Fixing Disaster Relief is Simple! Let Markets Work.
I’ve often commented on how childish, really adolescent, the views of libertarians are. But it’s rare that I see such a stunning example.
In a recent NYT “Room for Debate,” Russell Sobel of The Citadel gives us this:
Fixing disaster relief is simple: greater use of decentralized markets, and focusing government on its proper role.
After all, “Economists from Adam Smith to Friedrich Hayek to Milton Friedman have stressed the inherent problems in central planning.”
So there you go. QED.
Here, Sobel explains, is the “simple” solution to solving any problems of disaster relief:
By renting the [Chicago Board of Trade] trading floor and using the exchange, supplies and services would be better allocated to disaster victims than they are now by FEMA.
Such mechanisms simply work better
It’s so simple! And obvious! Why didn’t anybody think of this before? Heck, a thirteen-year-old could have come up with it.
And all of this is before we ever ask the question: does our disaster relief system need fixing? It certainly did under W. And: what part of it needs fixing? If recent fiascos provide any answer, the missing piece was effective national leadership.
Given that effective leadership, America seems to have far and away the best disaster relief system in the world — private, state, local, and federal combined, all working together. Just look at our preparedness and response this week — awe-inspiring.
Conservatives: Am I wrong?
And: You want to dismantle it?
So much for American exceptionalism.
Cross-posted at Asymptosis.
Dear Mr. Sobel: Please describe in detail the market based solution to be implemented that will effect disaster relief for ~5M daily NYC Commuters who are unable to use the still underwater parts of the subway system.
In demonstrating the “better working” mechanism you advocate, please show your math.
One problem with a “market” solution to disaster is that markets are not something that exist in nature. Markets are the product of human interaction, and are based on both formal and informal institutions. Disaster breaks down institutions.
So I’d like to add a challenge to the one offered by amateur socialist. Please give us a brief sketch of the “market” in which the wonders of disaster recover will be priced. Who is the bidder? Who is the supplier? How do they find each other?
As if often the case, this faith-based view of markets seems to treat “the market” as a deity, in existence before human intervention, ready to organize human activity in the best possible way, anytime, anywhere. Since “the market” is taken as a given, perfect all the time and everywhere, there is no need to wonder if markets work when disaster strikes. We must simply take it as a given and go along. No need for thought.
Markets are myths.
“The first Roman fire brigade of which we have any substantial history was created by Marcus Licinius Crassus. Marcus Licinius Crassus was born into a wealthy Roman family around the year 115 BC, and acquired an enormous fortune through (in the words of Plutarch) “fire and rapine.” One of his most lucrative schemes took advantage of the fact that Rome had no fire department. Crassus filled this void by creating his own brigade—500 men strong—which rushed to burning buildings at the first cry of alarm. Upon arriving at the scene, however, the fire fighters did nothing while their employer bargained over the price of their services with the distressed property owner. If Crassus could not negotiate a satisfactory price, his men simply let the structure burn to the ground, after which he offered to purchase it for a fraction of its value. Augustus took the basic idea from Crassus and then built on it to form the Vigiles in AD 6[contradictory] to combat fires using bucket brigades and pumps, as well as poles, hooks and even ballistae to tear down buildings in advance of the flames. The Vigiles patrolled the streets of Rome to watch for fires and served as a police force. The later brigades consisted of hundreds of men, all ready for action. When there was a fire, the men would line up to the nearest water source and pass buckets hand in hand to the fire.”
Later, Crassus got into the Triumvirate with Julius Caesar thought he could do in Parthia what Caesar did in Gaul and lost his head along with three legions.
Sobel: “…A FEMA that established free trade zones — in which all normal regulations, licensing and taxes were suspended, and in which buyers and sellers felt secure and protected — would better provide the goods and services victims need.”
By freeing the price gougers to more clearly signal demand and thus better allocate food, water, fuel, tents, tarps, chainsaws, batteries, dry socks, and so on. Like we need the price mechanism to figure this stuff out for us. This guy may live in Charleston, but I don’t think he’s been through a real storm.
The founding fathers and George Washington in particular would be repulsed by the state of the neo con empire which should not exist.
How FEMA works with the military.
FEMA needs access to a lot of military assets and manpower.
The governor already owns the national guard and can send them out and use disaster money to fund the operations.
When FEMA comes into the state they work for the governor, and the military equipment beyond that available to the state’s national guard comes through a military liaison working with the state adjutant general.
My suggestion: instead of 1.0 million active soldiers and .7M guard soliders, there be .2M active soldiers and 1.2M guard soldiers, with appropriate equipment.
Then each state would not need federal forces, and the empire would die on the vine.
Like the US constitution envisioned.
I posted this on my blog and my FB page last night, but this post is its rightful home.
The scariest thought I’ve had this Halloween evening – and I can’t get rid of it – is imagining some poor guy in a major natural disaster in the Romney universe of privatized FEMA responsibility, who has just lost his house and all his possessions having to pay Halliburton $100 for a pint of water so his child doesn’t die of thirst.
“And to be honest sir your best bet is to buy now, the water markets are off the charts today…”
Bob in Pensacola —
Just a single one of Wal-Mart’s 14 wheeler trucks provides more emergency supplies than hundreds of the proverbial guy selling out of the back of their pickup truck.
But Wal-Mart sells the goods at their normal low everyday price.
In an emergency US capitalist businesses do a great job of moving emergency supplies into the disaster ares without the need of any changes in price signals.
Your simplistic libertarian model could not be further from the truth.
We know how disaster relief markets work. Even if it is not historical, Genesis indicates the end result: slavery. First we sell our children, then we sell ourselves.
Walmart did a great job here after Ivan, as did Lowes, Home Depot, Albertson’s, Target, and others. However, a lot of their supplies took time to get here. (Some stores seem to be prepositioning some stock now.) In the meantime, once regular inventories were exhausted–in minutes to hours after the stores reopened–anyone who really needed a chainsaw or generator had to pay scalpers’ prices to the proverbial entrepreneurs operating out of trucks from pickups to (indeed) semis. That was brought under control around the time normally priced supplies began arriving at the big-box stores. Competition probably played a role, but I suspect Sheriff’s Deputies putting the kibosh on the laissez-faire played a larger one.
Also, while it would be hard for me to argue that my one-sentence libertarian model wasn’t on the simple side, I don’t think it would be hard to come up with one further from the truth.
Clearly the government has an early advantage in the opening stages of a disaster, and will take the lead in fixing government transport infrastructure.
But beyond that the private sector will do most of the work anyway, and will end up contracting to fix most of the government infrastructure.
So we are really discussing the initial response and the early stage patching up.
Examples of the “free market”.
1. A captured market do to distress? Just look at how the attendies of that fake Woodstock 2 were treated.
2. Everyone forget that house that burned because the owner lived in a place that decided to make paying for fire protection optional?
That place was Tennessee, and I believe there may have been more than one.
But, regardless of the number, libertarians are fine with it.
They seem to be a bit restricted in their ability to accept that there is such a thing as the commons.
“In other market action, Chain Saw and Diesel Generator futures opened sharply higher today with a big jump in plywood sheeting prices. Here to tell us why is Jim with the weather…”
“I don’t think $25 a gallon gas is unreasonable…” -Duke University economist on NPR this morning http://www.npr.org/2012/11/02/164157335/some-economists-think-price-gouging-is-good
Let’s not forget that our conventional understanding of how markets work is based on many buyers and many sellers, with the sellers all price takers who operate with prices equal to marginal cost. The notion of “scarcity” at work in that most basic model of markets is not a notion of Malthusian scarcity, but rather a notion that we run out of resources before we run out of wants. Disaster is, almost by definition, a situation in which necessities are locally insufficient to meet needs. Yes, distribution is the problem. But price adjustment cannot solve the problem of necessities being insufficient to meet need in the short term, because transportation resources are among the ones in short supply.
The reason I mentioned faith-based economic thinking earlier is because the details I mention are all missed by guys like Sobel. They don’t think about the details because they believe (or claim to believe) they don’t need to. They have faith that “markets” will magically solve all problems, and so have no reason to think about the long list of problems that have to be solved before we can rely on price signals to induce a reasonable level of human welfare.
Re the speed of relief issue, consider that in Ca the disaster folks say that you need to be able to live without any supplies for 3 days as it will at a minimum take that long for aid to arrive after a major earthquake. Hurricanes/Storms might have a lesser lead time since the storm is forecast before it hits. However it seems that the 3 day rule should be nationwide. Just like I wonder when some of the folks in NY/NJ filled up last, on the Gulf Coast they say filling up before the storm hits is part of being prepared. If the tank is full the question is how many days to empty?