By now you're probably heard the story of Gene Cranick, whose house burned down while firemen watched because he didn't pay the $75 fire protection fee. I get the economic reason why the firemen wouldn't save his house -- if they do the work for free, they don't give anybody else an incentive to pay. Matt's idea that the fire service should've just charged $10,000 an hour or something for firefighting seems right to me. I wonder why they didn't do that.
But what really needs to be criticized here is the whole idea of a private fire department. The fire protection business, especially in a sparsely populated rural area, isn't something where you're going to get multiple businesses competing. So the usual arguments for a free-market system -- businesses are going to compete to offer a consumer the best price, the best businesses will survive, and consumers will end up better off -- don't apply. When you're stuck with a monopoly, you aren't going to get the benefits of free markets, so you might as well make it a government monopoly and give the citizens the ability to control it through voting.
I remember an old hilzoy post about how back in the 70s the battles were between free-market fundamentalists and socialists who thought the government should run everything. People who thought that these decisions should be made on a case-by-case basis, with focus on the particular circumstances involved, were in the middle. Over the next couple decades, the socialists all more or less disappeared and now it's free-market fundamentalists versus case-by-case types like me and most of the Democratic Party. Even if I'd disagree with the socialists on lots of stuff, I wish they were still a major force, because then the case-by-case types would have decisive influence.