Theory review: Does fire safety regulation work? Lessons from Turin,Italy

Abstract

The general theory of regulation and then 10 theories related to safety regulation are summarized, explaining why regulation is or is not beneficial, or why negative externalities like building fires might increase. As an example, evidence from regulation and planning to enhance fire safety in Turin, Italy, is included, which shows apparent regulatory failure due to public choice and knowledge problems. Regulators there apparently failed to meet their public interest objective: the “control of safety conditions to prevent fires” and to “minimize the causes of fire.” Data perusal suggests that (a) the income effect, (b) public choice theories of bureaucracy and perverse incentives, (c) the “knowledge problem” theory, and (d) population density to a lesser degree best explain and predict the regulatory outcome. The results tend to favor government failure models, rather than theories that say (e) government provision works even if inefficiently or as a placebo, (f) that regulation is irrelevant, or (g) explanations that surmise that racial composition, (h) immigration of poor and ignorant people, (i) technical problems with electricity (wiring and materials), or (j) moral hazard cause more fires. Thus, planning theory should endeavor to better incorporate government failure theories into its models. These theories at times provide better explanatory and predictive power than traditional market failure models.