> But making coverage mandatory also ignores long term second-order effects whereby organization becomes completely disconnected from the people it serves
I don't see how you can argue that it ignores this in the case where people advocating for mandatory fire protection coverage advocate that the agency through which the fire protection is provided be democratically accountable to the people in the covered area, which pretty much excludes anyone advocating public coverage in the modern developed world; addressing that effect is a central purpose of democratic accountability.
Democratic accountability to the served population deals directly with disconnection from the served population without appeal to either "wisdom of the crowds" (it doesn't rely on the "crowds" being correct, it relies only on them being the population served) or the "perfection" of centralized control (which seems to be a completely different issue, that might be worthy of discussing, but isn't the one you said was ignored.)
I edited right before you responded, swapping out "completely disconnected" in favor of "does not have to be responsive". The former was indeed too absolute to ever be true.
So yes democracy does create a connection between centralized government and the body politic. It's just a bit of a tenuous connection that addresses only gross problems that are understood (the inherent limitation of any centralized planning) by more than 51% of people.
I don't see how you can argue that it ignores this in the case where people advocating for mandatory fire protection coverage advocate that the agency through which the fire protection is provided be democratically accountable to the people in the covered area, which pretty much excludes anyone advocating public coverage in the modern developed world; addressing that effect is a central purpose of democratic accountability.