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They're just sticking to making everything a reflection on Obama. I don't like Obama any more than them but Haiti is just a horrible tragedy. Has nothing to do with politics.
Yeah, I know. You mentioned infection. We may not have seen the worst yet. We almost surely haven't. To judge from this forum alone, people are still too busy picking lint from their navels to have noticed at all . You, Sir, are an exception.
Last edited by Winehole23; 01-20-2010 at 06:00 AM.
They're just sticking to making everything a reflection on Obama. I don't like Obama any more than them but Haiti is just a horrible tragedy. Has nothing to do with politics.
I disagree. Politics makes everything worse.
Infrastructure I believe. I heard a day or maybe two ago that there was just so many planes coming in that they couldn't get them all safely on the ground. Only one small airport. Here's a little bit about it...
http://penguinsix.com/2010/01/18/hai...e-complainers/
Well yeah you're right on that one.
I believe it too. I think I said as much.
Wish I wasn't.
I am amazed at what you believe decency to be. I don't think you or family members will deploy there. What exactly are you doing? Furthermore what statement exactly do you consider indecent? Also you for assuming you know anything about what I think. FWIW I have given a large amount, of my he, to Red Cross. That's my money asshole.
you do this all of the time when it comes to obama. funny how you don't like people doing it to you.
Here comes the professor. Let me guess, you know Haiti because of some book? What the are you talking about? You are the biggest blowhard winehole. You use stupid cliches and make no stands for anything. Oh wow the govt. is hypocrites. Wow, thanks cpt obvious.
You do that all the time. You are assuming alot. My comment was pointed towards you going to npr. You going to huffpos and npr to get most of your information, yes I find that insightful. Especially going by your slanted stories you post.
So are you going to stop assuming people's motives now? or will you just look like a hypocrite and keep doing it? I'll remind you everytime you assume someone's motives with your own words. how's that?
Why say that. Show me what post would make you write that? Especially after you wanting to give countries away to terrorists, dictators, and communists. I would also love to know what you have personally done for haitians and how it has helped. Then tell me when you plan on going there to further your assistance.
Part 2: What We Should Not Ask Government to Do and Why
4. Based on the rule of rational choice, government should not undertake in disasters those activities for which the benefits do not outweigh the costs – activities like getting supplies to victims and rebuilding disaster-stricken communities.
Government’s poor performance in disaster relief is best explained not by reference to venal and/or incompetent officials but instead by the centralized nature of government and the incentives that accompany government decision-making.
Economic analysis of the dismal record of federal, state, and local agencies in disasters like Hurricane Katrina suggests that part of our disappointment is an inevitable result of expecting government to perform functions for which it is ill-suited. Public choice economists have identified key factors that explain why government cannot – and, perhaps, should not be expected to – perform well the growing list of relief and rebuilding tasks it has been assigned over the last century:
Centralized ins utions like governments cannot efficiently gather, process, and act upon the widely dispersed, localized information that is key to disaster response.
Government’s difficulty harnessing knowledge is exacerbated by bureaucratic ins utional structure.
Government lacks an effective feedback mechanism for evaluating whether their disaster relief efforts are succeeding in meeting the needs of disaster victims.
The incentives that face managers and employees in government agencies reduce effectiveness in disaster response.
Government attempts to shelter people from disaster or to ameliorate their losses afterwards create moral hazards and perverse outcomes.
Government disaster-relief programs are prone to unintended consequences.
5. Government agencies have difficulty providing for people’s wants and needs in disaster because they are unable to overcome what economist Friedrich von Hayek famously identified as the knowledge problem – that “. . . knowledge of the cir stances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess . . . . “(Hayek, 519-20)
Centralized disaster response thus faces two significant obstacles:
The difficulties of gathering and communicating the fragmented, chaotic, and dispersed information from the disaster-stricken area to those responsible for responding.
People who are familiar with the local conditions, needs, and available resources will not be involved in the decision-making. (Hayek, 521-24)
Economists Russell Sobel and Peter Leeson of the non-profit Mercatus Center at George Mason University illustrate Hayek’s contention that centralized direction cannot overcome the knowledge problem as they describe FEMA relief and recovery efforts after Hurricane Katrina.
Case Study:
FEMA Failure – More Than Bad Leadership
“. . . Information is fragmented, diverse, and often contained in inarticulate forms, held separately and locally by the many individuals who compose society. . . . [T]he foremost obstacle that every effort at social coordination must overcome is somehow tapping into this dispersed information and processing it in forms that individuals can use to mutually achieve their ends.
. . . We argue that natural disaster management is no different in this regard than coordinating individuals in ‘normal’ economic contexts. Following a natural disaster there are ‘relief demanders’ – individuals who desperately need disaster relief supplies, including evacuation, food, shelter, medical attention, etc. On the other side, there are ‘relief suppliers’ – individuals ready and willing to bring their supplies and expertise to bear on the needs of relief demanders. On both sides of this ‘market’ information is decentralized, local, and often inarticulate. Relief demanders know when relief is needed, what they need, and in what quan ies, but not necessarily who has the relief supplies they require or how to obtain them. Similarly, relief suppliers know what relief supplies they have and how they can help but may be largely unaware of whether relief is required and, if it is, what is needed, by whom, in what locations and quan ies. (pp. 2-3)
. . . When government subs utes central planning for markets, essential information is generated in an untimely fashion, generated inaccurately, or not generated at all. Because of this, central planning cannot effectively coordinate decision making among numerous and dispersed individuals with different endowments, wants and needs.
. . . There is no reason to think that FEMA, or any other government agency charged with FEMA’s task, is immune to the information problem.
. . . Our finding that an inability to overcome the information problem is the root cause of government’s failure to effectively manage natural disaster relief casts doubt on recent explanations of FEMA’s failure following Hurricane Katrina. One strand of argument, for example, suggests that an unfortunate succession of ‘bad directors,’ culminating in the leadership of former FEMA director Michael Brown, is the reason for this failure. Our analysis suggests that although incompetent directorship may exacerbate government’s inability to effectively manage natural disasters, it is of subsidiary importance to Hayek’s knowledge problem. . . . Even the most benevolent and effective of directors cannot overcome this problem, which stems from inherent organization of government management, which is centralized.
. . . [B]ad leadership does not help, but neither does it explain the core failure of the system. Replacing Stalin with Mother Theresa or Albert Einstein would have been no more help for the Soviet economy than replacing Michael Brown or the current FEMA director with one of these individuals would be.”
(Sobel &Leeson, “The Use of Knowledge,” 2, 3, 21-23)
The United States is one of many economies that have achieved high levels of well-being by choosing not to rely on central planning. We have created a system that incorporates Hayek’s insight – government is inherently incapable (not unwilling) of overcoming the obstacle of dispersed economic information. Logically, we should also recognize that the knowledge problem that restricts government effectiveness in normal times does not disappear in crisis. Instead, it escalates.
Beyond the obvious difficulties imposed by damage to transportation and communication infrastructure, disasters exacerbate the knowledge problem by further fragmenting information. Additionally, disaster conditions vary considerably from locality to locality, increasing the volume of critical information.
6. Government’s inability to effectively harness knowledge and information is further exacerbated by bureaucratic ins utional structure.
Bureaucratic structures are characterized by detailed procedures, strict protocols, and line-of-command decision-making.
Nobel laureate Gordon Tullock reasoned that bureaucracy is an effective (some would argue, necessary) mechanism for centrally-directed ins utions where people’s choices are not constrained by compe ion for profit, as they would be in a market.
One of the problems inherent in carrying out government policies is to organize subordinates so that they will behave as their superiors want them to behave – that is, by contributing to the goal that has been identified through the political process. Bureaucratic structures create incentives for employees to contribute: benefits accrue to those who follow procedures and protocols and costs are borne by those who do not.
While the bureaucratic incentive structure may, indeed, be necessary to the functioning of government, it is a bersome method of dealing with the knowledge problem and – as was clearly evident during Hurricane Katrina – inevitably slows disaster response.
Case Study – The Knowledge Wedge:
Note to FEMA – Turn on the TV!
“From the view of political actors charged with relieving disaster, there is no disaster to respond to until the President, who is reached in the final stage of the bureaucratic procedure, has officially declared as much. This is true even if a disaster requiring assistance has already struck; the disaster is readily acknowledged and visible in the media, etc. Unavoidable bureaucracy inherent to government management creates a separation between what might be called ‘private knowledge’ of disaster and ‘political knowledge’ of the same disaster.
This bureaucracy-created ‘knowledge wedge’ severely limits the goals that can be successfully achieved using government. . . . The more monumental the task in terms of coordination, the greater the problem the knowledge wedge that bureaucracy generates becomes, and thus the less likely government is to effectively complete the task. Since . . . the coordination problem to be solved increases as the division of knowledge increases, this means that for endeavors in which information is more fragmented and localized, such as natural disaster relief management . . . government is an increasingly less effective tool to accomplish the goal.
The bureaucracy-created ‘knowledge wedge’ . . . explains why, though the citizens of New Orleans, the media, and countless others were aware of the impending and eventual disaster caused by Hurricane Katrina, key government . . . figures were not . . . . The secretary of the Department of Homeland Security, Michael Chertoff, for example, did not declare Hurricane Katrina an ‘incident of national significance’ until 36 hours after it made landfall . . . despite the fact [that] . . . two days before Katrina’s arrival the National Hurricane Center predicted Katrina would hit the Gulf Coast.
. . . As a useful point of comparison, contrast the government’s ability to learn about disaster with the private sector’s information . . . . ‘The private-sector planning began before Katrina hit. Home Depot’s ‘war room’ had transferred high-demand items – generators, flashlights, batteries and lumber – to distribution areas surrounding the strike area. Phone companies readied mobile cell towers and sent in generators and fuel. Insurers flew in special teams and set up hotlines to process claims.” (Sobel and Leeson “The Use of Knowledge. . . ”7-9)
7. The political process lacks an effective feedback loop from victims to the decision-makers responsible for allocating resources in a disaster.
The information necessary to determine which programs are working, which are not, and what other resource uses would be valuable is not communicated directly from consumer (disaster victims) to supplier (government). Instead, decision-makers have only the (insufficient and mostly incomplete) information that comes to them through the political process.
While we might reasonably expect that government decision-makers have good information about the costs of the programs they create, it is hard to imagine how they could be expected to have accurate knowledge of the benefits or of the potential benefits of alternatives; information that is communicated by price in the private sector.
The results of government agencies facing neither profit nor loss from their allocation of resources are the all-too-familiar stories of inep ude that disaster relief spawns.
Sample Illustrations: No Feedback
It Seemed Like A Good Idea At the Time
Gulf Coast relief fiascos in 2005 exemplified the problems government agencies face because of inadequate knowledge and ineffective feedback – problems that refuse to subside in the face of well-meaning compassion. Consider, for example, FEMA’s well-intentioned effort to provide temporary housing for the homeless. It seemed like a good idea to move them outside the devastated area. It resulted in trailer parks that went “virtually unused.”
“FEMA spent $1.3 billion on 95,000 trailers for hurricane victims, and in some cases $38,000 per lot to make parks trailer ready – double the cost of the trailers themselves. Because FEMA chose to locate the trailers in remote places, away from cities and jobs, FEMA . . . [also planned] to spend millions to cook meals and provide bus service and security for trailer parks. In the not-too-distant future, FEMA will turn around and pay yet again to tear the parks down. FEMA’s incredible misallocation carries little penalty or consequence for FEMA decision makers . . . . In fact, FEMA’s failure was rewarded with billions of additional dollars in funding for the agency’s continued work.” (Sobel & Leeson, “The Use of Knowledge . . .,” 19-20)
Sometimes, it does not take rocket science to figure out what disaster victims need – ice after a hurricane on the Gulf Coast in August, for example. Just knowing “what” however, does not solve the allocation problem. The feedback necessary for the seemingly simple task of getting ice to New Orleans did not happen. Though these failures seem funny after the fact; at the time, it was simply a waste of resources and a missed opportunity to help victims.
“FEMA ordered 182 million pounds of ice to be delivered to stranded families and aid workers. Yet some of the ice ended up in Portland, Maine, more than 1,500 miles away from the disaster area. The cost of shipping and storing the 200-plus truckloads of the Portland-bound ice was $275,000.
. . . NBC News reported that it had found trucks full of ice in . . . Maryland, Missouri, Georgia, and Tennessee. Some of the trucks had been driving and/or sitting idle with their full loads for two weeks.
. . . A truckload of ice even ended up at the Reid park Zoo in Tucson, Arizona. The driver of the ice truck got so many conflicting commands from government relief officials that he ended up traveling through 22 states without ever delivering a single bag of ice to a hurricane victim. Instead, he ended up donating it to the Tucson zoo to be enjoyed by the polar bears.” (Sobel & Leeson, “Flirting . . .” 5)
While it is certainly true that private firms also make mistakes, the key point is that they bear a cost for their mistakes, and FEMA does not. Having to “donate” misallocated ice to polar bears would reduce profits for a private supplier and that is a strong incentive to improve procedures. FEMA officials face no such incentive.
It bears repeating here that these scenarios cannot be explained away by laughing at officials’ “stupidity” or lack of “effort.” Even efforts to learn from past mistakes are often doomed to ludicrous failure by the lack of feedback and the ever-changing specifics of time, place, and event. Look at what happened when Florida Emergency Management officials tried to learn from Hurricane Katrina, determined not to get caught without ice “next time.”
“Minneola – Need some ice for that big Super Bowl party? How about some frozen daiquiris? Or maybe you just miss the ice and snow from up North.
Whatever the case, here’s your hookup.
The small Lake County city is looking for ways to use nearly 600,000 pounds of ice cubes – 15 truckloads in all – to be delivered . . . by the state Division of Emergency Management. The chilly delivery is part of a colossal effort to get rid of nearly $2 million in relief supplies . . . .
. . . Altogether, the state is storing about 225 truckloads, or a total of 9 million pounds, of bagged ice cubes in two large warehouses . . . . The glacier-sized supply was left over from relief efforts after Hurricane Wilma in 2005.
Emergency officials held onto the unused ice, expecting a busy hurricane season last year. That never happened.
The cost of keeping almost 5,000 pallets of bagged ice in cold storage is about $90,000 a month.” (Sargent)
8. As disaster response extends beyond immediate rescue and relief, incentives for both elected and appointed government workers result in increasingly poor resource use.
Public choice theory, the application of economic reasoning tools to political decision-making, teaches us that government disaster-relief activities are prone to serve the wants and needs of politicians rather than those of disaster victims.
The key insight of public choice theory is that elected decision-makers’ pursuit of self-interest is dependent upon their ability to gain and remain in office.
Regardless of how altruistic or depraved a politician’s self-interest, he cannot pursue it in the political arena unless he is in office. This reality creates strong incentives for politicians to be most responsive to those individuals and groups with the greatest ability to affect their political tenure. Thus, when government relief efforts extend beyond the immediate emergency, they tend to be politically allocated.
Unelected government employees also face incentives that frustrate effective disaster response. Because they are not motivated by profit – their civil service salaries are unaffected by any calculation of the amount and effectiveness of the assistance they provide – they have little incentive to respond effectively and efficiently to the needs of disaster victims.
It is important that the analysis of incentives not be read as primarily an indictment of government workers’ character.
Loyal, hardworking, caring employees know that they are likely to be commended for carefully following and do enting procedures and criticized for taking risks – incentives arguably ill-suited to disaster conditions.
On the other hand, employees know that they risk reprimand for skipping steps, abandoning procedures, and trying something new and different, despite the urgency of abnormal conditions.
Accountability and the close-scrutiny and second-guessing to which public agencies are subject make them prone to “type two” errors, errors that result from being overly cautious.
Case Study: Perverse Incentives
FEMA and Katrina: A Comedy of (Type 1 or Type 2?) Errors
“Economists distinguish between two types of policy mistakes: ‘type-one’ and ‘type-two’ errors. Type-one errors are mistakes that result from not being cautious enough. . . . Type-two errors, on the other hand, are mistakes that result from being too cautious. . . . [P]ublic choice theory informs us that government agencies like . . . FEMA are overly prone to commit type-two errors.
. . . Both type-one and type-two errors can result in injuries or harm to the public. However, the visibility and public backlash are likely larger for type-one errors. . . .[I]f a disaster is declared and FEMA jumps the gun by getting involved immediately, it may commit a type-one error. Because type-one errors are overt mistakes, they are highly visible and are therefore accompanied by a higher likelihood of admonishments from citizens, the press, and possibly, other government agencies.
Suppose, for example, that FEMA allows rescue workers to enter a disaster zone and those workers get hurt. FEMA could be blamed for letting them in prematurely. Thus, bureaucratic hesitancy has always been an operational assumption of FEMA. Indeed, as the Senate report points out, ‘FEMA has a longstanding policy of not putting its emergency responders in the path of a storm so that they will not be in need of rescue themselves.’
Type-two errors, in contrast, are less visible, and thus less likely to result in admonishment. . . . If FEMA waits too long to enter a disaster zone, it may be blamed for acting too slowly as it was in the case of Katrina. But that blame is likely to be less than what FEMA might receive if it entered a disaster zone immediately, before a plan was worked out, and consequently bungled its relief effort in a more overt fashion. FEMA . . . has an incentive to delay action even if more disaster victims are harmed by its not entering than would be harmed if it entered prematurely. Victims lost before FEMA enters because it delays action are less obviously linked to FEMA’s lack of action.”
(Sobel &b Leeson, “Flirting . . . “ 6-7)
Additionally, some of the inep ude and escalating cost of government relief programs can be explained by the incentives associated with what the late Nobel laureate Milton Friedman famously called the “other people’s money” syndrome.
Friedman identified four categories of spending, noting that the incentive to get value for money is very high when you spend your own money on yourself, but that it falls when you spend your own money on someone else or especially when you are spending other people’s money on someone else. (See appendix 1 following this lesson: “The Other People’s Money Syndrome,” for Friedman’s four categories of spending and how they help us to understand government inefficiency in the wake of disaster.)
9. Government programs to shelter people from disaster or to help victims afterwards tend to be characterized by escalating costs because they create moral hazards and perverse “Good Samaritan” effects.
A moral hazard exists when people are shielded from the full costs of risk, thereby creating an incentive for them to engage in more risk-taking behavior. While moral hazards occur in both the private and the public sector, they are more likely to persist in public sector programs.
Insurance is the classic example of an industry in the private sector that is affected by moral hazards. At the margin, insurance creates incentives for people to be less careful because their losses are covered by insurance.
However, because they are in business to make profit, private insurance companies are well aware of moral hazard. They incorporate their awareness in rate calculations and in pre-requisites for coverage – smoke detectors as a condition for home-owners insurance, for example.
Government programs do not have the incentive of profit, so there is no incentive to mitigate moral hazards. Government-funded disaster insurance programs, for example, continue to experience escalating real costs as a result of their inability to discourage building in disaster-prone areas of the country.
The “Good Samaritan” paradox refers to the distortion in decision-making that occurs when people come to expect generous disaster assistance.
The intention of assistance is to help people get through an unexpected tough time and regain their former independence. The perverse outcome of ins utionalizing ongoing government disaster relief is to increase the number of people who make choices knowing that the availability of government assistance reduces their risk of loss.
Sample Illustrations - Moral Hazards & Good Samaritan Effects
#1 – Relief Encourages Risky Behavior
In 1998 a team of American Geophysical Union (AGU) researchers investigating the dramatic rise in U.S. disaster relief costs from 1970 – 1998, were startled to find that Americans were actually moving into regions at high risk for natural disasters.
“States most affected by the costs of hurricanes (Florida, North Carolina, and Texas) and earthquakes (California and Washington) show the largest increase in both population and revenue. More people are moving into coastal areas that are vulnerable to natural hazards – particularly earthquakes on the west coast and hurricanes on the east coast.” (van der Vink, 553)
Two important factors that researchers noted in concluding that people were not moving out of ignorance were that: 1) there had been no significant change in the number or intensity of the weather phenomena producing disasters, and 2) it was well known throughout the U.S. that hurricanes, tornados, earthquakes, and floods generally occur where we would expect them to occur – on barrier islands, flood plains, hurricane coasts, and fault zones.
#2 – The Good Samaritan Paradox: Federal Flood Insurance
In 1968, Congress created the NFIP or National Flood Insurance Program for homeowners living in river flood plains and flood-prone coastal regions. The programs’ goals were: 1) to reduce the amount of flood-disaster relief the federal government was paying by subs uting an insurance program, and 2) to make a concentrated effort to encourage future development in other than flood-prone areas.
In the summer of 1993, serious summer flooding devastated the midwestern United States. By that time, 2 ½ million NFIP policies had been sold, a total of $200 billion of insurance, but the bill for flood relief was not covered by insurance. Writing in Regulation Magazine a year after the floods, Sheldon Richmond explained the paradox faced by the Good Samaritan American taxpayers.
“Federal coverage is voluntary, and only 13 percent of eligible property owners [were] . . . covered. People forgo coverage either because they are fatalists or because they are counting on federal relief anyway. [emphasis added] In past years the federal government has made relief payments to property owners without insurance . . . People who did not have flood insurance when the Midwestern rivers flooded can still get money from FEMA’s general fund . . . as long as they buy a NFIP policy. In effect, they get insurance after the fact.
. . . [M]ore than a third of total payouts have gone to 3 percent of all claimants, so-called ‘repe ive loss’ cases, since the policy allows for multiple claims without an increase in premium. Most of the money has gone to owners of beachfront homes, not to residents in riverfront areas.
. . . Since there is private insurance for other risks, one naturally wonders why a federal flood insurance program is needed at all. Federal officials and the insurance industry give the stock answer that floods are not an insurable risk, which presumably means premiums would be prohibitively expensive if not infinite. . . . [I]f an activity is so expensive that private insurers won’t underwrite it or will insist on very high premiums, that is market information that ought to be heeded . . . Private insurers would have no incentive to understate the risk. But bureaucrats have such an incentive. The bureaucrats do not risk their own money, and their agency can’t go out of business. The lower the premium, the more people will buy their policy and the bigger and more prestigious the program will be. But the lower premium encourages more people to locate in dangerous areas, exposes more assets to risk, and increases the economic loss from natural disasters.” (Richmam)
10. Disaster-relief windfalls are associated with increases in corruption.
Recent studies by development economists have established the relationship between natural-resource and foreign-aid windfalls and increases in corruption. Disaster relief creates similar windfall conditions and similar increases in corruption.
Intrigued by this relationship, University of West Virginia economists Peter Leeson and Russell Sobel studied the effect of FEMA-provided disaster relief on public corruption in the United States. They found a positive relationship between the amount of FEMA disaster relief received and public corruption in the state.
Defining corruption as “political officials’ abuse of public authority for private gain,” the researchers used data from the Department of Justice on corruption-related federal criminal convictions per state from 1990-99.
They found that “. . . [An] additional $1 per capita in average annual FEMA relief is associated with a 1.9 percent increase in public corruption in the average state.Alternatively, moving from a state that has experienced no natural disasters and received no FEMA relief to the average state in our sample increases public corruption 17 percent.”(Sobel & Leeson, Weathering . . . , 16)
Disaster Relief and Corruption
“Between 1990 and 2002 America convicted more than 10,000 public officials of corruption-related crimes. The distribution of corrupt politicians and bureaucrats, however, was far from even. America as a whole averaged four corruption-related convictions per 100,000 residents. Mississippi, Florida, and South Dakota averaged 7.5. Utah, Arizona, and Nebraska, on the other hand, had less than half the U.S. average.
Over the same period, 599 natural disasters struck America. Like with corruption, these too were unevenly distributed. Oddly, though, the geography of natural disasters maps the geography of corruption extremely well. Fifty-six of these natural disasters occurred in Mississippi, Florida, and South Dakota. Only 13, however, occurred in Utah, Arizona, and Nebraska.
The positive connection between public corruption and natural disasters holds throughout America. . . .The relationship is clearly positive: states hit by more natural disasters are more corrupt.
. . . Disaster relief windfalls open up new opportunities for bribery, for instance by privileging private vendors charged with administering post-disaster supplies in return for illegal side payments. . . . Disaster relief windfalls also create new opportunities for public officials in charge of disaster relief funds to skim incoming resources for themselves or divert them to their friends. The chaotic and confused atmosphere typically created in the wake of a major natural disaster facilitates public officials’ ability to do this.” (Sobel & Leeson, “Weathering . . . “ 1-3)
(Importantly, Sobel and Leeson are not comparing public corruption to private fraud or denying that fraud in the private sector is absent during disaster. Nor are they arguing that public corruption is inevitably associated with government spending. The important variable in their study is the windfall of FEMA relief.
The researchers also studied the relationship between corruption and changes in non-FEMA related state and federal government spending and found no significant increases in corruption.)
11. Government disaster-relief efforts are prone to unintended consequences. Just because a program is well-intentioned does not guarantee that it will produce the desired outcomes.
Disorganization, policy changes, and conflicting policies create uncertainty, which discourages private and commercial recovery efforts.
Well-intentioned government-financed assistance that persists beyond the immediate emergency hampers private and commercial recovery efforts. Once the immediate crisis point of a disaster has passed and basic human needs such as food and shelter are being met, government provision of goods tends to slow down recovery.
Sample Illustrations: “Signal Noise”
#1: When Regulation Gets in the Way of Relief
A year and more after Katrina, the vast majority of Americans remain dissatisfied with the federal government’s response to Hurricane Katrina and the subsequent snail-paced recovery. Emily Chamlee-Wright, economics professor at Beloit College, and Daniel Rothschild, Associate Director of the Global Prosperity Initiative, proposed the explanation that government disaster policies undermine community recovery. “Disastrous Uncertainty,” concludes that when communities fail to rebound, the problem may be that government is doing too much, rather than not enough. They argue that rebuilding is likely to be more rapid and sustainable if civil society, rather than government, takes the lead. Their study focuses on the “signals” that guide decision-makers in civil and commercial society and they contend that government intrusion slows community disaster recovery by introducing significant “signal noise.”
“After the storm, many parents faced the daunting task of navigating the system of relief services and beginning the demolition process while caring for young children. The temperatures were high, stress levels were higher, and the lines were long. But professional childcare was in short supply. Some daycare providers did what they could to open their doors to disaster victims in the weeks and months that followed, but state regulators fined them for failure to comply with child-teacher ratios and other requirements.
The parents sent a clear signal – a demand for much needed, safe, and affordable childcare. Childcare professionals easily and correctly read their signal. The regulatory environment, which was not crafted for a post-disaster context, caused signal noise that prevented childcare professionals from meeting this need.” (Chamleee-Wright, 14)
#2: The “FEMA Economy”
In the wake of disaster, the government has a key role to play in re-establishing and enforcing the rules of the game that minimize signal noise and allow a robust response to the disaster by civil and commercial society. By ensuring private property rights and enforcing contracts, for example, the process by which property owners discover the new value of their homes and businesses can unfold swiftly. To this end, it is important for governments to provide reliable police protection and courts. But when the government gets in the business of providing the goods and services ordinarily provided through markets – such as trailers and extended unemployment compensation – well-intentioned policies can create significant signal noise and thereby slow recovery. In this lies a paradox: government policies designed to help may actually harm the intended beneficiaries.
The government’s provision of goods and services long after immediate needs have passed creates what one New Orleanian referred to as a “FEMA economy.”
“. . . .For example, many businesses trying to reopen have found it difficult to attract employees. In part, this is due to the fact that many people simply haven’t returned to the affected region. But the repeated extension of unemployment benefits has exacerbated this problem: despite the availability of jobs and the need for employees, the federal government continues to pay people not to work. Further, the premium wage that government relief agencies pay low-skilled workers crowds out private employers from the labor market, stunting the speed of recovery. Service-based companies find the labor shortages particularly daunting as they attempt to bring operations back on line. As one business owner noted, ‘You’re competing with FEMA; you’re competing with everybody. The contractors that are doing debris pick up and stuff, they are paying big bucks. They are paying $12 [to $15] an hour to stand behind a truck with a little [“stop”] sign.’”
According to a study released in February 2006, two-thirds of firms in the affected region had trouble recruiting workers, and media accounts affirm the recruitment woes of employers. And yet in March 2006, Congress extended unemployment benefits for another thirteen weeks beyond the twenty-six weeks of unemployment benefits authorized by the Stafford Act. (Chamleee-Wright, 15-17)
The $12-$15/hr. from FEMA contractors left fast food restaurants like Burger King and Popeye’s Chicken scrambling for workers. Wages jumped more than 50% from the federal minimum wage of $5.15 to more than $8/hr. with annual signing bonuses of $6000, and owners were still scrambling. Glen Helton, president and CEO of Strategic Restaurant Acquisition Corp. lamented his inability to reopen many of the fifty-four Burger Kind stores his company owns in New Orleans. Not only was much of his former workforce unable to return home, but many who did found other options. “To make matters worse, compe ion has exploded for the unskilled and low-skilled workers favored by the fast-food industry. Every employer operating in the wake of Hurricane Katrina is chasing after the same pool of workers, he said. ‘Now the job market includes anybody doing relief work at $15 an hour. ... Everyone is looking for general laborers, and they are drawing from our normal work force’ . . .” (Darcé)
While many recognize the benefits of government assistance, it does seem that it is possible to have too much of a good thing:
“To some extent, these consequences may be unavoidable. To the extent that swift debris removal and other key public services are deemed top priorities, wage premiums will certainly facilitate the process. But the longer FEMA workers stay, and the more relief work is treated as a public works project rather than the short-term provision of an essential service, the longer these distortions will persist. As one Mississippi resident observed, “There’s no reason for a business to open up that provides any kind of food service if right down the street you get food [for free] . . . . It was necessary for [government] help to be scaled down so our businesses could come back in, start giving us a tax base, start giving these people an incentive to get a job, to work to get back to normal.” (Chamleee-Wright, 15-17)
Conclusion
Government inep ude during natural disasters may be good fodder for comedians and radio talk-show hosts, but the pertinent lesson is more about the need to adjust our expectations than the need for “better” government. Throughout the 20th century, we demanded that government take on more and more responsibility for citizens’ well-being with relatively little consideration of whether or not political ins utions are inherently capable of meeting the lengthening list of expectations. The tendency to think that big problems – like natural catastrophes – can best be dealt with by big ins utions, like government, is understandable. Persisting in that belief in the face of continuing evidence to the contrary is not. If we expect governments to perform functions for which they do not have the necessary knowledge, incentives, and mechanisms, we not only invite disappointment, but risk undermining their ability to perform the vital tasks for which they were created: restoring civil order, maintaining the rule of law, and providing those few public goods necessary for other economic and social ins utions to operate.
Lessons 2 and 3 have given us a framework for a “division of labor” between our political and economic ins utions in responding to natural catastrophes. However, sitting back and letting markets and governments do their jobs does not satisfy our personal desire to do “something” when disaster strikes. The next lesson turns from the big picture of ins utional response to the human desire to help others. How can we, as individuals, best reach out to disaster victims in ways that not only satisfy our emotional needs but also the real needs of victims? Lesson 4, “When Disaster Strikes, What Can We Do?” examines the ins utional dynamics of charitable giving.
http://www.fte.org/disasters/index.php?page=lesson3
Appendix 1: “Other People’s Money”
In 1979, Nobel laureate Milton Friedman and his noted-economist wife, Rose, published their best-seller, Free to Choose, containing what has become recognized as a classic analysis of the incentive problems associated with government spending. Below is an excerpt of their explanation of the perverse incentives that face people spending other people’s money – the “OPM Syndrome.” As you read this excerpt, mentally subs ute “disaster relief programs” where they refer to “welfare.” Their insight is as useful in our contemporary consideration of the role of government in disasters, as it was when written in the context of welfare reform three decades ago.
“When you spend, you may spend your own money or someone else’s; and you may spend for the benefit of yourself or someone else. Combining these two pairs of alternatives gives four possibilities summarized in the following simple table:
YOU ARE THE SPENDER
On Whom Spent
Whose Money You Someone Else
Yours I II
Someone Else's III IV
Category I in the table refers to your spending your own money on yourself. You shop in a supermarket, for example. You clearly have a strong incentive both to economize and to get as much value as you can for each dollar you do spend.
Category II refers to your spending your own money on someone else. You shop for Christmas or birthday presents. You have the same incentive to economize as in Category I but not the same incentive to get full value for your money, at least as judged by the tastes of the recipient. You will, of course, want to get something the recipient will like – provided that it also makes the right impression and does not take too much time and effort. (If, indeed, your main objective were to enable the recipient to get as much value as possible per dollar, you would give him cash, converting your Category II spending to Category I spending by him.)
Category III refers to your spending someone else’s money on yourself – lunching on an expense account, for instance. You have no strong incentive to keep down the cost of the lunch, but you do have a strong incentive to get your money’s worth.
Category IV refers to your spending someone else’s money on still another person. You are paying for someone else’s lunch out of an expense account. You have little incentive either to economize or to try to get your guest the lunch that he will value most highly. However, if you are having lunch with him, so that the lunch is a mixture of Category III and Category IV, you do have a strong incentive to satisfy your own tastes at the sacrifice of his, if necessary.
[Many government] . . . programs fall into either Category III – for example, Social Security, which involves cash payments that the recipient is free to spend as he may wish; or Category IV – for example, public housing; except that even Category IV programs share one feature of Category III, namely, that the bureaucrats administering the program partake of the lunch; and all Category III programs have bureaucrats among their recipients.
. . . Legislators vote to spend someone else’s money. The voters who elect the legislators are in one sense voting to spend their own money on themselves, but not in the direct sense of Category I spending. The connection between the taxes any individual pays and the spending he votes for is exceedingly loose. In practice, voters, like legislators, are inclined to regard someone else as paying for the programs the legislator votes for directly and the voter votes for indirectly. Bureaucrats who administer the programs are also spending someone else’s money. Little wonder that the amount spent explodes.
The bureaucrats spend someone else’s money on someone else. Only human kindness, not the much stronger and more dependable spur of self-interest, assures that they will spend the money in the way most beneficial to the recipients. Hence the wastefulness and ineffectiveness of the spending.
But that is not all. The lure of getting someone else’s money is strong. Many, including the bureaucrats administering the programs, will try to get it for themselves rather than have it go to someone else. The temptation to engage in corruption, to cheat, is strong and will not always be resisted or frustrated. People who resist the temptation to cheat will use legitimate means to direct the money to themselves. They will lobby for legislation favorable to themselves, for rules from which they can benefit. The bureaucrats administering the programs will press for better pay and perquisites for themselves – an outcome that larger programs will facilitate.
The attempt by people to divert government expenditures to themselves has two consequences that may not be obvious. First, it explains why so many programs tend to benefit middle- and upper-income groups rather than the poor for who they are supposedly intended. The poor tend to lack not only the skills valued in the market, but also the skills required to be successful in the political scramble for funds. Indeed, their disadvantage in the political market is likely to be greater than in the economic. Once well-meaning reformers who may have helped to get the welfare measure enacted have gone on to their next reform, the poor are left to fend for themselves and they will almost always be overpowered by the groups that have already demonstrated a greater capacity to take advantage of available opportunities.
The second consequence is that the net gain to the recipients of the transfer will be less than the total amount transferred. If $100 of somebody else’s money is up for grabs, it pays to spend up to $100 of your own money to get it. The costs incurred to lobby legislators and regulatory authorities, for contributions to political campaigns, and for myriad other items are a pure waste – harming the taxpayer who pays and benefiting no one. They must be subtracted from the gross transfer to get the net gain – and may, of course, at times exceed the gross transfer, leaving a new loss, not gain.
These consequences of subsidy seeking also help to explain the pressure for more and more spending, more and more programs. The initial measures fail to achieve the objectives of the well-meaning reformers who sponsored them. They conclude that no enough has been done and seek additional programs. They gain as allies both people who envision careers as bureaucrats administering the programs and people who believe that they can tap the money to be spent.
Category IV spending tends also to corrupt the people involved. All such programs put some people in a position to decide what is good for other people. The effect is to instill in the one group a feeling of almost God-like power; in the other, a feeling of childlike dependence. The capacity of the beneficiaries for independence, for making their own decision, atrophies through disuse. In addition to the waste of money, in addition to the failure to achieve the intended objectives, the end result is to rot the moral fabric that holds a decent society together.
Milton and Rose Friedman. Free to Choose. New York: Avon Books, 1979. pp. 116-119.
http://www.fte.org/disasters/index.php?page=lesson3
Jesus...they just got hit again.
http://news.yahoo.com/s/ap/cb_haiti_earthquake
Hard to fathom why anyone's breath is wasted on politics in the face of catastrophe like this. Of course, some folks will just waste breath as a point of order.
The logistics of this must be ishly gordian. Honestly..where the do you start? Blanket air drops? As for what happens after this is over, if it is ever truly over, I can see a magnificant opportunity for the world, the UN, each nation, to support the building of a nation. This could be a unique opportunity for the planet. Sadly, I don't see that happening.
your point?
Ask him if he is going to stop doing things to other people that he 'f*cking hates' when people do it to him? I'm curious to hear his answer.
NPR, hmmmm?
You can swear at me all you want, SnC, but when you denigrate legitimate news sources' reports because they don't jibe with your political affiliation, and accuse someone of knowing something just because they read about it in some book, not to mention calling someone "professor" as an insult... it doesn't piss me off. I pity you. I think it's sad how you can accuse someone of being more educated than you and intend it as a insult.
Most of all though, you bring your political BS into a thread in attempt to defend Rush, and then you accuse others of being political. Although Rush essentially told you not to give money, so I don't know how you can defend him at the same time you claim to be donating.
My best friend's wife is Haitian. I've been on the phone with them personally as they've been speaking to people and developing assistance plans with officials at the Haitian Embassy in DC. So, sorry, I guess it's wrong of me to take your at ude and what you said personally.
Last edited by Cry Havoc; 01-20-2010 at 12:06 PM.
I seldom post anything from either Huffpo or NPR. It's easily checkable. The search function is your friend.
BTW, what's so slanted about drawing attention to the fact that Haiti lacks water, food, fuel medical supplies and security? You never addressed this.
You twitting me for posting very basic, very uncontroversial reporting (the shortage of water,food, fuel, medical supplies) because the source was NPR. It was chicken .
Link?
I donated money to the IRC. I intend to donate for an ongoing basis for awhile. My place of work will also be having a benefit next Tuesday. I'll be working that. It's not very much, admittedly.
Yeah. I've read a couple of books. Got a problem with that?
Well, certainly some book isn't nearly as reputable of a source as a stalwart of journalistic integrity such as Rush or Hannity.
Doubtless not.
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