994).

5 - Despite regulatory examples to the contrary, the poor physical condition of a school does not always lead to its closure. Apparently, some schools are not in good (or even safe) operating condition yet continue their business. The Colorado School for the Deaf and the Blind in Colorado Springs reported a wide variety of structural and heating problems, then asked for state assistance to build a residential facility, which would enable the school to demolish some poor quality structures presently being used for that purpose (Thomsen 1997, p. 15A).

6 - Ley numero 4,563 (February 14, 1929).

7 - Much of this information was obtained from fact sheets prepared by the Cuerpo de Bomberos de Santiago or from comments made by Armando Oyarzún Figueroa, Technical Secretary, on July 22, 1998 (3:30pm-4:30pm) or on October 19, 1998 (4:15pm-4:45pm) or on January 8, 1999 (3:45pm-4:45pm) and January 11, 1999 (1:00-1:30pm) at the Cuerpo de Bomberos de Santiago headquaters, Santo Domingo 978, Santiago.

8 - Ibid.

9 - Many such details were obtained from Cuerpo de Bomberos de Santiago, specifically Patricio Contreras, an accountant in the payroll department, in a conversation at their offices on November 27, 1998 (11:00am and 3:45pm) or Cristián Amunategui, institutional manager and assistant to the general secretary who I spoke to on various occasions during my data collection in September to November 1998 in the archives of the Cuerpo de Bomberos de Santiago headquaters, Santo Domingo 978, Santiago. +56-2-672-1204, fax +56-2-695-0113.

10 - Conversations with Cuerpo de Bomberos de Ñuñoa, with a pair of staff members, and also with Cuerpo de Bomberos de Santiago, with Armando Oyarzún Figueroa, Technical Secretary, on October 19, 1998 (4:15pm-4:45pm) and at other times with Cristián Amunategui, institutional manager and assistant to the general secretary.

11 - Data requests were sent by fax in early December 1998 to each of the comunas in eastern Santiago.

12 - Apparently, medic runs (i.e., non fire runs) were being included in the count. Hence, I may have received inflated numbers for the years 1989 to 1994. Unfortunately, it appears that the records from those years have been destroyed, since BFD is only required to keep 3 to 5 years of records. Thus, we have not yet checked those figures (and may never be able to). I asked Captain Morris how this error could have occurred and he said that the woman who was keeping the records at that time had a drug problem and had to be fired on account of it. It is possible that she was the source of the error. The dramatic reduction in the number of structural fires since 1994 does not change the overall findings in my book Building Regulation, Market Alternatives, and Allodial Policy (chapter 1), it would suggest that the increase in structural fires per capita has been less dramatic. Future users of the data set should note that years 1989 to 1993 are suspect. While the figures for those years may well be accurate, they may be inflated by perhaps 30%. There is no way of knowing for sure at this point. The data keeping process is still not computerized at BFD which made me question whether Morris was in effect able track the number of fires accurately. The dramatic drop from 1994 to 1995 struck me as quite odd. Such variance, if accurate, would be remarkable to say the least. Thus, we might as well suspect all fire data after 1988 to some extent. Morris seemed quite confident in the 1994 to 1997 figures, but I would not be surprised if further scrutiny would result in changes to them. One thing I am sure of is that when I was copying the numbers from the data sheets in 1995, I was very careful to obtain the correct information. The only possible flaw would be if someone in the back office had indeed recorded inaccurate information which was then passed on to me. Barring that, I have more confidence in my method of collection than the current data system utilized by BFD. Therefore, for my research purposes, I will be changing the 1994 number and leaving the rest as it is. Until further information can be obtained, I would suggest that others using the data set do likewise.


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